Table of Contents
‘What gets measured gets accomplished’ - Dan Peña
In sales, measuring metrics can be the difference between making money and not making money. It can be the difference between taking your business to the stratosphere or shutting shop. You get the idea.
High-performing B2B companies continually track specific top sales metrics and take essential action to improve their performance. In this article, we shall discuss what sales metrics are and the most important sales metrics to track.
What are Sales Metrics?
Sales metrics are data points that evaluate the performance of an individual, group, or entire company’s performance over a specific period. Tracking these metrics helps identify strategic issues, facilitate business growth, track progress toward business goals, sales compensation, and more.
There are multiple types of sales metrics. We shall discuss them in the next section.
Types of Sales Metrics
Here are the primary types of sales metrics you should track:
- Sales Key Performance Indicators (KPIs)
- Sales Productivity Metrics
- Pipeline Sales Metrics
- Software as a Service (SaaS) Sales Metrics
Sales KPIs allow you to measure company-wide performance and track your business growth. Here are the primary KPIs to measure:
Total revenue refers to the amount of money you generate from both sales and operational activities from all your products and services. To calculate your total revenue, use this formula:
Total Revenue = Price x Quantity sold
If you are a product-based company, use this formula to calculate your total sales:
Revenue = Number of units sold x Average price of goods
If you are a service-based company, use this formula:
Revenue = Number of customers x Average price of services
Net Promoter Score (NPS)
Your NPS shows you how likely your customers are to recommend your business to another person. To calculate your NPS, ask your customer to tell you how likely they are to recommend you to another person on a scale of 0-10.
You can have them fill up a survey and give you their rating. Once you do this, use the following formula to calculate your NPS:
NPS = %Promoters - %Detractors
Promoters are customers who answer your question ‘How likely are you to recommend this product (or company) to a friend or colleague?’ with a 9 or 10. Such customers are enthusiastic about your brand and are likely loyal customers.
Detractors, on the other hand, answer the same question with a 0 to 6 out of 10. These customers are obviously not very happy with your product or company and aren’t all that likely to recommend you to someone else. You need to minimize the number of detractors your business has.
People who vote 7 or 8 out of 10 are passively satisfied, which means they may not be all that loyal to your company and can easily jump ship to a better competitor.
To calculate your NPS -
- Add the number of promoters.
- Then, do the same with your detractors.
- To calculate the percentage, divide the number of promoters by the total number of responses. Do the same with your detractors.
After this, subtract the two based on the formula mentioned above.
Average Customer Lifetime Value (LTV)
LTV refers to the revenue that you can expect to generate from someone during their time as a customer of your company. Calculating and maximizing your average customer LTV is critical. Here are a few reasons why:
- It is easier to sell more to a current customer than to acquire a new one. In other words, you cut down your customer acquisition costs
- It helps you identify issues with customer loyalty and retention over time.
- It helps you increase revenue over time
- It helps you target and retain your ideal customers
Here’s how you calculate your customer LTV:
CLTV = Customer Value X Average Customer Lifespan
Here Customer Value = Average Purchase Value X Average Number Of Purchases
To increase your CLTV, do the following:
Increase your average order value: You can do this by adding complementary products to the products that your customer wants to purchase. If you are running a subscription-based company, consider getting them to pick up an annual subscription.
Optimize your onboarding process: Make your customer onboarding process easy and seamless so that they know what your company works, what it is about, and why they should stay.
Year-Over-Year (YOY) Growth
This metric is a comparison of this year’s generated revenue with that of the year before. This is a vital metric to track because it allows you to evaluate your company’s performance over a specific period. You can use a metric like this to redirect your business strategy if necessary.
The formula to calculate Year-Over-Year Growth is -
YOY Growth = (This Year’s Revenue - Last Year’s Revenue) / (Last Year’s Revenue)
For example, let’s assume you made $100,000 last June and $120,000 this June.
YOY Growth = (120,000 - 100,000) / (100,000)
That is (20,000) / (100,000) = 0.2
0.2 X 100 = 20% YOY growth rate.
Net Profit Margin
Net Profit Margin is a ratio of the profits made to the revenue generated. You can express this ratio in percentages or in decimals.
The formula to calculate your Net Profit Margin is -
Net Profit Margin = (Revenue - Cost) / (Revenue)
Sales Productivity Metrics
Sales productivity metrics help measure and evaluate the productivity of your sales reps, thereby helping you determine how long it will take for them to hit your revenue targets. The faster they can hit those revenue targets, the higher your company’s productivity.
Tracking your conversion rate is an excellent way to understand your team’s sales performance. It tells you how effective your sales strategy is.
The conversion rate tells you how many leads you had to generate to close one of them. To calculate your conversion rate, divide the number of conversions by the total number of leads your team has received.
Average Deal Size
Tracking your average deal size is vital to generating more revenue and managing your time effectively. If your team is solely focused on large numbers of small deals, you will have to alter your lead generation process.
You will have to encourage and coach your team to close larger deals and increase the average deal size to make the best use of their time.
Win rate refers to the success your sales team has had over a specific period. In other words, it is the ratio of sales to the total number of sales opportunities. This can be calculated over a month, quarter, or year. Tracking your win rate:
- Gives you a thorough understanding of your finances. This helps you focus on products that sell the most, sales techniques that work the best, and so on.
- It helps you find areas of improvement. If your win rate is declining, you might be able to identify areas of improvement and work on them accordingly.
- Helps predict future sales and draw in more investors. You can analyze your win rate to predict future sales and extend your budget in certain areas. You can also show your stakeholders successful sales. The more successful sales you have, the more investors you can draw.
Here’s the formula to calculate your win rate:
Win rate = (Total number of sales/number of sales opportunities) x 100
Besides the metrics mentioned above, here are a few more sales productivity metrics you should track:
- Percentage of time used to create content
- Number of sales tools used daily (By the way, check out our sales analytics tool)
- Number of high-quality leads your team has followed up with
- Percentage of time spent on selling activities
Pipeline Sales Metrics
Tracking pipeline sales metrics can help you understand the ins and outs of your holistic sales process. Here are a few metrics you must analyze by team or individual over a specific time period:
Length of Sales Cycle
Sales cycle length refers to the time it takes for a new customer to move from the opportunity stage to a close. Understanding this metric is crucial to identify and rectify any bottlenecks that you might have in the sales pipeline.
You also need to track the time in each stage of the sales process to determine which sales opportunities are dead-end and which are worth pushing.
Total Value of Sales
Not to be confused with total revenue, this metric refers to the revenue generated exclusively from sales activities in the company.
Conversion Rate by Funnel Stage
Unlike the conversion rate we mentioned earlier, this metric refers to the conversion rate at each stage of the sales funnel. You can get your sales team or a member of your sales team to track this metric over a specified period.
Total Open and Closed Opportunities
The total open opportunities refer to the number of open deals you have while the total closed opportunities are a measure of how many closed-won deals you have.
Weighted Value of Pipeline
The weighted value of your pipeline is a measure of the value of deals that move through your sales pipeline.
SaaS Sales Metrics
If your business is a SaaS model, know that you have to track different key sales performance metrics than you would if yours were a product-based business.
With subscription-based businesses, your revenue depends on the customer's lifetime span. If they are happy with your service, they will stick with your company for a long time.
However, if they are dissatisfied, they will quit almost immediately. Here are the metrics you need to track:
Customer Acquisition Cost (CAC)
This metric refers to the average amount of money you will spend on sales and marketing to acquire one new customer. Your sales and marketing efforts will include inbound marketing, outbound marketing, sales and business development, social media, events, etc.
Here’s the formula to calculate your CAC -
Customer Acquisition Cost = Amount Spent Acquiring More Customers Over A Specific Period / Total Number of Customers Acquired During the Same Period
Your churn rate refers to the percentage of customers who cancel their subscriptions and drop out. As you know, you ought to minimize your churn rate as much as possible. There are many ways to reduce your churn rate:
- Find out the reason for the churn
- Talk to your customers
- Provide better service
- Target the right audience
- Offer incentives
The formula to calculate churn rate is -
Churn Rate = (Number of lost customers / Total number of customers since the start of the specified time period) X 100
Cost Per Acquisition (CPA)
Before you conflate or confuse CPA and CAC, know these are two very different metrics to track. The difference is that CPA refers to the amount you need to spend to acquire a non-customer. Examples of non-customers are leads, free trials, registrations, etc.
To calculate CPA, divide the total cost of conversions by the total number of conversions.
Monthly Recurring Revenue (MRR)
MRR is one of the most important metrics to track if you are a SaaS business. It is the total predictable revenue that your business generates every month. Tracking this metric is vital because it allows you to track your business growth and predict your future revenue.
To calculate the MRR, multiply the number of monthly subscribers by the average revenue per user.
Annual Recurring Revenue (ARR)
Your ARR is essentially your MRR multiplied by 12. It is the amount of recurring revenue in a calendar year. While MRR tells you how your business is doing every month, ARR tells you how your business is doing every calendar year.
Ideally, you need to track both ARR and MRR.
While MRR is the total predictable revenue you generate every month, revenue churn is the money that you lose in a month. Revenue churn is different from churn rate. Churn rate refers to the percentage of customers you’ve lost, while revenue churn refers to the amount of money you’ve lost.
If you want your business to grow, you need negative churn. Negative churn happens if your MRR is greater than your revenue churn.
Extra Metrics to Note
So, we’ve given you a list of the primary sales growth metrics you should track to ensure your business grows. Here are a few extra sales metrics you should also consider tracking:
- Email open rates
- Email close rates
- Click Through Rates (CTR)
- Percentage of opportunities won
- Percentage of opportunities lost
- Percentage of opportunities lost to a competitor
- Average time-to-hire
- Percentage of sales management time spent on hiring
- Average turnover rate
- Percentage of offers accepted
- Percentage of reps following the sales process
- Average cost of training a salesperson
- Percentage of reps using the CRM
- Average Contract Value (ACV): This refers to the revenue generated by a contract per year
- Number of conversations
- Number of emails sent
- Number of calls made
- Number of proposals sent
- Number of referrals
- Market Penetration: This refers to the number of your customers Vs. the total number of potential customers in the market
Track your Sales Metrics
And there you have it - all you need to know about sales metrics and how to track them. As you can see, there are countless metrics you can track. We suggest you first track the four types of sales metrics we’ve explained in the article and then prioritize the extra sales metrics we’ve mentioned in the final section.
Tracking sales metrics is vital. It is often the key difference between generating revenue and no revenue, satisfied and dissatisfied customers, a short sales cycle and a sales pipeline full of bottlenecks, high MRR, and a high churn rate. In short, if you want to run and grow your business over time, you need to prioritize tracking sales metrics. Check out our blog to learn more about sales.
Get sales tips and strategies delivered straight to your inbox.
Outplay will help you generate more sales right from your inbox. Try our Outlook add-on or Gmail Chrome extension for free, forever!