The 10 Most Important Sales Metrics to Track
If you’re a sales manager, you never have a day in which there’s not enough data. Your problem is most likely the opposite: you have too much data. This is due to sales rooms having advanced tools that measure everything under the sun. There seems to be no limit to the amount of data points, reports, and metrics. This can be very overwhelming. That’s why you need to determine which sales metrics are worth tracking.
Here are the ten most important metrics that smart sales mangers track:
This is important for informing you whether the quotas are too low or high. Here’s the general rule of thumb. Quotas are almost always unrealistic if fewer than 60% of reps are reaching it.
If this is the case for your team, it’s possible that you’ll need to hire better-skilled reps. Additionally, you may need to get rid of the reps who are underperforming the most.
Here’s another possibility. Your sales compensation plan might need to change. Look at the pay structure to determine what needs to happen. This is so your salespeople can increase their sales numbers.
Also, take action If the percentage of reps meeting their quota is over about 85% or so. This means their job is too easy and you need to have a loftier quota. Thus, reframe the quota setting methods. You’ll need to increase the number of targets.
The average deal size is an easy calculation. All you do is dive the total number of deals by the total dollar amount from all the deals.
It’s best to examine this metric every month or quarter. The numbers will convey to you if your contracts are becoming too big, small, or not changing at all. Many sales managers have a goal to move upmarket. If that’s what you want, then the average deal size must increase.
But say your goal is to increase the number of SMB customers. In this case, you need the number to decrease. At the same time, your total revenue and number of customers will need to increase.
Average deal size is a great way to identify deals that could be troublesome. For example, say one of your reps gets an opportunity that’s about 4 times the size of other opportunities in the CRM. This does two things. 1) It decreases the probability of closing. 2) It makes the sales process drag on for a long time. This is why a good manager knows to ensure his or her rep’s deals are almost guaranteed to happen. You can’t afford to allow your reps to put all their quota eggs in a single basket.
Also, keep track of any reps that have an average deal size that’s a lot lower than the average of the team. This means that they’re only pursuing low hanging fruit. There’s one key action you’ve got to take with reps like this. You must push them to target bigger prospects—or more competitive ones.
This quantifies the percentage of leads that end up becoming clients. Here’s an example: Say you get five hundred leads every month. Of those leads, fifty decide to buy your product. This creates a conversions rates of ten percent.
How does this metric help? You can use it to determine the number of leads necessary to hit your revenue targets. Here’s an example. Say the monthly quota is $800,000 and the ADS (average deal size) is one thousand dollars. This means the reps must close eight hundred deals. Say 10% of the leads convert to clients. This means eight thousand leads are necessary every month.
Utilizing historical conversion rates is crucial for success. It’s a great way to figure out whether your salespeople are getting better at their jobs. Say the average win rate is getting bigger. Plus, the same (or more) number number of deals are being closed. This is proof that selling performance is getting better.
Here are two huge red flags. 1) The win rate is decreasing. 2) The quantity of deals is stagnant or also decreasing. These are signs that your sales process isn’t working. It could also mean that your lead generation efforts haven’t been working.
Always remember that win-rates usually decrease while moving upmarket.
Few would argue with the notion that revenue is the single most important metric. And what does “revenue” mean? It’s the total cash received during a certain amount of time. Always factor in criteria such as discounts and returned merchandise when determining revenue.
A competent sales manager knows to break down revenue into the following 3 factors:
1) The percentage of new business. This refers to first-time buyers who never made purchased anything from your company.
2) The percentage of up-selling, expansion, and cross-selling. This refers to current customers that are doing one of two things. They’re either purchasing a separate item or upgrading to a premium package or tier.
3) The renewal percentage. This correlates to customers who are extending their current contracts.
Percentage growth is crucial to making your business goals become a reality. Say a lot of your clients are leaving after 6 months. This means you’ll need to improve your renewal percentage metric.
Be sure to always look at hard numbers. One percentage increase usually means others will decrease.
Evaluating this will inform you of when exactly most of your prospects are dropping out. Your team should be tracking stage-by-stage conversion rates. This is so they can see the leakage. For example, let’s say 35% of your prospects are willing to take part in discover calls. About half of them reach the demo stage and then only 3% agree to buy. This is a huge drop-off. It’s a reflection of one of three things:
-Your salespeople aren’t qualifying like they need to be.
-They’re not good at giving demos.
-Their negotiation skills are subpar.
If you suspect any of these three, you should pay close attention to your salespeople. This will allow you to figure out both what they’re doing wrong and who’s doing it.
This metric is dependent on how many prospects are in the pipeline. The definition of a lead for you might be different than how another company defines a lead. For example, a lead could be:
-Someone who reaches out to one of your sales reps.
-Someone who downloads content from your website.
-Someone who starts using a free trial of your product or service.
The simplest way to determine the average conversion rate per month? All you must do is compare the number of new leads with how many new customers you’re getting.
Quantifying sales numbers will give you an automatic glimpse into the big picture. You’ll see whether your company’s business is growing, diminishing, or staying in place. It’s important to figure out if your sales forecasts are accurate. You can do this by framing monthly sales numbers as a percentage of the monthly quota.
Paying attention to sales per month is important. It will help you see if the changes you’ve made to your sales process are hurting or helping. Try to go the extra mile by comparing sales numbers from previous years to current sales numbers. This will help you figure out if a certain month is hotter or slower than others.
This is a great way to figure out if a sale’s profitable. You’ll be able to answer this question. “Does the deal’s revenue outweigh the total of the worker’s base pay, commission, travel expenses, etc.?”
Determining this ratio is simple. All you need to do is examine how much money your company’s shelling out for sales. Then, compare that total to how much profit the sales have generated. You’re contrasting the customer acquisition cost with the average deal size.
This ratio positions you to identify financial red flags before anything drastic occurs. Say your sales workforce is costing more to run than the profit that they’re generating. In this case, you need to make big changes immediately. If this is what’s taking place, consider doing one of the following three actions:
-Come up with easy ways to cut costs.
-Make your sales cycle shorter.
-Go back to the drawing board with the type of prospect that should get targeted.
This determines if your team has opportunities to make their quota. But it depends on the timeframe. The ratio contrasts the fullness of the pipeline with the quota for the period.
Many opportunities don’t lead to sales. That’s why the SPC matters. It assists in determining the number of needed opportunities that must be ongoing. Here’s how to calculate the SPC:
1) Take the pipeline forecast and divide it by the sales forecast. This will equal the average sales days.
2) Take the average sales days number and divide it by ninety days.
3) Multiply that total by: (one divided by the close rate).
Once you do this, you’ll be able to understand the level of value that your pipeline must have at all times.
For example, say your ratio is 7:1. This means your pipeline should get filled with opportunities. Those opportunities should have a value of at least seven time the forecasted quota.
This metric helps you understand how fast your reps are replying to their inbound leads. The longer they take, the more opportunities will disappear.
If a prospect needs help and is contacting sellers, they’re going to be reaching out to lots of companies. This means if your rep has taken a full day to respond, it’s almost guaranteed that a sale won’t happen.
Contacting inbound leads in less than an hour increases qualification by seven times. But say your rep takes twenty-four hours to respond. The odds of making a sale drop by sixty times.
You can’t afford to sit back and wait when it comes to getting results. That’s why it’s time to take action. Use these ten sales metrics so you understand what’s working and what needs to change. If you’re consistent with these metrics, you’ll be much more likely to increase revenue over time.