Three Metrics Worth Tracking In Your Sales Org

John F. Kennedy first uttered the popular phrase, “a rising tide floats all boats” when arguing for government investment in the economy because it would benefit everyone. Years later, Warren Buffett added an addendum: “A rising tide floats all boats… only when the tide goes out do you discover who’s been swimming naked.”

During the pandemic, we saw a glut of advertising demand with many media companies having some of their best days. I’ve spoken to many smaller media company operators that thought they had cracked some secret code for their success. But when the ad markets contracted, they found that they were not well positioned to react. They had been swimming naked, benefiting far more from the tide than their own operational excellence.

The difference between an immature and mature sales organization is a deep understanding of how the operation is running. An immature team will look at revenue growth and say, “we’re doing our jobs.”

The problem is, revenue is a lagging indicator. It’s a sign that you have done your job. But it doesn’t tell you how well you have done your job. Just as importantly, it doesn’t tell you the health of that revenue.

And so, there are three basic metrics that I believe are worth understanding even during the good times to ensure that you are prepared for when things are bad.

Let’s dig in…

Win rate

I was talking to a senior manager at a large media company about how they could continue growing the business. And one thing he said to me was, “we win one in four RFPs that we receive. I suppose we could try to get that to one in every 3.9, but that would take an incredible amount of effort.”

To do the math, 1/3.9 is 2.5% more than 1/4. In other words, if you’re a business doing $100 million in revenue, that sort of an improvement can add over $2 million in revenue to your business. Imagine if you’re doing hundreds of millions or even ten figures.

I couldn’t tell you what a good win rate is because there are so many factors.

• Are the deals inbound vs. outbound?
• Are they small deals or big deals?
• Are you well known or not known at all?

So much goes into understanding your win rate. But that’s also why you want to track this over a long time horizon. If you know that your win rate is 25% and suddenly you see that it has dropped to 15%, there might be something there. And the inverse is also true. If your historical numbers are 25% and you’re now pushing 40%, it’s important to analyze why. Are the markets crushing it, has deal size dropped, or something else?

The reason it is important to keep an eye on this over the long-term is that if you get an influx in deals, you might not notice there’s a problem because the revenue number looks so good. If you need 100 $10,000 deals a quarter to hit your goal and your win rate is 25%, that means you need to talk to 400 companies. If 1,000 companies come in and your win rate is only 10%, you still hit your goal. But what sounds healthier for the long-term? 25% or 10%?

Dig in and really understand how many deals you’re winning.

Renewal rate

This one is my favorite. A criticism I have heard of advertising businesses (often in favor of subscription businesses) is that, “you sell something and when the campaign runs, you have to sell all over again.” And this is certainly true. But if your renewal rate is high, it’s not all that much of an issue.

According to Naylor Association Solutions:

The acceptable renewal rate is a lot lower for online publications – 50 percent should be renewal and 50 percent should be new to help your online project sales grow. Why? There are a ton of options and ad opportunities online – more than print. There are so many metrics you can get from digital ads, and people often have mismanaged expectations about the return they can get online.

A sales executive told me once that a 70% renewal rate was the sign of an unbelievably healthy organization. Ultimately, the exact renewal rate depends. But what’s important for you to understand is what your number is.

A low renewal rate means you have to hunt for a ton of new business every year to continue growing. Again, when the ad markets were flush, this didn’t really matter. However, with fewer companies spending, getting your current customer to come back is important.

Let’s say you sell $1 million in ads this year, but have a 10% renewal rate. That means next year, you can expect roughly $100,000 from current advertisers. If you want to grow at all, you need to first find $900,000 in new advertising and then find additional revenue on top of that. It’s like trying to build on quick sand.

Compare that to that 70% metric. If you sold $1 million this year, that means you can expect to generate $700,000 next year from your current advertising base. If you want to surpass the $1 million, you’re doing it from a much stronger position.

Ultimately, renewal rates are a function of performance. If you can’t help them to grow their business—either directly with leads or indirectly with insights on who saw their brand—then they are less likely to renew.

Account growth rate

Building on the renewal rate is the account growth rate. If you have 10 advertisers who spend $10,000 each and a 70% renewal rate, that means you can expect $70,000 in ad revenue next year without needing to find any new partners. That’s great; we love a healthy renewal business.

But what if you could grow each of those returning accounts by 10%? That $70,000 in expected revenue would actually be $77,000. Rather than needing $30k in new ad revenue to get back to baseline, you only need $23,000. I’m intentionally dumbing these numbers down because it shows how powerful a healthy renewal rate coupled with strong account growth is when it comes to growing revenue.

The thing is, this is hard. People—sellers included—bias to whatever is easy. The easy thing to do is go back to a partner next year with a plan that is identical to one they signed this year. So, getting a renewal on a plan that was already approved once is easier than trying to sell more. But the business needs sellers to sell more. Like I said above, if you are growing the size of your accounts, growth becomes even easier.

And the thing is, your publication has changed since the last time you signed an agreement with an advertiser. Maybe an audience segment is bigger. Maybe you have new products available. Not to mention, your advertiser has changed. They might have new products. Their priorities could be different.

Good sellers are going to be able to figure out what has changed about the advertiser and help them to understand how your products can help. And even if nothing has changed about the advertiser, these good sellers will be able to help advertisers understand how new products can help them achieve even more of their goals.

If we look at these three data points together, you start to understand the health of the business. If your win rates, renewal rates, and account growth rates are high, predicting your numbers becomes so much easier. If you can’t close deals, you’re losing partners after they run one campaign, and even your partners that are returning are either spending the same or less than the previous campaign, you’ve got a problem. Dig into those and try to figure out what needs fixing.

A healthy sales organization understands this data. Revenue is just an output. But if you understand the quality of the work that’s happening—the inputs—you can triage problems quicker and have a much healthier business.

Thanks for reading today’s AMO. If you have thoughts, hit reply or join the AMO Slack. As a reminder, ticket prices increase for the AMO Summit on September 26th. If you want to attend, buy your ticket now and I will see you here in NYC on October 26th! Have a great weekend.