Why Having Key Performance Indicators (KPI’s) are Important to Help Reach Your Sales and Profit Goals
By Thad Whittenburg
Back in February, I started a series of blogs on KPI’s and then branched off into different subjects. Now that 2018 is nearing it’s close and the budget season is upon us, I thought it was important to approach this topic again.
Working with several dealers over the years, I soon realized that the clear majority of them didn’t have KPI’s set up for their businesses. They always had sales and margin goals but that’s where benchmarks ended. Key Performance Indicators are the measurements you need to have in place that will have the greatest impact on reaching your financial goals.
Everybody has a different business model so KPI’s can vary from one company to the next. Here are a few common ones that pertain to our industry:
- Gross Margin Per Person (GMPP)
- Customer Survey Scores
- Margin Erosion
- Closing Ratios
- Net New Accounts
- Key Product or Service Growth
I’m going to talk about the first 2 in this blog and will cover the remaining 4 in subsequent blogs over the next 2 weeks.
GMPP is a great measurement when it comes down to productivity from the sales team. Here are some guidelines when it comes to this KPI:
First, figure out where you currently are. Here’s an example:
$2 million in sales at a 35 margin equals $700k in Gross Profit.
Now take that number and divide it by the number of people involved in sales (Designers, Support, Manager). For our example, let’s say it’s a total of 5.
$700K divided by 5 = $140K GMPP
Pretty straightforward, right? Now that you have that number, how does it compare to other dealers in our industry?
*I have adjusted these from previous blogs based on the companies I have worked with this year
Now let’s look at Customer Survey Scores. I think this is an important key metric because it will certainly have an impact on your future sales and margins. Whatever scale you use, your goal should be at least 8.5 on a 1-10 scale (this is the overall score) or a 6 on a 1-7 scale. By the way, please, please, please don’t ask over 5 questions. People are bombarded by surveys these days. Really 3 questions should be able to do the job. Here are a few ideas but ask about the things that are most important to YOUR business:
- How well were we able to meet your product and design needs?
- How well did we perform on your project?
- How would you rate your overall experience?
I hope this helps, and I would love to hear from you. We’ll cover margin erosion and closing ratios in next week’s blog.