Are Your Sales KPIs Driving Growth Or Draining Profit?

Many businesses track revenue as their top sales KPI. But what if that number is masking a bigger problem?

If your sales targets aren’t linked to margin, you might be unintentionally:

• Offering deep discounts just to hit targets

• Celebrating revenue gains while profits slip away (vanity v sanity)

• Rewarding sales that actually cost you money

On the surface, your sales look strong but if you take a look underneath, your business could be losing money.

Why Does This Happen?

I see this a lot in scaling businesses. The root cause? It’s not the sales team’s effort. It’s what the business is choosing to reward.

That means your KPIs might be encouraging sales volume without protecting the margin that keeps your business healthy and the doors open.

A Real-Life Example of How KPIs Can Go Wrong

I agree that having sales as a KPI is fundamentally important for your business. But it’s critical to do it right, otherwise, that KPI can become toxic.

Here’s an example from one of my clients:

They wanted their sales team to boost sales of an added-on service offer. Campaigns were launched, and salespeople were regularly checked to ensure success in selling this service. It wasn’t their core business, but an inordinate amount of time was spent pushing this offer.

Sales employees earned a percentage commission on each sale, which seemed fair until we took a look at the bigger picture.

The fundamental problem? The offer was losing money at baseline. The business thought it earned close to a 40% margin, but this calculation included only part of the costs, ignoring the full cost of delivery. Significant costs were being assigned instead to company overheads and gave a wrong picture to how profitable this offer actually was.

To make matters worse, the sales team’s commission on these unprofitable sales increased losses, and time spent pushing this offer took focus away from their core, highly profitable business.

When they realised the market wouldn’t accept a price increase and that costs simply didn’t justify the offer, they decided to shelf it. They redirected sales efforts back to their core business and the result was more growth that was truly profitable and sustainable for their business.

Aligning Margin with Growth Changes the Game

When your KPIs focus on margin as much as volume:

• Sales teams win by closing profitable deals

• The business thrives with sustainable growth

• You gain real control over profit, cash in the bank and not just the numbers on the board

If you’re unsure whether your KPIs reflect what really drives profit, I would really recommend taking a step back and completing a KPI review.

We all want to believe that every offer is profitable, but unfortunately time after time I come across services and products that are generating a loss and are draining the profits, cashflow and time from the core business.

Take Control of Your Business KPIs

I work with business owners to ensure the metrics they track and promote, truly support profitable decisions.

Let’s chat if you want some help to identify and track which KPIs will enhance your growth and deliver profit.

Message me here on LinkedIn or email sharonkearns@sgk.ie.