KPIs 101.2: How Many Deals Are On The Table?
As discussed in KPIs 101: How Much Can Your Business Improve?, every quantifiable Key Performance Indicator that has ever been devised falls into the following categories:
Size - how big is the deal?
Number of - how many deals are on the table?
Velocity - how fast does the deal take to work through?
Capacity - how many deals can we actually do?
Statistics - averages, conversion rates, ratios, standard deviations, skew, correlation etc. etc. etc.
If you use them together, you can quickly work out how much your business can improve.
Today we will discuss #2: How Many Deals Are On The Table?
This is commonly called a pipeline, and it directly determines how fast you can possibly go.
The key with pipelines is how well you can convert them to actual orders/work. For example, if you have 20 deals in the pipeline, but your deal/order conversion rate is only 20%, you will only be able to work on 4 deals. However, if the 4 deals are all big deals, then it may soak up much of your available capacity. But if they are not big deals, and you have capacity for more, you team will be underutilised.
The number of deals x the deal/order conversion rate = number of orders.
The number of orders x the size of the deal x the frequency x avg order value = total possible revenue that could be earned from the current marketing/sales efforts.
This is then compared with the capacity to determine whether the possible revenue is probable or whether it is constrained by the current capacity.
This is one of the many tightropes that businesses walk between sales and operations.
For example, while it might be possible to increase the number of deals on the table by 10%, if the capacity is already full, the orders cannot be processed any more quickly - and therefore, the increase leads to no increase in revenue.
When sales people are incentivised on margin or revenue, good sales people do not like being held back like this. So one of the keys is to always keep some extra capacity available to deal with the seasonal lumps and bumps that inevitably turn up.
The easiest way to uncover extra capacity is to reduce the resources required to perform a process.
In the world of face-to-face meetings where documents are required to be signed and executed to facilitate the business relationship, Suitebox reduces unbillable and unrecoverable travel time to meetings for both you and your customers to zero.
In the world of construction quoting, I have seen Planswift cut take-off/quoting times by 80%.
For everybody else, the key to understanding your capacity is to understand the time taken to complete the many processes that undergird the fulfillment of an order. Xsol allows your processes to be modeled and reviewed from a helicopter level right down to the task level.