You’ve heard it before, “You can’t manage what you don’t measure.”
The unfortunate reality is that too few of you reading this are measuring the most important numbers of your business. Because of that, you're not in a position to make the proper adjustment as you work to grow.
Admittedly, there are countless things you could measure, and I'd NEVER recommend you try and measure everything. But there are a handful of numbers that are too important not to track.
If you aren't reaching your potential, something needs to be adjusted. But you can't make the proper adjustments if you're not measuring the right factors.
Close ratio
Why it’s important
The opportunities in your pipeline are too valuable not to capitalize on them as much as possible. Once an opportunity goes in your pipeline, you need to close as many opportunities as possible.
Establishing a baseline
Calculate your close ratio based on the percentage of clients that choose to engage you as an adviser based on whatever you deliver in a final meeting.
If you focus on quoting for new business, you'll measure your close ratio by the percentage of prospects who say "yes to the spreadsheet." Suppose your sales process is more consultative (our Q4i MORE system, as an example). In that case, you'll measure the percentage who choose to engage you based on your overall recommendations.
How to improve
Don't guess how to improve your close ratio; ask those on the receiving end of your attempt. And ask (game film) them, whether you win or lose their business.
As difficult as it can be, go back to those prospects who said “no” and ask them to be honest with you about why you didn't get the business. Don’t do this as some gimmicky way to try and get back in the door. Do it to learn and be better positioned to close your next opportunity.
Less intuitive may be to game film with those new clients who said “yes.” It might seem a little odd, but sit down with them and ask, “At what point during our conversations did you know we were the right adviser for you?
Asking this question of your new clients accomplishes a couple of things. One, it will get them to reinforce in their mind why they made that decision, solidifying the new relationship. Two, it ensures you know what's most important to them. So, if you're only delivering “one thing,” you want it to be whatever they consider most important.
Finally, whatever they consider most important in their decision to hire you, other prospects will, as well. This insight allows you to emphasize it with future opportunities.
See also: An Inconvenient Sales Truth
Gross commission
Why it’s important
It is the ultimate scorecard of being a producer. Chances are, it is also what determines your income.
Establishing a baseline
Gross commission is calculated by taking a snapshot of all the business in your book and determining how much commission it will bring into the agency over the next 12 months.
How to improve
Oh, isn’t this the holy grail of sales questions? Without going over all of the countless ways in which you can improve your total commission, I’m going to start with the one approach that makes the others work.
To improve your gross commission, you must make improving this number a priority. You need to eliminate the activities that don't focus on adding new business, so you can spend time on those activities that do. Decide what percentage of your time should be committed to sales activities, then block that amount of time on your calendar – EVERY.FREAKING.WEEK.
Revenue per relationship
Why it’s important
In my opinion, this is the most important predictor of your ability to grow consistently and profitably. Individual producers can only effectively service so many accounts. The larger the average revenue per account, the more efficient the book of business.
The problem is that most books of business have too many accounts that produce too little revenue. You've probably heard us say that the typical book of business only generates 6% to 7% of total revenue from the bottom half of that book. Beyond the imbalance, many of these accounts have too little revenue to allow them ever to be profitable.
Establishing a baseline
Take the total gross commission (as defined above) and divide it by the number of client relationships.
How to improve
Determine your target account size and your minimum account size. Now the hard part: Find the discipline to not allow opportunities into your pipeline that can’t make it through that filter.
Your minimum account size should be your current average revenue per relationship. After all, you are pulling yourself backward by working on something less than your current average. I would also suggest that your target account size be the average revenue of the top 20% of your current book.
Gross new business written
Why it’s important
The most obvious reason it is important to write new business is the additional revenue into the agency. But don't underestimate its impact as a source of confidence and energy in your organization.
Many of you won't agree with me on this point. Still, I believe producers should always be expected to produce new business. Too often, they stop producing, at least to their potential, once they accumulate a book of business that makes them financially comfortable.
This isn't just about the producer and their income. If producers aren’t writing new business, it affects the agency's ability to make additional investments. It destroys opportunities for other team members to grow personally. It hurts the brand of the organization.
It also gets the competitors circling. If they see that you, as a producer or agency, aren't growing, they see a weak and vulnerable target.
To quote from Sun Tzu ("The Art of War"), "The purpose of the military is to be so intimidating that the enemy dare not attack." When you're consistently writing new business, you are an intimidating force that will keep competitors at bay.
Establishing a baseline
Total the amount of new business written over 12 months and determine how much revenue it will produce in a full 12 months.
How to improve
Similar to my comment on gross commission above, there are countless ways to improve. To emphasize an improvement tactic, regularly ask clients and other centers of influence for specific introductions.
Retention
Why it’s important
Growth becomes way too difficult if you’re losing existing clients as fast as you bring them in. Poor retention also hurts your sales confidence. It’s hard to be confident in promising results to prospects if you doubt your ability to deliver.
Establishing a baseline
You need to measure retention in two ways: revenue and the number of clients.
Calculate your revenue retention rate by taking your total gross revenue at the beginning of a 12-month period and comparing it to the revenue that remains at the end of the 12 months. Divide the ending revenue by the beginning revenue.
I would encourage you to also look at “effective retention.” This is the same calculation but includes removing any revenue you didn't have a legitimate chance to retain. For example, remove them from the calculation entirely if a client was acquired or went out of business.
It is also important to make these same calculations based on the number of clients in your book. This is important because you could lose several small clients without setting off revenue alarms. However, tracking the number you lost and the reason could create an awareness that allows you to adjust and prevent the loss of a larger client.
How to improve
Improve retention by setting specific goals for each client at the beginning of the year and then report regularly on your progress through stewardship reports and check-ins.
See also: Why AI-Assisted Selling Is the Future
It does get easier
If you aren’t already in the habit of tracking these key performance indicators (KPIs), it will take a bit of effort the first time. However, updating them, once established, is relatively easy. Those updates don't have to happen weekly or monthly, but they need to happen regularly.
As you read through this list of KPIs, how confident are you that you know your numbers? Which of your KPIs do you feel you need to improve most?
Well, then, what are you waiting for? Let the improvement begin!
