All you need to know about your sales metrics.
As a sales manager, it falls on you to ensure your sales team remains focused on their organizational and personal goals. This can only be accomplished by keeping a track of essential sales metrics. But what are sales metrics? That’s what we aim to explore in this extensive guide, along with uncovering what the Key Performance Indicators (KPIs) are and why they are essential as well.
Sales metrics are basically data points that tell us how a team, an individual wrap, or a company is doing in terms of sales. These metrics are used by business owners and sales managers to measure the daily performance of their teams. It’s highly pivotal to monitor these metrics as they will ensure you have set a benchmark for your team’s progress and that they are on the right track.
Sales metrics can also be known as sales KPIs, but they’re not exactly the same.
Sales KPIs are measurable values that indicate how effective a company is in achieving its goals. On the other hand, sales metrics track how well a team is performing when conducting sales. To put it in another way, KPIs can be used to keep track of highly important business goals, whereas metrics can be used to keep track of sales processes and workflow.
Here is a list of the most important sales metrics and KPIs that sales managers and reps should know about:
It is common sense that if you track your sales growth, you’ll be able to track the growth of your company as well. That’s why sales managers and reps need to factor the sales KPI considerably. By utilizing professional KPI dashboards, you need to monitor the performance of the sales reps, the target industry, as well as the area. For instance, if your team focuses on several verticals and only one out of them results in considerable returns. This could serve as an indication that you need to reassess your team’s verticals distribution. That’s why you need to be flexible and deeply study your sales KPIs so that more sales revenue and also profits can be brought to your business.
One of the simplest ways you can determine the state of your sales success is to compare the monthly results after some time. This sales metric lets you know how many new customers have bought your company’s products or have also subscribed to the service that you’re providing in the current month.
You can have this KPI framed as the number of monthly sales or as “percentage of monthly sales quota” to determine whether it is possible for you to achieve your monthly sales goal. To find out what is causing an incline or decline in one metric, you need to monitor more indicators to find any correlations between various marketing and sales processes.
Take the monthly sales KPIs and then compare them to see if your sales performance is improving or underperforming. You always need to look at the underlying reason for poor performance. For this, you need to see whether it is due to poor marketing decisions, lazy salespeople, or whether it’s because of the low season.
Besides that, you need to track how many new leads have been generated in a month to understand the gist of your sales performance.
This sales metric measures the success of the sales team or the opportunity over a certain time period. By comparing the number of close one opportunities to every closed opportunity within the same time period (both close loss and closed one), you can get a bird’s-eye view of the overall success of your sales team.
Individual win rates can also be used to identify strengths and weaknesses among individual sales reps and take the most appropriate action.
To calculate opportunity-to-win ratio:
The # of closed one opportunity/ # of closed opportunities (closed one + closed lost) within the same time.
This helps analyze how productive the sales reps are at both emailing and calling prospects. It measures the total number of sales emails and calls that individual reps send out at a particular date. It’s especially important for reps to keep up with the delivery of emails and calls with prospects.
Not only does this metric indicate how active your sales reps are, but it also tells you when something goes wrong with your sales funnel. For instance, when using sales benchmarks such as the 30/50 rule for cold calling and emailing, you can pick the sales funnel apart starting from the top and then determine where you need to configure and then later optimize your strategies.
To benefit the most from this sales KPI are sales directors and managers when tracking their team’s activities. Sales reps, on the other hand, can use this metric to improve sales productivity.
This metric refers to the costs that have been incurred in signing up a customer. Varying costs are linked depending on what kind of business you operate. For example, if you are an online marketer, the costs of every campaign will be included. In a typical SaaS business, it could mean costs associated with sales and marketing, as well as the staff’s salaries. Businesses are required to recover their CAC in under a year of their customer’s subscription. If this isn’t factored in, then this will burn through all the capital before the company can depend on its monthly recurring revenue.
The aim of this metric is to increase average revenue per unit and customer lifetime value or account/user, while also cutting CAC out in order to ensure the business remains profitable.
This metric informs you about the average revenue generated from your sales. The calculation is pretty simple and that you take the overall monthly (recurring) revenue and divide it by the maximum number of customers you have. Although it may seem a little obvious to some, it is worth noting that if the ARPU is lower than that of acquisition costs, it could be a sign of trouble. You must always ensure that customer acquisition costs are lower than ARPU, or else that it will be difficult to make profits from revenues.
This sales KPI depends entirely on the nature of a particular business. When it comes to new leads, it could either be people signing up for a free trial, or those who could only be browsing around your website for some time without necessarily ordering anything as of yet.
To get an accurate understanding of the number of new potential clients that your business is getting, it would be wise to frame the monthly new leads metric.
This KPI has several benefits to it. You can calculate the average lead-to-sale conversion rate when you compare this metric to your monthly new customers/conversions metric. Measure the new leads of the present months to previous months and check if how much you spend on marketing is justified.
The conversion rate metric, also known as close rate, will give you a better understanding of how effective your sales funnel is.
Leads are first generated right from the top of this funnel before it makes its way to the bottom where the sales department is. This offers both sales and marketing insights into the quality of the leads that come into the funnel via marketing campaigns.
To measure the lead-conversion rate, you need to analyze what your company considers “converted”. When you attract a potential customer’s attention, they are known as a lead. It’s only when they convert that they are then referred to as a paying customer.
Of course, average conversion rates vary from one company to the other, but it’s still crucial to monitor those rates from both Marketing Qualified Leads (MQL) and Sales Qualified Leads (SQL).
Here is the formula for calculating conversion rate:
Lead conversion rate = (total number of new customer/number of leads) x 100
There is no point for sales reps delivering emails and calls if it doesn’t attract potential leads and converts them into customers.
This metric tracks the number of opportunities reps create so that you can predict future sales and find out which one of the opportunities has the biggest sales potential.
The point of this sales metric is to ensure your sales team identifies potential sale opportunities so that they can acquire valuable insights about their sales process, including:
This sales metric greatly benefits sales managers who can determine the health of their sales pipeline and make appropriate decisions about the whole sales process.
This metric is of the utmost importance for your business. The more paying customers you have, the more profits you’ll be able to generate in the foreseeable future. To calculate this sales KPI, don’t include CAC into the total amount of revenue that you expect from new customers over the lifetime of the relationship. If the CLV and ARPU continue to rise, it means that you’re generating more revenue from your customers on average in the long run, and that’s exactly what you need to be doing.
This sales KPI refers to the percentage of new customers compared to new leads.
In other words, this sales metric determines whether your sales team can turn a prospective deal into a real-life profitable business. If we say that 5% of the new leads convert into paying customers, it means the rest of the 95% aren’t bringing in any business whatsoever.
If this is the case with your business, then you’ll be happy to know that there are various ways in which you can improve your lead-to-sale conversion rate. You can do this by offering prospects better benefits as well as sales materials. You can even opt for discounts, promotions or deals, or even an enhanced customer experience from the buying process.
Whatever the reason is that none of the new leads you catch turn into paying customers, you need to isolate the source of the issue so that you can improve your sales.
Understanding the average deal size you have could possibly serve as an indication that you need to grow it. of course, it isn’t possible to double the size of your deal if you don’t know what the current average size is.
This sales metric is exactly what you need to track the amount of revenue coming in, and we’ll also serve as an indicator of how many deals need to be closed in so that you can reach or (even surpass) monthly quotas. It even helps sales managers determine at-risk opportunities.
When you keep track of the sales KPI on a monthly basis, you will also know exactly how and also when the pipeline changes. For instance, if the average deal size is improving, it could mean that you’re bringing in leads that come with even more needs than they did previously.
This metric will allow you to track the expected revenue from every act of seal opportunity in a certain time frame. It will also give you a “best-case scenario” look at those deals that are being negotiated so that you know whether you’re on the verge of hitting some of the sales targets.
It isn’t possible to hit any of the sales targets if there aren’t any deals in progress. By getting an immediate read on your confidence, deal status, and pipeline, you’ll know whether your reps can reach their goals.
Both sales reps and managers can utilize pipeline value in measuring their progress and performance towards other sales goals.
Cross-selling is when a product that the customer doesn’t have is sole to them as they make their first purchase. Upselling, on the other hand, is when you attempt to sell a related product or accessory to your customers, which is paired with the original purchase. Both upselling and cross-selling can boost the overall sales pipeline value, revenue growth, and sales quota if done right.
With both upsell and cross-sell ratio sales KPIs, the sales professional in your team will be able to review the data and determine how they can properly be applied as selling tactics on customers.
If you feel that your customers aren’t reacting as positively as you had hoped to up-selling and cross-selling, then perhaps you should revise your tactics. Most companies find this to be an effective and simple way of making more sales.
Anything that the sales team does to attract new leads is going to cost money. The costs can include social media management, web design, or even advertising costs. Whatever the case may be, it’s going to take a significant portion of the company’s budget.
By adding this metric to your dashboard, you can determine how much it’s going to cost you to bring in a potential new customer.
The cost per lead metric is calculated by summing up every marketing-related costs per month and then divide it by the number of new leads in a month. The marketing team’s salary should also be included in this.
Of course, you’ll need plenty of data to acquire an accurate reading of the sales metric to get a proper understanding of the situation. The best way to collect data in a relatively short amount of time is to use a professional services automation program. This will enable you to use all sorts of data for real-time KPI and detailed reporting dashboards.
If the cost per lead decreases, then it may be a sign of improved brand awareness or better customer experience. If you experience the opposite effect, then you need to closely probe your company’s marketing strategy and give the more profitable channels greater focus.
Arguably one of the top priorities for a company should be to see whether they are on the right path to achieving the goals that they have planned. This sales metric compares several closed deals from various time periods. It serves as a great motivator for your sales team and reps.
When you implement automated sales reports, you will know for sure whether your actual revenue is either doing good or worse than the revenue you had forecasted. Also, when you had planned your goals out, what were they based on exactly? Have you included your baseline in the charts?
The information within the sales KPI will allow you to expect results and deal activities. And should any inconsistencies surface, you can recognize outliers and trends better.
This sales metric is also useful for forecasting, as well as letting you know whether any other factors are impacting the bottom line. Your goal, in the end, is to ensure your actual revenue outperforms the forecasted revenue.
Further inspection of your sales metrics can reveal even more amazing insights. A great example includes determining the source of your sales. This metric comes in handy in tracking sales within specific regions and informs you which of the markets are most valuable and receptive.
The purpose of an incredible sales process is to know who your ideal customer is. An important aspect of this metric is to determine where that ideal customer lives. You can also further segment the sales data to track down sales via demographics and other crucial factors to know your ideal customer profile.
Sales directors that made the overall sales plan can use this sales metric to see how certain campaigns are performing. That way they can assist sales managers to properly optimize their targeting.
This sales KPI can be used when developing revenue projections, a sales growth strategy, and forecasting. This shows the value of the average sales for every transaction of every customer. It’s quite interesting to have the average purchase value compared with the number of opportunities since we can see how much both of them correlate.
When this metric is incorporated into our sales strategies, it can give us the opportunity to incentivize customers to spend more on products and services.
To understand whether the average purchase value metrics have increased or not, we need to compare our average purchase value with our past performance.
The smarter sales teams focus immensely on acquiring more revenue with less the amount of effort required. One way to do this is to increase the value of every purchase. And by doing so, we are effectively boosting the results of our sales efforts. What’s even better is that the more the average purchase value increases, the more we can offset a high CAC. This enables us to spend more on acquiring customers of higher-value.
This metric reviews the performance of every sales team member and is one of the most essential sales metrics in the sales pipeline.
You are responsible for analyzing the percentage of sales compared to the last sales period, to see if the sales reps are on track to meet their target sales, as well as the profit margin for sale.
If one member of the sales team has an impressive performance, they will be used as a standard for other sales reps so they can perform just as well. And those who performed poorly will be trained by the sales manager so they can perform their duties better. This produces a better overall team performance, employee morale, and satisfaction.
You can use this metric to recognize which product or service is selling and which aren’t. The idea is to focus on which one of these items or services are selling better than the rest.
This metric will let you know how well or badly your products or services are doing by measuring their revenue performance. However, it’s worth noting that using this tactic isn’t necessarily ideal for all business models. For instance, a product that is priced low yet high in demand will make up a good portion of your sales, though not necessarily in the top three when it comes to revenue.
When you measure the performance of your products and services over time, you will acquire insights into your market changes, sales strategy, as well as the health of your offerings. To get the most of the sales metric, it would be wise to consider its context. Any changes in product/service performances could indicate a bigger trend like:
Sales metrics must include statistics regarding sales reps. It is highly pivotal that you know how well your team is performing and the types of targets that they need to reach. To get a better understanding of your team’s performance, you have to compare the stats with previous periods. This way, you’ll know whether your team’s results are growing or not.
You should set ambitious, but also realistic or achievable goals. Upon doing so, you should review the precise revenue that a sales rep brings, and how they impact these results after some time.
In short, you should determine which one of your sales reps is getting the best results. Then you can compare those results with other factors in order to improve the performance of your team.
Also known as customer turnover or attrition rate. This metric indicates how many customers decide to stop using a product or service. To achieve desirable results, the number of new paying customers has to be greater than the turnover rate.
The customer churn rate is calculated as a percentage of customers who have stopped using a particular product or service in the last year or so. For instance, if two clients out of 40 are no longer using a product or service, the churn rate will be 2/40 x 100 equals to 5%.
It’s understandable why companies lose some of their clients, but at the very least there has to be a reason behind that decision, something that you need to look into. You also need to differentiate between voluntary turnover and involuntary turnover.
Voluntary turnover indicates that customers go over to another company for their product/service as they think it might be better for them. Involuntary turnover, on the other hand, refers to a customer’s decision to quit being influenced by bankruptcy, relocation, or anything else that was not under their control.
To lessen the turnover rate, you need to offer excellent user experience and customer care, not to mention offer better value and deals with your services than your competitors.
This seals KPI provides an insight into which sales and marketing tactics work best in bringing in leads. It also lets you know which ones are completely pointless and are a waste of time and money. The method of tracking this metric is the same as tracking sales from a product or service. You need to look at what’s working and if it isn’t, then you should either improve it or discard it.
One interesting observation about this metric is that it is more concerned about the quality of leads rather than quantity. If the conversion rate for a particular lead source is awkward, then either fix it or don’t bother wasting your resources. Only focus on the ones that save you considerable money and time.
This KPI refers to measuring the number of products sold in under a month compared to the total inventory that was shipped to you from a manufacturer at the start of the month.
It’s a crucial seals metric that enables you to look into your supply chain’s efficiency. This is especially important for physical stores due to the rise of e-commerce platforms including Amazon, Shopify, and eBay.
Obviously, your goal is to have a high sell-through rate for your business. Any product that is sitting on the shelf is going to cost you money, which means to be occupied by more popular products. If you have a slow sell-through rate, you need to analyze this issue a little deeper. The problem with the sell-through rate is that it will only tell you that something is wrong but not what is wrong exactly.
You need to segment the sell-through rate analysis by product to see which items are doing good and which are doing poorly. Use this data to keep your inventory process up to date so you no longer have to carry products that are moving slowly in sales. Lastly, you need to be on the lookout for seasonal trends that can also impact product sales as well.
This sales KPI refers to the profitability of the sales reps. This metric is extremely useful when you need to know whether you want to offer bonuses or promotions for each representative or to find out the commission’s amount, for instance. Conversely, sales reps can utilize this metric and determine where they can allocate their resources and time so that the best results can be delivered. It’s wise to measure the results among representatives and set up realistic goals that every one of them can outperform while also delivering the best value for the company or department.
Compare the results of each sales rep over time and be sure to identify their strengths. See whether the targets have been met or else you’ll need to revise your sales strategy.
This KPI shows how likely a customer is going to recommend your brand, product or service to their family members or friends. You can measure this metric with customer interviews and surveys. However, the quickest way to measure this metric is to ask this question in the follow-up e-mail of a new subscription or a product order.
Net Promoter Network reports that there are three forms of customer advocacy levels, including:
To calculate the net promoter score, you need to subtract the percentage of Detractors from that of Promoters.
After a couple of months, compare the customer success metrics to see whether there’s any improvement towards user experience or not. If the net promoter score is seeing a downward trend, it might mean that a stronger competitor has made itself known in the market and is targeting your ordinance with a service that is better.
Companies should take a chance of introducing new products and services to expand their business. However, doing so can also impact the sales of existing products/services. It is here that you need to measure the cannibalization rate.
The cannibalization rate measures the level of impact that new products and services have on the sales revenue of existing products. As soon as your company releases any new product/service, the demand and attention of existing products could increase. Cannibalization in companies can pose risks and challenges to marketing and sales teams that are focused on a particular existing product line.
There’s no harm in introducing something new and superior, however, it doesn’t always come without risks. This can especially be true if both new and existing products come with differing, or even competing value propositions. If the new product makes the other obsolete, then there is a risk of alienating some of your existing customers.
One way that organizations can reduce the dangers of new product cannibalization is if they offer the new products at a discounted rate to their existing customers.
This shows the number of sales in every marketing activity your company is performing, whether it is by e-mail or social media.
Calculate incremental sales by subtracting the company’s baseline sales with every new sale generated. This would mean that if your current sales have generated over $85,000 and the new sales have generated over $105,000, it means that your marketing campaigns have produced a total of $20,000 in incremental sales. By tracking this sales metric on a daily basis, you can find out which of your campaigns deliver the best results possible and come up with even more strategies to help tailor your campaigns better to your target audience.
All in all, you need to figure out which campaign brings you the most incremental sales and inspect the results regularly.
The success of the sales team depends on the success of the sales reps. The more you help empower them in doing their jobs, the better the revenue you’re going to get.
This sales metric measures every individual sales rep’s affectedness based on their conversions and activity and how it translates to other members of your team. It’s a way for you to quickly know how well your team is doing as well as motivate your reps and create a friendly rivalry.
No sales rep when want to come to work is to do a bad job. But without any insight at hand, it’s quite difficult to know exactly when they need to put in more work. Besides that, most sales reps are competitive by nature, and having a little friendly competition between members of the sales team might motivate them to do their jobs better.
This sales KPI enables you to look into where leads and prospects are dropping out of your sales pipeline. To determine the biggest leakage point, look into the win rates at every stage of the pipeline, and then isolate the lowest win rate.
If most of the prospects are leaking out from call to demo, it may indicate that your sales reps are doing that good of a job of selling by phone, and their pitch isn’t good enough. If the final stage (demo to close) is where you’re experiencing trouble, it could be that the sales reps need to understand how to better overcome sales objections.
There is never a one-size-fits-all solution for when it comes to sales KPIs or metrics for a company. Each and every one of these measurements will vary depending on one’s niche, industry, and role. For instance, the most important sales metrics for a sales director will be entirely different.
You need to think of choosing sales metrics like choosing a particular diet. The best results will only be achieved by choosing only items. Matching your weight-loss or health goals and exercise routine.
Overall, these are some of the most essential sales metrics that give you an overview of how your sales team and sales reps are performing their duties. It will let you know about every opportunity lost and every close the deal. Every one of these KPIs is impacted by how your sales team is interacting with potential new clients or whether they have the proper tools to convert customers of high value with less expenditure. One way they can turn their performances around is by granting them access to sales engagement software.
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