Sales KPIs are quantifiable metrics used to assess the performance and efficiency of a sales team.
Tracking these metrics will help your company gain a competitive advantage and provide actionable insights in areas of lead generation.
Before we dive into knowing the KPIs that every team should track, let us first understand why are sales KPIs important.
Why are sales KPIs important?
A preferable way to track and measure performance, sales metrics keep your team accountable and help identify if the desired outcomes are being achieved through company’s designed sales strategies or not.
They improve the way you:
- Measure success: Sales KPIs provide clarity by highlighting areas of improvement and encouraging accountability. In addition, they also ensure that company is moving in the right direction towards the designed goals.
- Identify performance trends: By analyzing sales KPIs over a period, you can study patterns and trends of growth and decline and forecast future sales. You can also analyze outliers or anomalies to identify issues and areas of improvement.
- Focus on key areas: By highlighting key areas such as conversion rates, average deal size, or customer acquisition cost, sales KPIs ensure optimised allocation of resources to foster effective decision making.
- Diagnose team issues: By following the “AIR” concept, you can see both leading and lagging indicators of success or problem areas, allowing you to pivot in time to act. KPIs also help to identify bottlenecks in the sales process and track conversion and team collaboration metrics.
- Create alignment with strategic business objectives: One of the most effective techniques of sales performance tracking is to set KPIs in such a way that they align with your company’s strategic objectives. Proceeding this way will help you foresee any misalignment early so that you can take corrective action timely.
- Motivate sellers: Sales KPIs break down goals into small clear targets thereby making them achievable. Moreover, they allow managers to know both small and big wins. For instance, a seller surpassing his/her monthly target should be celebrated publicly fostering a sense of motivation.
Top 10 sales KPIs that every one should look out for
1. Revenue Growth
Why you should track: Revenue growth is one of the most critical metrics to be measured to understand financial health of your company. For eg. tracking revenue growth quarterly or semi-annually will help you know if you are on track or not.
How to measure: Track revenue growth before and after training to evaluate its effectiveness. You can also study trends and correlations and visualize them via CRM analytics tools or ERP software.
2. Sales Productivity
Why you should track: Used to measure the efficiency of your sales team, sales productivity KPI also drives revenue growth and streamline resource allocation. It boosts your team morale and addresses knowledge gaps if any.
How to measure: By calculate the ratio of revenue generated per salesperson or per hour worked, you can measure sales productivity. You can also assess if this metric improves after training.
3. Customer Acquisition Cost (CAC)
Why you should track: You should track this KPI because it helps you analyze the amount you are spending to acquire new customers for your organization and if your marketing practices are up to the mark or not.
A lower CAC means the company is spending less to acquire each new customer, improving profitability and the overall efficiency of the sales process.
How to measure: In order to calculate CAC for your company, you may use the below formula:
Customer Acquisition Cost (CAC) = (Sales Expenditure + Marketing Expenditure) ÷ New Customers Acquired in a Given Period
However, it’s advisable to keep a track of the KPI after training if the above value is lowering.
4. Sales Cycle
Why you should track: Sales cycle refers to the time taken from the initial contact to closing the deal with a client. Shorter is the sales cycle, faster is the revenue generation. This KPI will also allow you analyse the stages where deals can get stuck in near future.
How to measure: To determine sales cycle, you may use the below formula:
Sales Cycle = Total number of days taken to close all deals ÷ Total number of deals closed
It’s essential to track the value at the start and end of the sales cycle to see the overall improvement.
5. Win Rate
Why you should track: Win rate is the percentage of deals successfully closed. High value of win rate means that you are closing deals successfully while a low value means a scope of improvement in your sales processes.
How to measure: Use the below formula to calculate win rate for your company:
Win Rate = Number of closed deals ÷ Total number of opportunities
It’s important to track win rate before and after coaching programs.
6. Customer Lifetime Value (CLV)
Why you should track: CLV measures a customer’s revenue over the entire time they do business with your company. This KPI will not only help you understand the overall growth of your business but also the long-term customer value. Since this KPI will reveal your most-profitable customers, it will strengthen customer relationships to nurture them. It provides a better understanding of ROI and future revenue predictions, as well as the real impact of customer churn.
How to measure:
The basic formula to calculate Customer lifetime value KPI is as mentioned below:
CLV = Average Purchase Value * Average Purchase Frequency * Customer Lifespan
In order to calculate this KPI, you should determine how much money you expect to get from a customer over the relationship lifetime and detract the CAC number.
7. Customer Churn Rate (CCR)
Why you should track: Sales is not just about acquiring new customers, but also about retaining them. Retention and churn rates have a yin and yang relationship. Tracking churn rate will help you assess how well you are at customer retention and satisfaction.
Keeping a historic record of this KPI can give you a lot of information about your business because you will be able to see if there’s a correlation between spikes and change in management, new features, price rises, and customer lifetime coming to an end.
How to measure:
The formula to measure customer churn rate is:
Win Rate= Number of customers lost ÷ Total customers
8. Monthly Recurring Revenue (MRR)
For businesses running on a monthly subscription model, this KPI is essential. It represents the expected steady income a company anticipates each month.
There are two kinds of MRR namely New MRR and Expansion MRR. New MRR is the additional recurring revenue added this month (through new customer acquisition or lowering CAC), while expansion MRR is the additional recurring revenue added from existing customers who upgraded their plans, bought new products, etc.
Why you should track: In order to make effective decisions about your sales process, tracking MRR is a must. For instance, if you have 100 customers paying Rs 50 per month, your MRR is Rs 5,000. Knowing this amount allows you to make informed decisions.
How to measure:
Below mentioned is the formula to measure new MRR:
New MRR = Number of new customers * MRR per new customer
9. Average Profit Margin
This KPI is a key indicator to evaluate company’s financial health. It is used to learn the average profit made across all products, services, bundles, and sales channels.
Why you should track: It’s important to track this KPI to know all products & services from which major chunk of profit is coming. This is an especially important KPI when you sell multiple products and offer dynamic pricing.
How to measure:
Average Profit Margin = (Revenue – Direct expenses) * 100Revenue
10. Pipeline Value
This KPI measures the total value of all your deals in pipeline and tracks the anticipated revenue from all active sales opportunities in a given timespan.
It works on a “best case scenario” framework so that you can foresee if you are on track to hit your sales targets.
Why you should track: It’s important to track this KPI for revenue forecasting and tracking goal headway. For eg. If your pipeline value is INR 10 lakh and your average win rate is 25%, you can expect to generate INR 250,000 in revenue.
How to measure: One of the most basic ways to calculate pipeline value is by summing up the value of all deals in pipeline.
Pipeline Value = Σ Value of all opportunities
However, it’s important to note that pipeline value is not just about totalling the potential deals. A good CRM analytics tool such as Salesforce will help you derive accurate insights on the pipeline value for an individual and the team.
Conclusion
Overall, tracking each of these sales KPIs from revenue growth and sales cycle to customer acquisition cost and lead generation metrics will not just help you optimize performance but also make data-driven decisions.
Start integrating and tracking these KPIs from today and see the magic happening.
