Some call it the “slugging average.” Others prefer “dollars generated per lead issued” or “net sales per lead issued” (NSLI). Whatever the name, many home improvement contractors call it the best measure of their sales reps' effectiveness.
“Leads are an asset, and I view them as if they are cash or any other asset,” says Rick Wuest, owner of Thompson Creek Window Co., in Lanham, Md. “As a businessperson, I'm looking for a return on investment. NSLI is a simple measure of the return on investment on a lead.”
The Whole Picture Other common sales-performance measures provide just part of the picture. Sales volume per rep can be misleading, says Bob Dillon, owner of Unique Window & Door in Indianapolis. For example, if in one month two reps each generate $80,000, but one takes 30 leads to do it and the other takes 60 leads, clearly one is more profitable, Dillon explains.
But using the closing average also has its shortcomings. Some reps will pre-qualify leads, “instead of doing their job, which is to give a masterful presentation,” says Oliver Schreiber, sales manager for Medallion Doors, Windows and Patio Rooms, Forestville, Md. If a rep chooses not to pitch 30% of his leads, for example, it's much easier to maintain a higher closing average. Schreiber found that when he began tracking slugging averages about two years ago, his reps became more diligent with all their leads. The focus on NSLI got the reps to try to reschedule potential one-leggers, for example, and to generally give more attention to all their leads, Schreiber says.
Clear Targets Instead of penalizing a rep for working every lead, no matter its “quality,” NSLI provides a strong incentive to run every lead because all leads affect that rep's performance numbers. It also filters out cancellations, one-leggers, rescissions, bank rejects, and any other reason a lead wasn't converted into a sale.
Also, NSLI “gives you a good number to see if your marketing is paying for itself with individual salespeople,” says Kip Lee, owner of Coastal Exteriors, Savannah, Ga. “It costs me about $450 to generate a sunroom appointment, and we look at our marketing costs on sunrooms at about 10%,” he says. “So if your slugging average isn't at least $4,500, you're probably not making the company money.”
However, you don't want to view the slugging average alone, as accurate as it may be. A rep may have a high closing average but sell a lot of partials. Another might be much better at converting bigger sales but less frequently. Lee also tracks the closing average to give him “a good blended number.”
Unfortunately, you have to develop your own NSLI benchmarks. NSLI is strictly an internal measure, and company-to-company comparisons aren't really valid because there's no accurate general target; it varies because of factors such as product, demo rate, and lead source. “But,” Dillon adds, “as long as the marketing costs are in line, [whatever you use as your specific benchmark] doesn't matter.”