Which sales performance metrics are important to track and measure every week, month, and quarter?

One of the most important issues in sales management is the measurement of sales performance. The most obvious measure is a resultant sale. However, with growing recognition of the importance that customer loyalty, customer satisfaction, long-term relationship management, and customer knowledge management play in the strategic success of an organization, companies look beyond the concept of immediate revenue when measuring and evaluating sales performance.

What are Sales performance metrics?

Sales performance metrics are measurements of the activities that happen in a business to represent your sales performance either as an individual, team, or organization. They are statistics tracked over time that can be quantified into useful figures that company leaders can use as guidance and benchmarks for growth.

Sales KPIs — or Key Performance Indicators—are specific sales metrics connected to one or more of your company-wide goals. 

Of course, there is no one size fits all business. For example, a company that has the bulk of its revenue coming from a subscription service will follow different metrics than a company focused on manufacturing.

Still, most sales teams share some common core goals. So, if you want to scale your sales team, grow your revenue, and beat out the competition, there’s no question you need to understand data.

Why are performance metrics important?

Sales teams and leaders use sales KPIs to track progress against goals. Without sales KPIs, salespeople and managers may not be clear about whether their efforts are delivering the desired results or whether the team needs to change direction. They also use KPIs to track emerging trends and issues.

Based on KPIs, sales leaders can dig deeper to identify root causes and how to address them. For example, if new product sales exceed expectations, additional resources can be reallocated to focus on sales. On the other hand, if a product underperforms due to price pressure from competitors, the sales team may lower prices or shift sales efforts to another product. Sales team performance metrics also provide insight into team activity and performance, so managers can ensure that the team and its members (sometimes spread across different geographies) are doing the best they can to meet their goals.

With the right strategy for measuring sales performance, you can identify where you are getting the greatest return on investment from your sales team and where you are missing out on key revenue opportunities.

What are the Top Performance Metrics to measure?

Measurement matters. But what matters most is if you measure what truly matters.

And when it comes to sales, the sales metrics you choose can mean the difference between profit or loss. Between market leadership or dwindling share. Between success or failure.

When the right sales metrics are in place, the organization and its contributors know where they stand at the individual customer, territorial and companywide levels. Appropriate sales metrics also help identify the state of sales regarding time-based goals. Perhaps most importantly, the right sales metrics can help an organization make prudent decisions for any changes necessary to achieve both short-term and long-term objectives.

However, questions still loom as to which metrics are appropriate under what circumstances, and how they can best be developed.

An important note may be that, unlike revenue, more isn’t always better when it comes to sales data.

Once you start tracking and measuring every move your team makes, you’re bound to hit analysis paralysis. And instead of empowering your team to sell more, all those numbers and charts and just slowing them down.

You don’t need more sales metrics and data to wade through. You need the right ones.

Sales KPIs to track

Here is a list of some key metrics to measure sales performance - those we think are most critical.

1. Total revenue

This is a simple formula that multiplies the number of products or services sold by the price of each product or service.

You can monitor revenue for a team or for individuals by geographic area and more.

The goal, of course, is to increase total revenue regardless of its type.

2. Annual Recurring Revenue (ARR)

Essential for businesses with a subscription model, ARR helps in forecasting revenue and assessing the health of the business. It represents the predictable revenue that can be expected to recur annually from customers.

3. Sales cycle length

Describes the average time it takes from first contact to closing a deal with a potential customer. The average is calculated by dividing the total number of days to close a deal by the total number of deals.

This metric can be used to track the efficiency of your sales process, find out how to shorten sales cycles, and analyze rep productivity and team productivity. Remember that the sales cycle varies depending on the product or service, size of the deal, complexity, etc.

4. CAC - Customer Acquisition Cost

CAC measures the cost of converting a potential lead into a customer and the amount of money a company spends to acquire a new customer.

The cost of acquiring a customer is simply the sum of all marketing and sales costs (including salaries and overhead costs) in a given period, divided by the number of new customers added in that period.

By using this metric, you can determine your true return on investment (ROI) and invest wisely in marketing. The lower the CAC, the better for you.

Knowing customer acquisition costs helps companies understand if they are getting their money's worth when it comes to acquiring new customers. In addition, they are an excellent metric to measure the profitability of efforts to expand the customer base.

CAC must include all overhead and expenses associated with acquiring a new customer. This may include marketing, advertising, sales, salaries, and software costs. However, it is critical not to consider factors that are not directly related to acquiring new customers, such as retention costs.

 A decrease in CAC indicates that a company is spending its money efficiently and should generate higher profits. Conversely, an increase in CAC would indicate that a company needs to spend more money on acquiring new customers, which is likely to reduce its profits.

5. Customer Lifetime Value (LTV)

In this sales KPI, you measure the average amount of revenue you get from your customers from the moment they start paying you to when they stop paying.

Calculating your LTV isn't quite as straightforward as it might seem. Different models can be used to understand LTV, but all require a large enough sample size in order to make accurate assumptions.

If you do have enough supporting data, your teams can calculate the average revenue per unit or per user (ARPU).

You can predict your company's future revenue and profit using LTV. If you don't understand the value of a customer, you can't decide how much to spend on acquiring them (CAC), how long to spend trying to convert them, how many leads to pursue to hit sales goals, or how to handle churn (lost customers).

6. Conversion rate

Is the percentage of qualified leads that result in a sale. Divide the number of paid customers by the total number of leads you received to calculate your lead conversion rate. The higher this rate, the more successful your campaign. Note that we use qualified leads instead of regular leads in the lead-to-customer conversion rate. A qualified lead is a potential customer who has expressed interest in purchasing a company's product and meets certain criteria. A qualified lead is included in the penultimate stage of the lead lifecycle before the actual sale, so using qualified leads makes sense.

7. Average cost per lead

Cost per lead measures the effectiveness of your marketing campaigns in generating new leads for your sales team. Leads are potential customers who have expressed interest in your product or service. This metric is closely related to other important business metrics such as the cost of acquiring new customers. By using this metric, your marketing team can determine how much money to spend on acquiring new leads. You can calculate it by taking your total advertising spend and dividing it by the number of leads you received.  

8. YoY growth

The YoY Growth is the comparison of how much you grew in the current period compared to the previous period(s). The period is usually a month or a quarter (e.g., the fourth quarter of 2020 compared to the fourth quarter of 2019).

Your company's YoY performance is measured in every area you can measure. Your YOY growth can be calculated for a variety of business performance indicators, including revenue, acquisition costs, total employment, and website traffic.

In order to calculate YoY, take your current year's revenue and subtract your previous year's revenue. You now have a total change in revenue. Once you have that amount, divide it by last year's revenue. Multiply that sum by 100 to get your YoY percentage.

9. Number of won deals

A KPI that measures how many deals your sales team has closed in a given period. These are the opportunities that have been converted into paying customers. If it is low, you should definitely consider changing the sales process or investing in some courses for your sales team. Depending on the company, this KPI will consider a different time period. It is calculated by dividing the number of closed deals by the number of leads, opportunities, or meetings, multiplied by 100. In addition, it can be calculated at each stage of the pipeline.

10. Customer lifetime value (CLV)

Customer lifetime value refers to the value a customer provides to a company over the course of the relationship. Increasing the value of your existing customers is a great way to drive growth since it costs less to retain them than to acquire new ones.

You can use this metric to identify which customer segment generates the most revenue and how much time you spend acquiring new customers. It is calculated by multiplying the average purchase value of your customers, the average purchase frequency, and the average customer lifetime.

11. Lifetime value (LTV)

The LVT is concerned with aggregate customers. In this metric, you can measure and quantify how valuable your customers are over the course of their relationship with your company. E-commerce businesses, which rely on recurring sales from the same customers, should pay close attention to this metric.

An average customer lifetime value can be calculated by subtracting the average cost per customer from the total revenue generated over that customer's lifetime.  

12. Customer Churn Rate

The churn rate is the number of customers who cancel or do not renew their subscriptions within a certain period. Churn rate can help you decide whether to lower your prices, increase customer satisfaction, or change your goals. Increasing churn rates can indicate problems with a company's offering, customer experience, or sales approach, as well as competition. 

In order to calculate it, the number of lost customers is divided by the number of new customers and multiplied by 100.

13. Average Purchase Value

Customer average purchase value refers to the amount each customer spends on average on a company's products or services. Selling more to each customer is a cost-effective way to increase revenue. Average purchase value is used to develop sales strategies that encourage customers to spend more and to forecast lead value. Divide the total sales by the number of customers or transactions to calculate the average purchase value.

14. Sales Growth

This metric indicates the health and growth trajectory of a business. It measures the increase or decrease in the sales revenue over a specified period, typically year-over-year.

15. Average Deal Size

Understanding the average deal size helps in forecasting revenue and strategizing sales efforts. It is calculated by dividing total sales revenue by the number of deals closed.

16. Sales Pipeline Coverage

This ratio helps in predicting whether there are enough deals in the pipeline to meet or exceed the sales quota. It's a forward-looking metric that provides insights into future sales performance.

17. Quota Attainment

This KPI measures the effectiveness and performance of the sales team. A high quota attainment rate indicates a strong sales force and effective sales strategies.

18. Lead Response Time

A crucial metric in sales, as faster responses to leads can significantly increase the chances of conversion. It measures the responsiveness of the sales team.

19. Win Rate

This metric provides insights into the competitiveness and effectiveness of the sales team. It measures the proportion of sales opportunities that are converted into actual sales.

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How often you should track each sales performance metric?

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Different sales metrics should be measured in different time periods.

Some should be tracked weekly to give your team an overview of their performance so they can regularly evaluate their opportunities for improvement, such as deals won and churn rates.

Using a weekly report, they can break down their goals and identify short-term improvements. Reps can set weekly goals that they can achieve.

In addition to measuring first contact, monthly metrics cover a long enough period to capture completed cycles. Some of the common sales KPIs that are measured monthly are Win Rate, CAC, Total Revenue, Average Cost per Lead, and more.

Rather than just looking at a snapshot of a few weeks, quarterly sales performance metrics show you trends over time. You can use these metrics to compare your costs to your customer value and determine if you're investing in the right segments. Quarterly sales performance metrics examples are LTV and Average Cost per Lead. Some metrics are measured annually, such as YoY.

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