A while back I wrote about the “Forgotten Metric.” I talked about how so few companies measure forecasting accuracy and why that is a mistake. In this post, I’m going to talk about another missed metric. It’s the average deal size. In all my years of selling I’ve never worked for a company, nor consulted with a company that measured the average deal size AND managed its sales people to it. It baffles me. The average deal size is a KILLER way to determine the value of your sales people and the effectiveness of the sales team. It gives you insight into a number of important metrics including:
- How well a sales person can preserve pricing integrity. In other words, do they cave on pricing or do they have a backbone?
- How well a sales person upsells or bundles additional products and services.
- Which sales people are the most efficient with company time and resources.
Knowing your average deal size by rep let’s you see who your most efficient sales people are. Deals take a long time to close. Therefore you want to get the most out of every deal. The rep who closes 15 million in 15 deals is far more efficient than the person who closes 17 million in 25 deals. The person selling 17 million is working a lot harder and using more company resources to get that 17 million.
Sales people are expensive. Getting the most out of them is critical. When the average deal size goes up, your cost of sales goes down and that’s a good thing.
Do you measure the productivity of your reps? Do you know which of your reps gets the most out of every deal? You should.
Average deal size, an ignored metric.
