Key Performance Indicators: Which do you consider relevant?

I would use a combination of sales volume (number of new customers brought in), size of orders and value sold to current customers.
That I have found is a good basis on which to set incentives, motivating salesmen to close as many deals as possible at a high price to both new and old customers.

I would also recommend measuring number of phone calls, meetings and face time with customers your salesmen have. This can be used to improve their performance as you will see what mistakes they are making.

Another set of performance indicators to consider is how effectively the salesperson manages progress through the sales cycle. How swiftly do companies/prospects move from one stage to the next? Is it within your acceptable range? Are the right steps taken to ensure ongoing movement through the process?

I've always suggested that you measure the activities that lead up to the end result. Every industry is a little different but make a list of all sales activities (relevant) that happen prior to the "close" of the sale. Then measure each one, normally after about 90-120 days you'll begin to see an average. Once you have these metrics you can start to look at ratios (how many presentations does it take to get one sale, or how many prospecting calls does it take to get an appointment). When you have the ratios you can then begin to set personalized activity goals that will help the sales person reach their ... results.
No matter how seasoned the sales person is it's imperative that activities and results be measured, always.

I'd focus on a handful of leading indicators, but for these to have real value you need to make sure that all your sales people are using exactly the same stage definitions for the key steps in the sales cycle. Once you have these in place, I'd recommend that you:

1) Track and measure how long winning deals take to move from one step to the next in the sales process, and from the current stage to win/loss.

2) Track and measure the percentage of deals that move from one stage to the next, and how many are ultimately won from each stage in the sales process.

Armed with these two data points, you can start to compare performance between sales people and identify the common characteristics of "winning" deals.

Sales people whose conversion rates or sales velocity falls below the norm for winning deals may need coaching or skills development.

Deals which have remained "stuck" at a particular stage for longer than normal at their current stage should be singled out for management attention.

These two metrics - velocity and conversion rate - will prove extremely helpful in enabling you to determine where your management resources can best be applied.

Too often KPI's are over-complicated by Sales leaders. In addition, the KPI's are more than likely based on financial outcomes - e.g. units sold, revenue achieved - and are often measured infrequently.

While these measures are important (at the end of the day they are the ultimate measure of sales success), KPI's should be a frequent (weekly at the most) measure of the behaviours of your sales team. Are they doing the right things, are they asking the right questions, are the having enough new business meetings, what is the quality of the sales opportunities they are progressing.

Granted, some of these are not easily measured, using a traditional metric-based method. But, there is a role for managers (and peers to an extent) to play in 'observing' the right actions being taken by the sales person.

So, having a blend of metric-based and observed behaviour type KPI's provides the best opportunity to drive the right actions on a day to day basis to, hopefully, allow the result to take care of itself. Some of these might look like:

1. Number of new prospect visits this week
2. % of existing prospects that have 'progressed' through the sales pipe this week
3. CRM/sales pipeline management tool up to date at the end of each week
4. Manager 'Quality' score on sales proposals
5. The quality of the conversation with new prospects (if there is the opportunity to observe this)

Just a few ideas, that sit a bit outside the standard KPI's that we see time after time.

KPI’s are crucial! Just make sure that the KPI’s you select will actually drive revenue. For example, a measurable number of demos may be a KPI, but it might be a misleading KPI. What happens prior to the demo will actually drive revenue. In that case, you may want to measure first meetings, pipeline advancements, new qualified opportunities, and new closable opportunities. These not only drive revenue, but they cause the sales team to focus on the key points in the sales process where opportunities actually advance through the sales cycle.

Agree with Dave Kurlan's response. Your KPI's should align with the revenue, profit and customer satisfaction goals for the business, and strike a balance between quantitative and qualitative measurements. Activity-based sales metrics and KPI's are key to create the velocity and sales momentum. However, the critical measurements to focus on are conversion rates, sales cycle times, average sale values, profitability and retention. These KPI's reflect how well the business is doing in meeting its business goals and taking care of the customer.

In simplest terms, KPIs should become leading indicators of the outcome, not necessarily the outcome itself. If you track metrics like "Scheduled Events" or "Proposed Dollars", these will directly impact on the final outcome. Maybe there is a need to develop the new business base and not simply live by farming the current existing account base? Develop a KPI for "New Business" carved out of the total revenue goal. Comp plans and KPIs drive behavior together within your team.