If you’re a sales manager, you never have a day in which there’s not enough data. You need sales metrics.
Your problem is most likely the opposite: you have too much data. This is due to salesrooms having advanced tools that measure everything under the sun. There seems to be no limit to the number of data points, reports, and metrics. This can be very overwhelming. That’s why you need to determine which sales metrics are worth tracking. And that’s the purpose of this article. It addresses the most important metrics that smart sales managers track. But before we get into those metrics, let’s address some common questions about sales metrics.
Sales metrics are data points. The data represents the performance of a company, the sales team, or an individual rep. All sales teams use sales metrics so that they can track progress. The progress relates to goals, incentives, and bonuses. Sales metrics also help sales managers recognize the weaknesses of each salesperson. Is your sales team preparing for growth and/or changes in the market? If so, observing sales metrics is a key strategy for getting prepared. But don’t assume that viewing sales metrics can solve all your problems. Learning how to use sales metrics is only the first step toward making positive changes.
KPI stands for “key performance indicator.” All sales KPIs serve as crucial indicators and signposts. The indicators assist salespeople in gauging how effective certain indicators are. Observing any form of KPI can also help sales leaders understand how their teams are doing. Sales KPIs refer to any sales metric that connects to the performance of a sales team. Managers learn fast how sales numbers compare to the goals of their organizations. Sales KPIs are a great tool for assessing average performance analytics. That’s why people hold sales KPIs in such strong regard.
There are many ways to track sales metrics. In fact, this article explores the best metrics that sales managers should use. But consider tracking reps by using the following eight sales analytics metrics. Each common metric can help you make sure that your reps are performing well.
Sales growth metrics are crucial for all types of companies. They show each company important insights. And the insights consist of more than showing if sales numbers are getting better/worse. Sales growth metrics can display the following three pieces of criteria.
This sales metric 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. This is a sales metric that AI software is beginning to test out. In the future, AI will have the ability to assess all sales metrics within this article.
The average deal size is an easy calculation. All you do is divide 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. 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. After all, no business can function without consistent revenue from customers. That’s why the average deal size related to customers is so important. The bigger the deal size, the more revenue you will have from each customer. Plus, more revenue for the company leads to more revenue in your pocket.
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.
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 slower 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 is crucial for both individual success and team success. That’s why you should go over this sales metric on a consistent basis. It will clue you in on whether your team can handle the sales pipeline.
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 conversion rate of ten percent. How does this metric help? You can use it to determine the number of leads needed 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 that 10% of the leads convert to clients. You now know that eight thousand leads are necessary per 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 of average deals are getting closed. This is proof that selling performance is getting better. Here are two huge red flags.
Few would argue with the notion that average revenue is the single most important sales metric. And what does “the revenue” average 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 average percentage of new business. This refers to first-time buyers who never purchased anything from your company. 2. The average 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 average renewal percentage. This percentage correlates to customers who are extending their current contracts. It’s a very important percentage related metric.
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 sales metric will inform you of when most of your prospects are dropping out. Your team should track stage-by-stage conversion rates. This is so they can see the leakage.
Here is an example. Let’s say 35% of your prospects are willing to take part in discovery 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. 1. Your salespeople aren’t qualifying like they need to be. 2. They’re not good at giving demos. 3. Their negotiation skills are subpar. If you suspect any of these three, then 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 sales metric is dependent on how many prospects are in the pipeline. And it’s one of the easiest analytics to measure. The definition of a lead for you might be different than how another company defines a lead. For example, a lead could be one of the following three factors. 1. Someone who reaches out to one of your sales reps. 2. Someone who downloads content from your website. 3. Someone who starts using a free trial of your product or service. Here’s 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.
This is another easy sale analytic to measure. Quantifying sales numbers will give you an automatic glimpse into the big sales 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 the sales per month metric 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 measure if sales can profit over time. You’ll be able to answer this question. Does the deal’s revenue outweigh the total of the worker’s base pay? And what about the 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.
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.
Once you do this, you’ll understand the level of value that your pipeline must have at all times. For example, say that your ratio is 7:1. This means your pipeline should get filled with opportunities. Those opportunities should have a value of at least seven times the forecasted quota. This metric is like the customer acquisition cost metric. Let our team know if you need help with that sales metric.
This sales metric helps you learn 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.
Another Sales Performance Metric to Track: The Churn Rate
The churn rate is another crucial sales metric that your organization should track. Calculating the rate will clue you in on an answer to the following question. “Does my company excel at keeping our clients around in the long-term?” You might already ask yourself this question anyway. And using the churn rate is one of the best ways to get to the bottom of that question. Recognizing the churn rate refers to understanding why clients are leaving your company. After all, the churn rate will display how often people are moving on.
Say that your business has a high churn rate. This means that a lot of your customers could switch over to competitors on a regular basis. Once you realize why clients are churning, you can start to make positive changes. The changes should apply to your team’s sales techniques and tactics. Calculating the customer churn rate is easy. You begin by subtracting clients at the end of the month from clients at the beginning of the month. Next, you divide that number by the customers at the beginning of the month. Use this sales metric every month so you stay on top of the number of clients that are leaving your company.
Is your company unsure of what sales metrics it should track or measure? If so, please contact our firm today. Our sales experts can assess your pipeline fast and come up with analytics solutions. We know how important it is to get more closed deals and improve the win percentage. That’s why our team loves to partner with every type of salesperson. No matter what your business entails. From outbound marketing to selling software- we’ve got solutions. And those solutions can lead to many closed deals for you and your team.
So, what are you waiting for? Call or email us today and we will send you a link to our members-only Sales Acquisition Support Guide. It serves as a window into how to boost the performance of any type of rep. It features free indicators that would cost a lot of money under any other firm’s service. And if you need any other type of sales support, our team is standing by. Remember- to measure a sales metric can help anyone understand the level of a rep’s performance. But you can’t stop once you measure a key metric.
The next step is to make positive changes that lead to a percentage increase in revenue. And that doesn’t mean getting on an intercom and yelling at your salespeople. (Although you could use your intercom to motivate them.) It means doing whatever you can to boost revenue by winning more deals. And our firm has sales analytics strategies to help you do so. We’ve helped HubSpot, software companies, and many other organizations boost sales numbers. There’s no reason we can’t assist your company today.
You can’t afford to sit back and wait when it comes to getting sales revenue results. It’s time to take action and increase the win percentage of your reps. Use the ten sales metrics of this article on a consistent basis. Doing so will help you understand what’s working and what needs to change. If you’re consistent in using the metrics, you could increase your revenue over time.