Hello.
Today I wanna talk about the role
that contracts and processes play
in meeting your K P I objectives.
So KPI P I stands for Key Performance
Indicator KPIs, provide targets
for teams to shoot for milestones
to gauge progress and insights that
help everyone in your team.
make better decisions.
KPIs are distinguished from
other metrics in your business by how
useful they are in helping you measure
your progress toward achieving your
strategic goals.
Some examples to illustrate
the difference between KPIs and
other metrics.
An indicator is simply a metric
used to make some measurement in
your business.
As we know, some of them can be
meaningless, such as how many likes
your LinkedIn post received.
How does knowing the number of likes
your LinkedIn post received help you
make progress toward achieving your
strategic goals?
I'm gonna guess none.
Conversely, a performance
indicator tracks a measure related to
your organization's performance.
For example, how many hours your
employees worked on a project.
Now, even if you don't bill by the
hour, and I know you don't, it's
important to know this so that you
can measure the profitability
of the project if the resource
is required to.
Execute the project, exceed the value
of the project, then you know you
have some problems.
There are some action items that
come off of that that you need to.
Make some adjustments.
You need to raise your rates or you
need to increase the efficiency
of Delivery.
Maybe you need to use a less
expensive resource for delivery,
such as if you are doing a hundred
percent of delivery.
Maybe some part of that can be done
by a less expensive resource, such as
an assistant or maybe automation.
or even maybe another partner
who's not as expensive as
you are, or both Of course.
So when a performance
indicator is critical to your
business, such as something
that affects profitability,
then it rises to the level of a
key performance indicator.
So in other words, key performance
indicators are a subset of
performance indicators that
are most critical to your business.
KPIs help you measure
progress toward achieving your
strategic goals.
And these KPIs will cut across all of
your organization financial KPIs,
customer related KPIs, process
related KPIs, and of course people
related KPIs cuz we know our people
are our most important asset.
So today we're going to cover
two main areas.
Both related to your customers.
Where we have KPIs that are related
to our contracts.
those two areas are customer acquisition
costs and customer lifetime value.
So since I know nobody wants to
listen to a lecture on a podcast, this
conversation will be intentionally
superficial.
But the point is to help you start
thinking about.
All the places that contracts
and SOPs have a material impact
on your business.
You know, contracts aren't just about
intellectual property.
Of course, they're very important, but
they're not just about intellectual
property.
They affect.
Many, many areas of your business,
including those that are important
towards achieving your strategic
goals and, are contributors to, uh,
creating KPIs that help you hit them.
just generally when we think about our
KPIs, we wanna have KPIs that measure.
And drive the right behavior that we
want from our team.
That's why a lot of these, KPIs will be
around efficiency or utilization and
about effectiveness.
So we can measure how effective
and efficient, what we are doing
is so, First bucket, customer
acquisition costs.
So customer acquisition
costs, that's the total cost that
are accumulated through the process
of closing a deal or gaining
a new customer.
these costs include research, marketing,
and sales.
They may also include,
legal costs.
So since if you have to, hire a lawyer
for your contracts or if there are
some clearances perhaps that need
to happen before you can close a deal.
So those are all those costs.
Associated with that, acquisition.
we're gonna talk about three
KPIs associated with customer
acquisition costs, sales cycle, time
spent selling and conversion rates.
First sales cycle.
Sales cycle is the total amount of
time it takes for your organization
to close a deal.
there are, six key steps,
finding leads.
Connecting with the leads, qualifying
the leads, making presentations,
overcoming objections, and
then finally closing the deal.
And so we look at that sales cycle, we
measure it in terms of number of days.
You might measure that per salesperson
or through your whole organization,
especially if you're the only
salesperson.
And hopefully it is a number of days,
but it might not be.
You may have very large engagements
that have much longer sales cycle,
and the fact that they're long is not
an indicator of any type of failure, but
just the nature of your business, such
as if you're doing, million dollar
deals, those are gonna take more than
a number of days probably to close.
It may be measured in weeks or months,
but regardless, the shorter the
sales cycle, the more, profitable,
and so the lower your customer
acquisition cost is.
All the resources of your sales
team while they're still trying to
close that sale.
the number of touchpoints
required, each touchpoint is
another cost.
And so that will increase
your customer acquisition cost.
And the sooner that you close a deal,
obviously the sooner you can move on to
another, project and therefore
increasing revenue.
The time spent selling another
important K P I.
So obviously, the more time your
sellers are spent selling, the more
likely they're to close deals, and the
more quickly they can close deals.
Now it seems.
Obvious.
However, there are a number of
studies that show that sellers spend
only about 35% of their time selling.
They are getting caught up in
administrative tasks.
They're getting caught up in,
finding and delivering
collateral, creating new collateral.
So we're gonna talk about, ways
that we can make these processes
more efficient so that your sellers
can spend more time selling.
And then the third K p R we're gonna
talk about is conversion rates.
conversion rate that's defined as
a percentage of leads that turn
into customers.
along with, sales cycle and times
been selling, the longer it takes
for lead, to become a customer,
the higher the customer acquisition
costs and the more time you can
spend selling, hopefully the more
quickly you can convert that lead
into a customer.
So that conversion rate is an
indicator of your.
Marketing effectiveness,
your ability to get enough leads in
the door and your sales effectiveness,
your ability to convert those leads
into customers.
So if you're not getting enough
leads, then that's telling you you had
a pipeline problem.
If you're not converting enough,
then that tells you that something
along in that sales process isn't
working.
Either you're not having enough
touchpoints or your touchpoints
aren't effective.
So, to summarize, sales cycle, time
spent selling and conversion rates,
all those are KPIs that will affect
your customer acquisition costs,
which of course we want to be, as
low as possible.
what is the role that contracts
and the related processes play
in, customer acquisition costs?
So let's talk about resource
availability.
We just talk about that 35% of time
that salespeople are spending selling.
one way to get them spending more
their time selling is making sure
that they aren't wasting a lot of
time searching for.
Creating, updating the collateral
that they're using for sales.
And so the time that they are saving
or lost during the sales process is
directly related to that resource
availability, existing collateral.
You may have some standard pieces of
collateral and can they find it easily.
is that existing collateral
constantly being updated?
You making sure that any, data or
numbers that are changing, make sure
those are updated.
Don't make your sales reps do that.
Are there any links in there
that need updating?
Make sure those are updated.
Is any branding change?
Make sure that's up, updated.
If you have any new testimonials and
things like that, new case studies,
make sure that's all up to date
so that you're.
Salespeople can find it, access
it, and engage with the client as
easily as possible.
I'm a huge fan of having an inventory
of these things.
I call it IP inventory, but,
other types of content management
tools will work as well to make
sure that everyone knows and the
business knows what's available,
and then can easily access it.
That we're not recreating
the wheel.
Now sometimes though, you will
want to recreate the wheel will not
recreate the wheel, but personalize,
customize some of that collateral.
When you have big dollar engagements,
you'll absolutely be creating,
personalized collateral for
those prospects.
Having personalized collateral will
reduce, sales cycles, will
increase conversion rates, but we wanna
make sure it's still effective
and efficient.
even though it's customized, we
want a process for customization.
So making sure that we have those things
in place so that our salespeople
can easily and efficiently,
personalize our collateral and
get that shared with the clients.
And then, again, all these pieces
of content, whether it's our standard
content or our personalized
content, making sure that it is not here.
There're everywhere to have one place
that we can find all this material
so that our sales team can use it very
effectively, whether they're on the road.
so they can access it.
If they're in the middle of a call
and someone asks a question and that
there's, something that can help
illustrate a point.
Or to help overcome an objection.
These are all things you wanna
have available to your sales team.
Then for the contracts in
particular, making sure that you have
standard term sheets here, that when
they're going out in the field or, having
their conversations, I'm dating myself
with going out in the field.
do, people still go out in the field,
and That part of that negotiation
process, that they know exactly what
the parameters are, where they
can give, where they can't give.
And more importantly, that
they don't promise something that
you can't deliver.
sometimes things get a little, heated
in the middle of a negotiation.
Sales people are pleasers, they wanna
make sales, and so make sure they
understand, what the parameters are.
So having those standardized term
sheets avoids any conflicts there.
Having a streamlined contract creation
process, you wanna have standardized
proposals.
If you have the type of, business where
you are sending out proposals, even if
they are customized, you still wanna
have a template that everyone's using.
And also when it comes time for.
Signing, having standardized
services agreements, and in the event
if your clients are large corporate
clients, the likelihood of
them having their own services
agreements, that they're going to
require you to sign, that doesn't mean
you're completely at their mercy.
You wanna have your own s o w templates
that are specific to your services.
You I review.
Hundreds of large corporate
agreements.
All the time, and they're very
generalized.
They want that same vendor agreement
or that same supplier agreement.
They send it over to you and almost
none of it applies to your services.
So make sure you have some
exhibits that can.
Easily be attached to customize it to
what you're doing.
Have your own s o w templates that
talk about your services, have
your own operating procedures or terms
and conditions so that you can just
attach those as exhibits that don't
have to be overly negotiated so you
can get to the finish line quickly
and start working on your projects.
and then in terms of closing, what
differentiators do you have?
Obviously you have your reputation,
but there's also some objective
differentiators that are important,
certainly in the current environment
of information and data security.
Do you have like ISO certifications
for instance?
Or do you have just, policies regarding
information security and technology?
If you are going to have access
to their network, there's definitely
going to have, their own requirements
regarding that And the further along
and having your own systems in place
that you can show them, the more
comfort they get.
If you will be handling any
personal data, you're going to
be have to show them that you
comply with.
Data security laws, and data processing
laws and large public companies.
International companies will
also have, codes of conduct
requirements, ethical,
requirements, um, E S G requirements.
These are all things, if you
already have these things in place,
that will also smooth the route
to close and Reduce that customer
acquisition cost.
All right.
So now the next bucket, customer
lifetime value.
Customer lifetime value is the
predicted dollar value that you'll
derive from future transactions with
the customer during the course of your
entire relationship.
Unlike customer acquisition costs,
which we wanna reduce, obviously
customer lifetime value, we want
to increase.
The longer that customer stays
with us, the more profitable
that customer is.
So losing a customer is cost of business
much more than just the direct revenue
that you use.
there are some costs of acquisition
that you need to recover, so you
need to make sure that that customer
stays around long enough to recover
those costs.
And second, a business is not
sustainable if you can't have some
measure of customer retention and
repeat business.
It's a very difficult business
if every sale is a one-off sale.
And of course, every time a
customer leaves team morale suffers.
So generally, across a wide range of
industries, just a 5% improvement in
customer retention rates yields
25 to a hundred percent increase in
profits and that's very impactful.
Couple of reasons why, the carrying
cost of keeping a new customer is
a fraction of the cost of bringing
on a new customer.
So when your sales and marketing costs
to an existing customer go pretty
close to zero, all of that money save
drops directly to your bottom line.
Also a happy customer is like
an noncommissioned sales rep, right?
They are singing your praises to
other customers and, they are
providing referrals.
They provide opportunities
for upsells and cross-sells.
They are your own personal market
research panel that you can go to
for feedback and product suggestions.
And of course, the longer they're
with you and they continue to open
their wallet to you, the more
entrenched you come with that customer.
So the KPIs that we're gonna talk
about in connection with customer
lifetime value, customer complaints,
client churn rates, and cross-selling
and upselling.
First customer complaints.
this is a leading indicator of client
satisfaction.
So measuring complaints is
critical to ensuring that our
quality matches our customer's
expectations and requirements.
So you can pick up a change in complaint
levels much earlier than a change
that you might see through a customer
satisfaction survey or by
looking at your client retention
metrics where.
It's obviously too late after
you've lost them.
customer complaints is an early
indicator regarding client satisfaction
that helps us react and correct quickly.
So we definitely wanna keep a track
on those client churn rates.
That's the percentage of
customers that fail to make a
repeat purchase or discontinue
your service during a certain
period of time.
So that provides insights on how
the business is performing.
Of course, it is an indicator
of customer dissatisfaction.
Indication of product quality,
maybe that shows that your prices
aren't favorable.
They get in there and then they see
that they're not really getting
the value that they thought they
would, so they're not renewing.
Maybe competitors are coming in with
better offers, so you're losing them
to competitors, if they aren't, doing
repeat business.
you need to keep marketing to your
clients and maybe your marketing,
game falls off once you sign them on.
Or it could be just a natural part of
the life cycle.
But we do wanna make sure we are paying
attention to these and understanding
why it's happening, so we know what we
might need to fix.
Do we need to create a better
renewal program?
Do we need to make sure we're
staying more customer-centric
after they sign so that they are
keeping us in mind, so we can reduce
churn rates and therefore maximize
our renewal revenue?
And then the last one is that we're
talking about, there's many more,
but the one we're talking about today
is cross-selling and upselling.
So that is getting additional
value from your existing customers
and providing additional value
to your existing customers so that
you increase that repeat business.
You're exposing your customer to more of
your, service and product portfolio.
You're creating a deep relationship.
Enhancing the customer experience.
if you aren't getting cross sells
and upsells, then you are failing in
one of these areas and you need to
make sure that you are looking to see
how you can, do that and you Many
product and service ladders are built
on the assumption of cross-selling
and upselling.
That is an important part of growing
your business.
So if those things aren't working, then
we definitely need to figure out what's
going on there.
maybe the upsell opportunities aren't
truly upsells.
Maybe that really, is one
service doesn't really follow
on the next one.
And so we need to look at that to
make sure we have appropriate ladders.
So the role of contracts in the
customer lifetime value, process
many things.
First, contracts set expectations
from the beginning, you the transaction
or, and the utility of a contract does
not end at signing.
You once you sign that contract,
That is the place where you set
expectations.
You want to make sure that the
client clearly understands what
the process will be, so that there
are no surprises.
In addition, once that contract is
signed, you want to make sure that
there is a handoff process from
your salesperson.
To the team that will be
doing delivery.
So that, that is seamless.
You never, want to have bumps in that
because you want customer confidence
to be high that the time when they are
second guessing a purchase and we've
all done this, know, whether it's
in our businesses or personally.
Once we sign on the dotted line and
we start to second guess ourselves.
Don't let that happen.
Make sure you have a process in place
to make it smooth.
No surprises, happy customers give
you the benefit of the doubt as
the, engagement moves along.
maybe you introduce the delivery
team so that they really feel like
they understand who's working on
their, engagement.
Contracts provide transparency again,
you making sure that they understand
the entire journey.
and a lot of times this will be done
through a kickoff, meeting, again
to talk about the process and
introduce the team.
you wanna make sure you have your, very
clear performance and delivery
process in place.
You want to make sure that the
contract lays out all of the
milestones when you expect to have, them
to be hit, what will be delivered, who
it's delivered to, what the acceptance
process is when you expect to have,
questions, when they have their
questions to you.
when you have time to turn that back
around, if there are any issues to turn
that back around.
There should be no surprises in that
process, and that should be laid out
in your s o w if not in the agreement.
Of course, you have to have a dispute
resolution process.
the more complicated the engagement I.
There's possibility that
there'll be some miscommunications
and we wanna make sure those things
are resolved as soon as possible
to maintain a good relationship so that
we, have a long-term relationship
with that client.
And then, Equally important as
onboarding is offboarding, making
sure you tie up any loose ends,
making sure you remain a resource
for your client.
This also makes it easy for you
to do have those cross cells and
do those upsells.
You wanna also, be able to come to
them for referrals, you want them
to consider you, for them to be a
referral source and of course,
a testimonial process as well.
It increases their value because
it helps you
obviously,
sell and reach new markets.
So I hope this was helpful to you.
Again, this is just an overview some
examples of the way that contracts do
help you hit some of your key performance
indicators.
Don't think of them as just,
intellectual property tool,
but it is also a.
Performance tool.
Until next time.
Thank you friends.