There’s no doubt that understanding the true performance of your sales efforts is crucial for your business – after all, sales are what keep a business alive. And when it comes to understanding sales efforts there’s a certain depth to it; you have to know what to look into and what metrics to track. ✔️
Fast-forwarding, keeping sales metrics in mind: properly understanding and then tracking those allows you to observe what is actually working and what needs a bit of fine-tuning.
However, with so many metrics to track, it can be difficult to know which ones to pay attention to and make sure you get the optimum effectiveness of your sales strategies. 🎯
Worry not, this guide is all about that. With this, you’ll learn all about sales metrics, which one to actually track to make data-driven adjustments to improve overall sales performance and learn the difference between leading and lagging sales metrics.
Let’s get going!
🔑KEY HIGHLIGHTS
- Sales metrics are indicators that are used to assess sales performance.
- Sales metrics give insights into measuring progress, identifying areas for improvement, and adjusting strategies.
- You should track sales metrics like total revenue, market penetration rate, CLC, CAC, sales cycle length, win rate, and churn rate.
- You should opt to use a combination of leading and lagging indicators to gain a comprehensive understanding of your sales pipeline and overall performance.
What are Sales Metrics?
Sales Metrics are data points that are used to track the performance of a salesperson, sales team, or an entire organization over a specific time period. The data points under consideration provide direct insights into how effective the sales strategy being used is in achieving the goals.
As the simplest explanation, sales metrics help you understand what’s working and what’s not in your sales funnel. And by just using and tracking these metrics, you can identify areas for improvement, motivate your sales team, and make data-driven decisions to boost sales.
Metrics in sales are extremely important as they play a vital role in giving insights as well as tracking progress toward set goals, identifying areas for improvement, adjusting strategies, and recognizing strategic issues.
With all of that in hand and ready-to-be-used, sales managers can optimize the strategies and the way they are to be implemented to ensure success at all levels.
And while there are a good number of sales metrics that can be looked upon and tracked, some of the most used ones are Total Revenue, Market Penetration Rate, Customer Lifetime Value, Sales Cycle Length, and Win Rate.
That said, let’s move on to the next bit and discuss each of those and a few others in depth and clarify for you what they actually mean.
10 Key Sales Metrics to Track
As of now, it should be clear that sales metrics, by being properly tracked, can help you gain meaningful insights into the performance of your team and the organization as a whole, and then by using those, you can make adjustments in your sales planning to improve the overall sales results.
In light of that, it is also essential to choose the right metrics to track and truly & effectively assess the effectiveness of your sales efforts.
So, to make matters easier for you on the decision-making side, here are some key sales metrics you should be tracking in your organization.
1. Total Revenue
Total revenue acts as an indicator that shows the financial health of a company.
Total revenue, as a metric, helps you gain insights about overall sales performance and helps you set and measure progress toward sales goals. It is like the lifeblood of any business as it directly reflects the success rate of sales efforts of individuals and the overall organization as well.
You can easily calculate Total revenue by:
Total Revenue 🟰 Sum of all sales transactions within a specific time period (e.g., month, quarter, year) ✖️ Price per unit.
2. Market Penetration Rate
The market penetration rate is a sales metric that reveals your company’s market strength and growth potential. It also helps assess how well your company is performing in your target market.
A higher penetration rate denotes that your product or service is well-established, while a lower rate indicates room for expansion; that is why you should definitely track this.
To calculate Market penetration rate, you can use this:
Market Penetration Rate 🟰 (Number of Your Customers ➗ Total Market Size) ✖️ 100.
3. Customer Lifetime Value (CLV)
Customer lifetime value is one of the most essential sales metrics to be tracked. That is because it helps businesses understand the total revenue that can be generated from a single customer from start to finish throughout the entire relationship.
Its true value is directly dependent on various factors like customer behavior, loyalty, relationship lifespan, and average purchase value. Having said that there are two ways about how you can calculate CLV, which are:
Basic CLV 🟰 Average Purchase Value ✖️ Average Customer Lifespan (in years).
Advanced CLV 🟰 (Customer Revenue per Period ✖️ Gross Margin) ➗ (1 ➕ Discount Rate) ✖️ Customer Lifespan (in periods).
4. Sales Cycle Length
Sales cycle length simply means the time that was taken by one potential prospect to go through all the stages of a sales process (from start to finish) and convert into a real customer.
Further, its tracking helps identify the efficiency of the whole sales process, identify bottlenecks, and optimize strategies to shorten the time taken to convert leads into customers.
Sales cycle length can be easily calculated by using the following formula:
Sales Cycle Length 🟰 Total Time (Hours or Days or Weeks) to Close Deals ➗ Number of Deals Closed.
5. Win Rate
Win rate is a pretty basic sales metric that defines and measures the effectiveness of your sales team at closing deals. It also helps reveal trends in win rate and hints for lead qualification & closing.
It is important to track it as ‘it represents the percentage of sales opportunities that were converted into closed deals.’
Win Rate can be calculated using the following way:
Win Rate 🟰 (Number of Deals Won ➗ Number of Deals that Entered the Pipeline) ✖️ 100.
6. Conversion Rate
As per its name, the conversion rate is the measure of the number of leads that are converted into customers at every sales stage and how effectively you move leads through different stages of your sales funnel.
It is important to track and measure as it helps identify areas for improvement in lead nurturing or qualification.
Conversion rate can be calculated by using the following math:
Conversion Rate 🟰 (Number of Conversions ➗ Number of Leads) ✖️ 100.
7. Quota Attainment
In the profession of sales, quota attainment as a metric is one of the most important to be tracked. That is because it helps evaluate individual or team progress (Quotas) against set sales targets, enabling adjustments in strategies, training, or resources to ensure goal achievement.
Aside from that, its tracking is also done to measure the number of deals that a single salesperson has closed into their set quota during a specific period of time.
Here’s how you can calculate quota attainment:
Quota Attainment 🟰 (Actual Sales ➗ Sales Quota) ✖️ 100.
8. Average Deal Size
Average deal size, also known as average selling price, is the value of each closed transaction on average.
In particular, it represents the average revenue generated per sale. Also, monitoring it can provide direct insights into the value of deals closed by sales teams, aid in setting realistic revenue targets, and guide pricing strategies.
Average deal size can be calculated by using the following math:
Average Deal Size 🟰 Total Value of Deals Closed ➗ Number of Deals Closed.
9. Churn Rate
Customer churn rate is also one of the most essential sales metrics that always needs to be tracked. It represents the number/percentage of customers that discontinued doing business with your company within a given period.
It is to be noted that tracking churn rate is crucial for understanding customer retention and loyalty. Likewise, high churn rates can indicate issues with product satisfaction or service quality, and there needs to be immediate implementation of customer retention strategies.
To calculate the churn rate, you can use the following formula:
Churn Rate 🟰 (Number of Customers Lost in a Period ➗ Total Customers at the Beginning of the Period) ✖️ 100.
10. Customer Acquisition Cost
Lastly, we have customer acquisition cost (CAC), which solely shows the average cost that was used or needed to acquire a new customer. It is important to be tracked as it shows the efficiency and profitability that was associated with acquiring a new customer.
Additionally, it shows the financial efficiency of your sales efforts and plays a crucial role in guiding strategies related to marketing strategies and budgets.
When taking CAC into account, it’s important to balance it with CLV just so as to ensure your customer acquisition efforts are profitable.
To calculate customer acquisition cost, you can use the following math:
CAC 🟰 Total Cost of Customer Acquisition (Marketing & Sales Expenses) ➗ Number of Customers Acquired.
Leading Vs Lagging Indicators in Sales
At this point, it might surely be clear to you what key sales metrics are to be used and tracked. Regarding each of them, they all play a crucial role in empowering the user to understand the actual sales performance.
That being said, all of those can especially be categorized into two sets of indicators, namely, Leading and Lagging, based on the distinctive purpose they serve. So, let’s look at what those terms mean:
On the one hand, leading indicators are a type of sales metric that are forward-looking in nature. These types of indicators or metrics are tracked to predict the future of sales performance. Leading indicators can act as measures that can be used to get insights for the betterment of real-time coaching opportunities and enable proactive measures to avoid potential issues.
On the other hand, lagging indicators are backward-looking measures that show a complete view of historical sales performance of a team or an organization. Typical examples of lagging indicators are revenue generated, conversion rates, and average deal size. Lagging indicators in most common use cases are used to evaluate past strategies and serve as a snapshot of completed sales as a whole.
Final Thoughts
To sum things up, it is not to be forgotten that sales metrics serve as invaluable tools for businesses seeking to optimize their sales performance and drive growth. As such, knowing which sales metrics to actually track can make a huge difference in how you can understand your team’s performance.
And if you are a manager looking to get a better understanding of your sales team’s performance, you should have a laid-out plan that clearly outlines which KPIs to look into. By doing so, you can accurately gain valuable insights into your team’s operations and make data-driven decisions to achieve your business’s sales objectives.
FAQs
What are the three important sales metrics?
The three most important sales metrics are Deal Conversion Rates, Sales Cycle Length, and Customer Churn Rate.
What are the KPI metrics in sales?
KPIs in sales are metrics that are used to track the performance of a salesperson, a team, or a whole organization. KPIs are also used to track how well the person or the team is progressively working towards the sales and business objectives.
How to improve sales metrics?
If you are looking to improve your sales metrics, you should consider and do the following actions:
- Analyze your sales process to pinpoint areas that have bottlenecks and need improvements. In addition to that, you need to build a well-managed pipeline that ensures a steady flow of qualified leads.
- Utilize data and analytics to track metrics/KPIs throughout your sales process. You need to focus on tracking both leading metrics like leads generated, sales cycle length & market penetration rate, and lagging metrics like revenue generated, CAC & CLV.
- Employ sales enablement tools that directly align with your sales strategy and are meant to work for your sales team and help you through the sales process.
