Sales Metrics Guide: Which KPIs to Track, Why & How (to Create High-Performing Sales Teams)
If you’re just getting started with your sales process, you know that there is a lot of sales data your team will be generating. What are the important sales metrics should you track?
There’s a ton of technology that enables you to measure and analyze every sales metric from the number of minutes talked, to number of words per average email and the length of your sales team’s email subject lines. And you can bet your sales managers will be tracking every sales rep’s metrics.
But when you start out, you really want to keep it simple before you get into full sales data overload.
Things will grow complex over time all by themselves—it’s unavoidable. Complexity isn’t difficult to achieve, it’s difficult to resist. Invest your efforts into simplifying as you work key sales metrics into your overall sales strategy.
Let’s get started by looking at the most important sales metrics for sales managers and sales teams to track & monitor.
What are Sales Performance Metrics?
Sales managers will also establish sales key performance indicators (KPIs) for their salespeople in order to standardize performance measurement and set goals. KPIs are used to measure a salesperson’s performance based on a sales metric. The two are not synonymous but are closely related.
Sales metrics are the cornerstones for data-driven conversations and decision-making because you’re approaching the conversation with numbers to back up your assessments.
Common Sales Metrics to Measure
There are three main kinds of sales metrics that all sales managers will measure:
- Sales activity metrics: Are you making enough calls, connecting with prospects, scheduling demos, and completing them?
- Pipeline management metrics: Are your activities generating qualified leads that result in proposals being created and sent? Have your leads become customers? What’s your close rate?
- Sales results metrics: How long is your average sales cycle? What is your generated average revenue per user (ARPU)? What is your total sales volume? How are you rated in customer satisfaction surveys by both new and existing customers?
Here we’ll take a look at the leading indicators and benchmarks your sales organization is (or should be) using to set sales goals.
Customer Lifetime Value
Customer lifetime value (LTV) is the amount of money earned from a single customer throughout their entire relationship with you. LTV is automatically calculated in most customer relationship management (CRM) systems in real time. It can be manually calculated by taking a customer’s average order value and multiplying it by the number of annual orders times the expected number of years they will be a customer.
Not only is this statistic used by you and your sales manager, but by your company’s marketing team to determine how much they should spend on acquisition expenditures.
Sales Conversion Rate
Your conversion rate is the percentage of people who enter your sales funnel and come out the other side after completing a specific action, such as a purchase. Conversion rates beyond closed sales that may be measured include:
- Subscription signups
- Form submissions
- Customer referrals
- Webinar attendees
- Social media engagement
- Free-trial conversions
Sales Cycle Length
The sales cycle is the steps that salespeople take to turn a lead into a customer. Some stages that may be included in the sales cycle are prospecting, qualifying, researching, connecting, pitching, addressing objections, following up, closing, and asking for referrals. At your company, different people may be involved throughout the process like a prospect researcher or a scheduler. Your company will determine when the sales cycle begins and ends and what they deem an ideal period of time is for a full cycle.
- Average Sales Cycle Length =
Total Number of Days to Close All Deals / Total Number of Deals
Average Deal Size
In many cases, the easiest way to increase revenue is to sell more to each customer. Tracking your average deal size lets you see how your sales value is trending. While you want the average deal size to increase, you might also find that it is decreasing. If nothing else has changed with your product or sales methodology, perhaps the quality of your leads has decreased.
- Average Deal Size =
Total Sales Revenue / Total Number of Sales
Sales Pipeline Size
As your leads are qualified, they enter the sales pipeline. This metric is important because any significant changes to your pipeline size may indicate the need to hire more salespeople or put more effort into building a sales pipeline.
Related, quota attainment is the percentage of won contracts that sales reps close in a given period compared to their set goals for that period of time.
Average Churn Rate
Churn measures the customers who tried out your product/service and then canceled their subscription or account. While there may be some unavoidable churn when a customer goes out of business, for example, these instances are few and far between. Learning more about churn can help set reasonable key performance indicators around churn.
- Average Churn Rate =
(100 x Number of Customers Lost) / Starting Number of Customers
The opposite of customer churn is customer retention. Customer loyalty in the era of unlimited choices is a critical component of your company’s ongoing success. Luckily, the number one factor in customer retention is an exceptional customer experience - something that your company has lots of control over. Should you notice a significant drop in retention, it’s time to ask yourself why it’s happening and how you can address it.
- Customer Retention Rate =
(100 x Number of Customers Retained) / Starting Number of Customers
Lead Generation Sales Metrics
Measuring lead generation isn’t just about quantity, it’s about quality, service levels, and your salesperson’s effectiveness in combing through them and getting the good ones into your sales funnel. Here are the metrics you should look at.
Percentage of Qualified Leads
Qualified leads are prospective customers that match your customer’s ideal profile. You know your ideal customer and where that customer base is located. Work with your marketing team to meet them where they are and your qualified lead percentile will grow.
There are several ways to qualify leads including the BANT, CHAMP, and MEDDIC methods. And for heaven’s sake, if a lead isn’t qualified don’t try and make it fit your model. Move on. There are plenty of new leads to spend your time on. Now, if you find a large batch of unqualified leads, you must ask yourself where they came from and why they are so poor. Related that information to your sales manager and marketing teams so they can adjust tactics.
- Qualified Lead Percentage =
(100 x Qualified Leads) / Total Leads
Average Lead Response Time
Again, we are living in an era of “unlimited options” for many services. When a prospect reaches out for more information from you they are likely also reaching out to your competitors. Waiting too long to respond to a lead can make you seem unresponsive. Studies have shown that the optimal lead response time frame is 5 minutes or less. Tracking the individual salesperson's response time vs. the entire company or team can help set good KPIs.
Now, of course, you might have a lead call in or email you in the middle of the night when your office is closed (and please stop emailing at 3 AM... self-care, people!). Setting up automatic responses when you’re not at your desk with answers to the most frequently asked questions and a link to schedule an appointment using an online scheduling tool can keep engagement high.
Frequency of New Leads
Generally, your new leads come as a result of an effort of your marketing team’s initiatives. They use a variety of lead generation tactics to drive sales targets into your sales funnel. Tracking the frequency that new leads come into the sales process can inform what’s working (and what’s not).
You may also see new lead generation peaks during periods of extensive promotion. Maybe you’ve just had a big presence at a major trade show, a competitor has gone out of business. or your CEO was a guest commentator on a big business show on CNBC.
Sales managers should always work with the marketing team to anticipate pipeline changes. These metrics can determine if pipeline size is proportional to the number of deals and overall win rate.
Number of Leads Followed Up With
Tracking the number of leads each salesperson follows up with can help identify whether sales team members are following through on assigned leads. Combined with their sales productivity metrics, this can show if their lead workload is appropriately assigned. They may also be disqualifying previously qualified leads based on their experience.
- Total Lead Follow-up Percentage =
(100 x Total Leads Followed-up With) / Total Leads
Pipeline coverage is a multiple that represents a salesperson’s potential sales opportunities over their sales quota. For example, if a sales rep has a pipeline with $250,000 of open sales opportunities and a quota of $100,000, they have 2.5X (or 250%) pipeline coverage. This value is often paired up with the percentage of contracts won to ensure there are enough opportunities in the pipeline for sales reps to reasonably meet their quotas.
- Pipeline Coverage =
Potential Sales in Pipeline ($) / Sales Quota ($)
Sales Productivity Metrics
Productivity metrics are used to assess sales performance and prospect engagement for salespeople and sales teams. These show how a prospect is moving through the sales process. As leads move through the sales cycle, some may inevitably become disqualified. These metrics can identify at what point disqualified or lost opportunities happen and how you can ask questions early on in the process to better qualify future leads. Higher productivity metrics mean a higher number of sales, amount of revenue, average revenue per account, and better team performance.
Total Meetings Scheduled
Booking a higher volume of better-qualified meetings with your prospects is a topic we’ve covered during a webinar and recent blog post. High-performing sales leaders know that before you can sell the product, you first need to sell the appointment. This metric will ensure your opportunity to sell the product is well lined up.
One tactic for increasing your meeting signups is the use of an online scheduling tool. These are web interfaces that allow you to block off appointment times so prospects can sign up for meetings with you on their own. The appointment and the data you collect get added to your calendar automatically. The best scheduling tools allow you to set up different types of meetings with various lengths and participants.
Number of Proposals Sent
Once you get through the meeting (or series of meetings) and have addressed the prospect’s questions, it’s time to send them a killer proposal. In many instances, the more proposals you send to qualified prospects in a given time, the better your closed-won sales percentile. Some companies provide incentives for sending proposals in high volume.
If you are generating proposals by hand and emailing them or sending them via post, consider using your CRM and integrating an electronic signature service to reduce the number of steps a prospect has to take before they finally sign on as a new customer.
Total Conversations and Emails Sent
Good communication with your prospects is critical to successful sales relationship building. Using a good CRM system to track conversations and e-mails can help ensure you are having top-notch communication with potential customers. Creating a series of email templates to send at different points during the sales process can result in more sales opportunities, upsells, and plant seeds to discuss during meetings.
Number of Scheduled Demos
A final productivity metric is the number of scheduled demos. This is your opportunity to show off your product/service at a given time. Your prospect has qualified through the rest of the process, so showing off how everything works can increase closed deals. A big factor in this is using the concept of saving time. Yes, you are spending time demonstrating the product, but the customer is getting a personal guided tour of your product instead of spending hours clunking around and trying things on their own.
Sales Activity Distribution
As the end of the month approaches, new or inexperienced salespeople will often ramp up their productivity to meet sales quotas. This can have several negative effects on your business. Not only will this throw off your projections or planning, but sales reps might rush through explanations leading to customer service issues later. They may also use any price reduction or “bonus” giveaway tactics to close more deals. This results in lost potential revenue. The top performing salespeople balance a portfolio of opportunities at various stages at all times throughout the month so that sales are closing throughout the entire sales period. This creates consistency in reporting, steady success, and less stress on the salesperson. Sales Linearity is plotted by tracking average daily or weekly closed-won sales over time.
What are SaaS Sales Metrics?
SaaS companies have unique needs when it comes to sales metrics. Their long-term relationship with customers means they need to track more than just new customers, but also existing customers’ churn, satisfaction, and usage.
Customer Acquisition Cost
Unlike a one-time purchase, the long-term recurring revenue factor with SaaS means the customer acquisition cost can be spread across several months. Therefore, SaaS companies can strategically invest more in acquiring customers. Monitoring your customer acquisition cost can be an important metric that includes advertising, staffing expenses, creative costs, publishing fees, promotional costs, sales commissions, prospect list purchases, and sales events/trade shows.
- Customer Acquisition Cost =
(Cost of Sales + Cost of Marketing) / (New Customers Acquired)
ARPU (Average Revenue Per User) and ARPA (Average Revenue Per Account)
ARPU or Average Revenue Per User is calculated by dividing your total revenue in a time period by the total number of paying customers. This metric can be used to figure out the net number of new accounts required to hit a financial goal. In many cases, the ARPU and ARPA will be the same. If you sell a product or service that sells per-user licenses, there may be times when a strict ARPU is calculated. Another term for this is Average Revenue Per Customer (APRC). You’ll want to work with your company leadership to determine the exact calculations for each for your unique situation.
- ARPU or ARPC =
Total Revenue / Average Number of Users or Customers
MRR (Monthly Recurring Revenue)
Most SaaS users love the ability to pay monthly. It’s easier on their cash flow than a big upfront investment. Tracking monthly recurring revenue is also done to understand your company’s cash flow. Monthly Recurring Revenue includes all recurring charges and adjustments from active subscriptions, add-ons, discounts, coupons, and active promotions. It is important to not simply look up all customers with subscriptions and their total monthly revenue as one-time fees such as data overage charges should not be included and should be treated as auxiliary revenue.
Annual Subscription Percentage
Ideally, a number of your SaaS customers will sign up for annual deals. This not only helps lock in customer revenue and provide a larger initial investment while immediately covering customer acquisition costs, but provides you with opportunities to build good customer rapport and supportive relationships over the contract period.
- Annual Subscription Percentage =
(100 x Total # of Annual Plan Accounts) / Total # of Accounts
Annual Recurring Revenue (ARR)
When tracking sales metrics, invest time in calculating annual recurring revenue (ARR). Several critical KPIs are part of the ARR including average revenue per user and customer lifetime value (LTV).
ARR is often broken down into metrics with the following statistics:
- ARR from new customers
- ARR from existing customers
- ARR from customers on a promotional annual payment plan (vs. monthly)
- ARR generated from upgrades and add-ons
- ARR lost to downgrades
- ARR churn rate
ARR is closely tied to another metric, monthly recurring revenue (MRR), which is often measured in relation to cash flow needs rather than the overall financial and sales forecasts.
- Annual Recurring Revenue =
(Monthly Recurring Revenue* x 12) + Total Annual Plan Revenue
* This formula assumes that monthly recurring revenue is ongoing and not term-limited.
Average Net Contract Value
Each contract signed means more profit for the company, right? The answer is maybe. To determine this metric, take the total contract value minus the implementation or onboarding costs, the customer acquisition cost, and the cost of goods or services sold for the contract. You may find your customer base doesn’t generate the profit margin you expected. The Average Net Contract Value shows the financial impact of gained or lost accounts.
- Average Net Contract Value =
Gross Contract Revenue - (Total Cost of Goods/Services / Total # of Customers)
The AQC Framework and Examples
To keep sales metrics simple, we like to use the AQC framework, which stands for:
A = Activity: Covers what your team is doing on a daily basis to close more sales and grow revenue.
Q = Quality: Refers both to the quality of the salesperson’s work and the lead/prospect pool.
C = Conversion: Measures the number (or percentage) of customers who move on to the next stage in the sales cycle, including changing from a lead/prospect to an opportunity to a customer.
These three data points are enough for any sales organization to make informed decisions and optimize performance. Here are two examples of the AQC framework at work.
Example 1: Sales Team Cold-Call-A-Lot
A(ctivity): How many numbers do they dial? How many attempted calls (no matter how many of these calls got answered, went to voicemail, or got lost in dial tone limbo)? How many use messaging provided in optimized call scripts? Are sales reps doing appropriate follow-up calls? What is the total amount of time being spent trying to reach someone versus actually talking to someone?
Q(uality): What’s the reach rate (number of people reached/number of dials made 100. e.g. 15/100100=15% reach rate)? How many times do you actually get to speak with a decision maker on the phone?
C(onversions): How many of the people you spoke with did you convert on the phone? How you define a conversion depends on your sales process: scheduling a demo, making a sale, signing up for a free trial, setting up an in-person meeting, and other benchmarks.
These three sales metrics are everything the Cold-Call-A-Lot sales team needs to know. They tell you which part of your sales process needs to be improved first: Do you need to dial more numbers? Is your reach rate too low? Are you reaching a lot of people, but failing to convert? Looking at cold calling conversion analytics can tell you.
Example 2: Sales Team Cold-Email-A-Lot
If you’re mostly doing cold emails, your AQC would be:
A(ctivity): How many emails did you send?
Q(uality): How many of those emails were received and opened?
C(onversion): How many responses did you get (or clicks on a link if that is your desired conversion)?
Again, this simple framework gives the Cold-Email-A-Lot sales team exactly what they need to optimize their process and close more deals.
Simplify Your Sales Metrics
These are three very simple, basic sales metrics, but they’re really all you should be tracking in the early days of your sales process. Spend more time closing deals, and less time measuring activity.
Once you find that this basic AQC framework for tracking your sales performance is no longer sufficient, you can transition to a more sophisticated model.
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