Key Performance Indicator for New Business Development Essay
Most agencies employ measured and well managed approaches to the functions of accounting and information technologies. A common question regarding the business development function is: How do we know if we are doing well?
Managing business development for success begins with measuring it, and while there are no measurements that will accurately predict success across all agencies. Key Performance Indicators (KPIs) are measurements that reflect the health of an organization, and for our specific purpose, the health of its business development system. They connect the firm’s goals and strategies to its activities and outcomes, keeping management informed of overall health (past, current and future).
2.02 different types of KPIs:-
2.1 Lagging KPIs Historical measurements that look back to determine it success was achieved. Financial measures are lagging indicators; they prove how well the firm has performed.
2.2 Leading KPIs Activity or task-based metrics that are measured early and can be influenced to affect future outcomes. Leading indicators have the predictive power of success. They are measured today to determine if goals will be met tomorrow.
2.2.1Other Measurements: Metrics That Contribute to Leading Indicators A lagging business development indicator such as a new client obtained is a pure result or outcome. A leading indicator such as the closing opportunity is both an outcome and an activity. Some leading indicators are pure activities, but usually leading indicators are the sum or reflection of such activities, and merit some of these activities merit as measurement as well.
3.0MEASURING THE WRONG THINGS
3.1Written Proposals Proposals are often seen as a step in the sales cycle, when in reality they are a tool and nit a step. Further, they are a grossly overused and misused tool. Writer of this article have wrote an article in August 2004, that most written proposals need never exist. Their purpose is confused with that of contracts: the proposal should be the words that come out of your mouth, and the contract is the written document. It is merely one in a series of commitments.
Contracts signed are a valid lagging indicator of business development success. A signed contract means a new assignment secured. Writer mentioned that the largest, most widely shared agency business development problem is the over-application of resources against early-stage buyers. At the top of the list of wasted resources is the writing of proposals for people who are not buying.
3.2Meetings Many agencies measure business development activity and implied future success based on a loose metric of meetings with prospective clients. 3 important lessons on the subject:- * Getting meetings is not difficult
* The number of meetings obtained is no accurate indicator of business development success to come. * Most meeting are expensive. If you measure meetings, you will get more meetings, at a significant cost. The easiest way to increase your volume of meeting is to meet with people that you really should not. If you target meetings as an indicator and begin to measure them you will find the quality of those meetings decreases at least proportionally with the increase in their quantity.
3.3Weighted Sales Forecasts. A weighted sales forecast is the value of an opportunity multiplied by the likelihood (percentage) that the opportunity will converted into an engagement. Sales figure are lagging indicators, measured after the fact. Attempting to project a lagging indicator is like trying to guess on Monday what Tuesday will look like from Wednesday.
Financial indicators are always lagging indicators because they can be only measure after the dollars are in. Another challenge with weighted sales forecasts is that they easily allow for overstatement of probable success. Forecast can be significantly affected by slight exaggeration of either factor or by entering volumes higher value.
4.0MEASURING THE RIGHT THINGS
4.1Late-Stage Opportunities Early-stage opportunity is a buyer who has no intent to act. He may see that he has a need (or he may not) but he has not yet formed the intent to act on that need. Someone who has formed the intent to solve their problems or capitalize on their opportunity almost always does so with timeframe in mind, and an event backing up that timeframe. Behavioral psychologist will tell you that the timeframe to take action must be within the next 6 months. Intent to act on something outside of 6 months is not real intent, its wishful thinking.
A late-stage buyer is someone who has a need (further, he acknowledges that your firm is qualified to help him with it) and who has decided to act on that need, and to do so within the next six months. While late-stage opportunities are a KPI that should translate to most agencies, the target value for this indicator will differ from firm to firm. View your target value for this KPI as a threshold, and not a cumulative figure. Your objective is to stay at or above a certain number of late-stage opportunities at any given time. Falling below that number should serve as warning of sub-target performance ahead.
4.2Lead Generation Metrics These metrics are the activities that you increase or improve to drive your leading indicator back to its target value. This will vary from agency to agency, and even within one firm they will change and evolve. They are the metrics of lead generations:-
4.2.1The Ladder of Lead Generatin There is a hierarchy of lead generation activities that sees the pr/publicity-based activities of speaking and writing at the top, advertising and promotional activities in the middle, and selling activities of personal introductions and unsolicited enquiries at the bottom.
4.2.2Dial/Conversations/Qualifications The telephone is the primary tool of business development for many agencies. Dials are a driver of a more desirable activity/outcome: conversation with decision makers, which in turn drive something even more coveted: qualification of the opportunity as early stage or late.
4.2.3Advertising/Promotion. Some agencies employ ongoing advertising programs to drive lead generation, while others employ sustained or sporadic mailing program. These can be measured in term of insertions, impressions, mailings, or dollars.
4.2.4Speaking/Publishing Your lead generation strategy is all about driving late-stage opportunities to or above your target. One recommendation strategy is to aim high on the ladder early in the year, setting goals for the longer term, esteemed activities of speaking and publishing, and then top up any shortfall with those activities lower on the ladder, such as advertising, mailing and dialing.
5.0HISTORICAL MEASUREMENT: LAGGING INDICATORS OF SUCCESS The overall of the article is devoted to leading indicators and their contributing metrics simply because most firms routinely use lagging indicators effectively. They are the financial metrics of billings, gross revenue, new client engagement and etc.
To determine the most meaningful lagging indicator of business development success for your firm, simply ask the question, how will we know our business development program was successful when we look back in the year?
6.0TIPS TO BUILDING YOUR OWN KPIs
6.1Begin by Measuring Management Guru Henry Minztberg proved years ago that simply measuring activities drives improvement in them. In as soon as couples of months you will begin correlate your metrics to your leading indicator. Soon after, you will be able to make rudimentary projections about the level of activities required to meet your desired outcomes. Eventually you will have very tight predictive model, specific to your firm, of what you need to do today to ensure that you meet your business development objective tomorrow.
6.2Improve with Time Your initial KPIs may prove over time to be less than perfect, and that is fine. The point is that initial rough understanding of the more basic metric was still valuable, and over time we will refine it to make it even more valuable.
6.3Tie KPIs to Goals and Strategies Set your target result, share it with everyone in your firm, then work to determine what target values of your leading indicators will accurately predict achievement of that goals.
6.4Keep it Simple and Easy Resist urge to add more and more indicators or metrics. Instead embark on a quest for simplicity. Employees and outsiders should be able to deduce your strategy by looking at your indicators and metrics. If they cannot, then you have over complicated it.