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Sales Metrics Guide: KPIs to Track, Why & How (Sales Teams)
Businesses need to measure sales performance to assess success, identify areas for improvement and plan future strategies.
Sales metrics are the measures of activity that allow you to track progress toward your business goals. These sales metrics can include anything such as the number of leads generated, average deal size, and average revenue per account.
In this blog post, we will discuss seven essential sales metrics that you should be tracking. We’ll also provide tips on how to improve these metrics. Let’s get started!
What are sales metrics and why you should track them?
Sales metrics are key performance indicators (KPIs) that help you understand how your sales team is performing. By tracking these metrics, you can identify areas of improvement, how to improve them, and make necessary changes to increase sales.
Successful businesses track a variety of sales metrics, including:
- Total Revenue
- Sales Qualified Leads (SQLs)
- Customer lifetime value (CLTV)
- Percentage of Revenue from New vs. Existing Customers
- Lead velocity rate (LVR)
- Sales cycle length
- Percentage of Qualified Leads
- Annual contract value (ACV)
- Customer acquisition cost (CAC)
- Projected pipeline sales value
- Average Churn rate
Why Tracking Sales Metrics Is Important for Sales & Marketing
Tracking sales metrics is certainly important for sales performance and can be helpful for marketers. Sales indicators are useful for marketing efforts.
Sales metrics is an effective tool for evaluating the effectiveness and impact of marketing strategies on target demographics. Markets can use sales data and analytics to help them optimize their strategy to improve results. Sales data helps marketing teams develop best practices for success for each business unit.
To ensure the success of any sales strategy, it is necessary to track key performance indicators (KPIs) that best reflect the organization’s desired outcomes. KPIs allow marketers to measure percentage of progress and performance against goals and objectives.
What are sales metrics that your sales team needs to track?
Sales metrics represent data that describe the performance of individual salespeople, sales representatives, sales manager and even entire business units. Key performance indicators can help companies understand market changes or plan for future growth.
1. Total Revenue
Most business data is revenue. Total revenue is measured on each time scale, typically monthly, quarterly, and annually. The annual return on capital (ARC) measure is often used to measure performance for the company’s business processes and services.
Similar to monthly recurring revenue or MRR, the monthly recurring revenue measure can be measured over a longer period of time.
How to improve total revenue? Explore pricing models, such as pay-as-you-go or subscription plans; look for ways to increase sales prices; and optimize customer acquisition strategies.
2. Sales Qualified Leads (SQLs)
The first sales metric on our list is SQLs or sales-qualified leads. A sales-qualified lead is a potential customer who has been contacted by a sales representative and determined to be a good fit for the product or service being offered.
To generate SQLs, businesses typically use marketing campaigns and lead-generation tactics such as content marketing, search engine optimization (SEO), and pay-per-click (PPC) advertising. Once leads are generated, they are passed on to the sales team for follow-up.
The number of SQLs can be used to measure the effectiveness of lead generation efforts and the quality of leads being generated. It can also be helpful in identifying potential problems with the sales process, such as a high number of SQLs that are not converted to sales.
If you want to improve your SQL rate, start by taking a close look at your lead generation efforts. Are you generating enough quality leads? Once leads are generated, are they being passed on to the sales team in a timely manner?
The sales qualified lead (SQL) to opportunity rate measures the number of SQLs that are converted into opportunities. This metric is important because it shows how effective the sales team is at converting leads into sales.
3. Customer lifetime value (CLTV)
Lifetime value represents the revenue or the number of deals that can be expected during an average customer relationship. As a result, the relationship with the customer is nurtured and your team should ideally nurture the existing relationship to keep them happy and grow the LTV.
LTV can be an important sales action if the value of the average contract price is more than or equal to the average contract price. To determine the long-term viability of the sales team, retention rates and churn rates are important.
Customer lifetime value is determined by taking the total revenue generated by a customer and subtracting the cost of acquiring and servicing that customer.
After you calculate the ACV for specific contracts or customers, average all your clients to get your customer lifetime value – CLTV (or LTV, some like to call it). This number will give you a good idea of the value of acquiring a new customer.
There are two ways to increase your customer lifetime value: increase the revenue generated per customer or decrease the cost of acquiring and servicing customers.
4. Percentage of Revenue from New vs. Existing Customers
The percentage of revenue from new versus existing customers refers to the percentage of your company’s total revenue generated from new customers versus existing ones.
Understanding the percentage of revenue generated by new customers and the number of deals they can make can be helpful. In some cases, existing customers account for the increase in revenue, which could indicate that your team has done a great job promoting new products. To know where your team was trending at this point, track your LTV and more.
To improve this metric, focus on customer retention by targeting existing customers with promotions and discounts. Additionally, you should have a plan in place to acquire new customers and engage them with your brand or products.
5. Lead velocity rate (LVR)
The lead velocity rate is a pulse check for the health of your pipeline. LVR measures the speed at which leads are moving through the sales pipeline.
A high LVR is indicative of strong sales processes, while a low LVR can be indicative of a number of problems, such as a slow lead generation process or a lengthy sales cycle.
To improve your LVR, start by looking at your lead generation process. Are you generating enough leads to keep your pipeline full? If not, consider increasing your marketing budget or changing your lead generation strategy.
If you have a lengthy sales cycle, there are a few things you can do to shorten it. One is to make sure you’re qualifying your leads properly. Another is to streamline your sales process so that it’s as efficient as possible.
6. Sales Cycle Length
The sales cycle refers to the length of time it takes to close a deal. A shorter sales cycle indicates a more efficient sales process, while a longer sales cycle can be indicative of a number of problems, such as lengthy proposal processes or a need for more training for your sales department.
Your sales cycle length can be optimized in a number of ways, but it starts with having a clear and concise sales process that your team can follow. If you don’t have a defined sales process, now is the time to create one.
One pro tip is to make your sales email stand out from the crowd with exclusive and valuable insights. Then, make them sign and stay with your winning personality, support, and by keeping up with those consultative insights to provide your clients with real value for their business.
7. Percentage of Qualified Leads
Qualification Leads refers to the people who fit the profile of your customer in the most favorable way. You can pinpoint your ideal customer location. Make sure you meet their needs and you will get a higher qualified percentage of leads for your business and increase your revenue.
To improve the percentage of qualified leads, you need to use selective targeting. Send out surveys to potential customers and find out what their needs are, which solutions they prefer, and how they would like to be contacted. You should also provide additional information about your product or service in order to appeal to them more directly.
8. Annual contract value (ACV)
ACV, or annual contract value, measures the revenue a yearly or multi-year contract generates per year. This metric gives you an important perspective of a total contract value (TCV) so that you can track your progress each year.
To increase your ACV, you should focus on selling to larger companies that have the budget for more expensive contracts. You can also try upselling and cross-selling existing customers to increase the value of their contract.
This is important because it allows you to see not only how much revenue a number of deals generate, but also how much revenue your business can expect from that customer over the course of a year or more.
9. Customer acquisition cost (CAC)
Customer acquisition cost refers to the total cost of sales and marketing divided by the number of new customers acquired in a certain period of time.
Although it’s not always possible, the ideal scenario is to keep your customer acquisition costs low by working with interested prospects and an improved sales process.
To lower your CAC, you need to either increase your conversion rate or decrease your acquisition spend. You can increase your conversion rate by optimizing your sales process and making sure you’re targeting the right leads. And you can decrease your acquisition spend by improving your marketing ROI.
10. Projected pipeline sales value
Projected pipeline sales value refers to the projection of the value of deals that are currently in your sales pipeline. To calculate it, you’ll need to know the close rate for each stage of your pipeline and the average deal size.
This metric is useful for forecasting purposes and can help you determine whether you’re on track to hit your quarterly or annual sales targets.
To improve this metric, you can work on increasing your win rate and the average deal size. Also, make sure you’re regularly reviewing your pipeline and removing any deals that are no longer active.
11. Churn rate
The churn rate is the percentage of customers who cancel or do not renew their subscription to your product or service.
This metric is important because it can give you insight into whether your customers are happy with your product or service. If your churn rate is high, it could be a sign that you need to make some changes to your offering.
To improve your churn rate, focus on increasing customer satisfaction and retention. You can do this by providing great customer service, regularly communicating with your customers, and offering incentives for them to stay with you.
Churn is a reality for any business, but there are ways to reduce or avoid it. By tracking your churn rate and taking steps to improve it, you can keep your customers happy and reduce the risk of them leaving.
11.Average Revenue per user
Average revenue per user is another key metric to track. This helps you understand how well your team is converting customers and the amount of revenue each customer is generating. To improve this metric, focus on upselling products or services and leveraging data-driven insights to create more personalized experiences for customers.
Average revenue per user and percentage of income from new vs. existing customers are just two of the key sales metrics to keep an eye on. It is possible to track average revenue per account over time by determining the ratio of total sales to the total number of active users.
By monitoring this metric, it is possible to measure changes in sales performance across different customer segments and channels.
How to choose the right sales KPIs for your team
Key performance indicators that illustrate what success looks like in your organization are important choose the sales metrics that matter most to your business and measure them.
You also need to create a KPI vocabulary to ensure everyone is working from the same spreadsheet. A cluttered data set can cause errors that could have slowed the growth of the business.
Use specific, actionable, and measurable metrics
These metrics should also be directly linked to your business goals, and the metrics must also have a direct impact through strategic actions and measures that can be tracked and quantified. You can choose actionable KPIs with these simple principles.
SMART is for scale, measurable, easy to learn, relevant, and current. Use the downloadable worksheets that include your agreed-upon KBPI terminology, definition calculations, and relevant information.
Define your goals with a cross-functional team
First, sit up and talk with everyone who works on your revenue operations cross-skills. This will give your organization a clear understanding of your KPI. Agree on how many metrics you will calculate with the data you collect and design systems to get the data you need. The best questions to build teamwork are common terminology.
Challenges in Tracking Sales Metrics
Sales metrics can provide valuable insights into the performance of a sales team, but there are some challenges to tracking them. One challenge is understanding which metric or combination of metrics best reflects the performance of your team in different contexts.
It is also important to ensure that you are collecting accurate data and setting up systems for accurately tracking it over time.
1. Accurate data collection
Sales metrics need to be properly tracked and collected in order to accurately measure sales performance. This includes gathering information from multiple sources, including customer records, accounts receivable, and sales reports.
Collecting accurate data can be a challenge due to a lack of standardization among companies or a lack of access to records.
2. Keeping up with changing trends
The sales environment is constantly changing due to factors such as new technology, economic conditions, customer demands and market shifts. It’s important for sales teams to stay up-to-date on the current trends so they can effectively adjust their strategies and tactics in order to optimize their performance. Keeping track of these trends can be difficult without proper tracking systems in place.
3. Establishing the number of meaningful KPIs
Key Performance Indicators (KPIs) are an important part of measuring success when it comes to sales metrics, but they need to be measurable, relevant and attainable in order for them to have true value.
Developing the right KPIs takes time and should be tailored based on specific objectives and goals. Without establishing meaningful KPIs it can be difficult to accurately measure success or areas needing improvement over time.
4. Determining the right mix
As a business grows it’s often necessary for managers to determine which channels are providing the best returns when it comes to revenue generation, such as online vs offline channels or retail outlets vs direct sales representatives, etc.
Having the ability to track each channel separately is key so decision-makers can make more educated decisions about where resources should be allocated for maximum ROI potential.
5 . Analyzing results efficiently
Gathering insights from collected data is an essential part of tracking sales metrics but this task requires proper analytics tools that allow users to quickly glean actionable information from raw data sets such as identifying correlations or anomalies between different variables etc.. The right mix of analytics tools makes this process much easier but also relies heavily on having accurate data that has been collected correctly in the first place.
6. Establishing benchmarks
In order to accurately measure progress, established sales benchmarks should be set as a reference point for comparison. This can be done in two ways – either by setting measurable goals based on previous performance or industry standards or by conducting market research that identifies comparative customer behavior across different markets and customer segments.
These are just a few challenges that need to be taken into account when tracking sales metrics. However, with some experimentation and dedication, any business can start seeing improvements in its performance.
SaaS Sales Metrics
Software as a service (SaaS) is an online distribution method that provides customers with an Internet connection instead of physical devices and custom installations. SaaS and subscription services require different metrics.
SaaS sales metrics focus on customer retention, user growth, and lifetime value. This means tracking the number of customers that are lost each month, the average time a customer stays with your product or service, and the total amount of revenue generated by those customers over their tenure.
Here are 3 SaaS sales metrics and some tips for improving them:
1. Customer Retention Rate (CRR)
This metric is the percentage of customers that remain with a business after their initial purchase. Improving your CRR means focusing on customer service and satisfaction, as well as creating loyalty programs and marketing initiatives to keep customers coming back.
2. Customer Acquisition Cost (CAC)
This metric is the average cost associated with acquiring a new customer. It considers all marketing and sales costs, such as advertising campaigns, website development, and personnel costs. To improve this metric, businesses can look to optimize their marketing efforts by targeting more qualified leads or focusing on different channels that may be cheaper and more effective.
3. Months to Recover CAC
This metric shows how long it takes to recover the money spent acquiring new customers. It is calculated by dividing the cost of customer acquisition (CAC) by the monthly revenue from those customers. Improving this metric requires focusing on increasing lifetime value, as well as making sure that each sales lead is qualified and can be easily converted into a customer.
SaaS sales metrics are essential for understanding your business’s performance and growth. By tracking these key metrics, businesses can make data-driven decisions about where to focus their resources in order to increase profits and efficiency.
To improve these sales metrics, businesses should first develop a dashboard of the data they are tracking. This allows them to detect areas where there is room for improvement and easily identify which actions will have the greatest impact on their bottom line.
For example, if you notice that your conversion rate is low, it may be worth investing in more marketing activities or improving your customer service. Additionally, by understanding the buying behaviors of different customer segments, you can tailor your approach and craft more targeted sales strategies to reach them.
Leading vs Lagging Indicators
Leading indicators face the future while lagging indicators analyze the past. A financial indicator such as revenue is a lagging indicator because it tells you what has already occurred. Leading indicators give us predictive coaching opportunities- for example, observing representative activities or call connection rates. Lagging indicators tell us to review and strategize by displaying outcomes of actions that have already been taken.
These are indicators that can help you understand the effectiveness of your actions, be they in marketing or customer service. This metric guides a sales manager to better understand what methods work best for their target audience and how to adjust tactics if necessary.
Sales Metrics vs. Sales Performance Metrics?
Sales Performance is a statistic that represents salespeople, sales force, and company sales results to achieve their goals. These statistics can be used in setting wages, incentives, and bonuses.
To standardize performance measurements and target sales, sales managers also need established sales performance indicators (KPIs). KPIs are used to evaluate sales performance by selling metrics to customers. They are not identical, but they have a close relationship.
Sales Metrics are based on the number of sales made by a business, and it gives an overview of how successful they are. Sales metrics evaluate and measure performance in terms of the rate at which sales are being made, customer satisfaction, lead generation efforts, and employee productivity.
Sales metrics vs Sales KPIs
Sales metrics are used to track progress and performance, while KPIs (key performance indicators) set expectations for businesses and measure their progress toward achieving key goals. In other words, KPIs provide a broad overview while metrics focus on more specific business activities and processes needed to achieve these goals.
Sales metrics are the measures that you track in order to assess whether your sales department is performing well. Sales KPIs (key performance indicators) are a subset of those metrics that indicate whether your team is on track to reach its targets.
For example, if your goal is to increase sales by 20% this year, then a relevant KPI would be sales growth. However, to track sales growth you need to measure different sales metrics such as a number of new customers, customer lifetime value, etc.
What is the most effective way to track sales metrics?
A range of sales tracking tools can be used to measure sales metrics. One tool that is essential to have is a customer relationship management (CRM) system, which consolidates data and insights on all your customers and prospects.
Your CRM system should be able to give you a complete view of your sales pipeline, from the first interaction with a lead to the final sale and beyond. This data can then be used to track key sales metrics such as conversion rates, win rates, and deal size.
Frequently asked questions about sales metrics:
What are the 4 types of metrics?
The four types of sales metrics: Activity, Pipeline, Effectiveness, and Results Metrics.
What are good sales metrics?
Good sales metrics to track include win rate, average deal size, conversion rate, customer retention rate, and lead response time.
What are KPIs in sales?
Key Performance Indicators (KPIs) are metrics used to measure the performance of a sales team. Common KPIs include win rate, customer retention rate, and lead response time.
Sales Metrics: Summary
Sales metrics are important performance indicators that help you understand how your sales team is performing. By tracking these metrics, you can identify areas of improvement and make necessary changes to increase sales.
Some of the most important sales metrics include sales qualified leads, lead velocity rate, sales cycle length, win rate, annual contract value, customer lifetime value, and customer acquisition cost. Tracking these metrics will help you make data-driven decisions about your sales strategy and improve your overall sales performance.
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