Knowing how well your sales team is doing helps you make better decisions and improve your strategies. However, simply looking at sales numbers doesn’t give you the entire story.
That’s where key performance indicators, or KPIs, come into play.
These are measurable values that help track different aspects of how well your sales efforts are working.
Let’s take a closer look at some important KPIs that can provide insight into your sales performance.
What are KPIs and why do they matter?
KPIs help you see how effectively your sales team is reaching its goals. Instead of guessing about what’s happening in your sales efforts, you can rely on meaningful numbers to get the real picture. This clearer view allows you to spot trends and make changes based on what the data tells you.
Now that we know what KPIs are, let’s take a look at some specific ones that can really help you improve your sales performance.
Sales Revenue: Your bottom line
One of the first KPIs to monitor is sales revenue. This number reflects the total income from your sales before subtracting any expenses. By simply looking at sales revenue, you can quickly determine if your sales strategies are working.
For example, imagine a small coffee shop. They use a simple process to track revenue every month. If they notice revenue increasing after a new promotion, they know they’re on the right track. However, if revenue starts to drop, they might decide to rethink their marketing tactics or adjust their prices.
To better understand sales revenue, keep an eye on it month by month or quarter by quarter. An upward trend is a great sign that your team is doing something right, while a downward trend might suggest it’s time to rethink your approach.
Average Deal Size: What’s the value?
Now that we’ve looked at sales revenue, let’s explore another important number: average deal size. This KPI measures the average value of sales you’ve closed in a given time. To calculate it, simply take your total revenue and divide it by the number of deals you’ve completed.
Picture a sales team at a software company. If one salesperson consistently closes larger deals than the others, it might mean they’re targeting different clients or effectively communicating the value of the product. Their manager could then share their successful techniques with the rest of the team to improve overall average deal size.
If you track average deal size, consider discussing it in team meetings to identify strategies that work well across the board.
Sales Conversion Rate: Turning leads into customers
Next, let’s think about the sales conversion rate, which tells you how many leads actually become paying customers. To calculate this, divide the number of conversions (sales) by the total number of leads and multiply by 100 to get a percentage.
A high conversion rate shows that your sales techniques are likely connecting well with your audience. For example, a car dealership might find that their online leads convert at a much higher rate after launching a virtual car tour. This could prompt them to implement similar strategies across their other marketing channels.
Regularly reviewing your conversion rate allows you to see which strategies are performing well, helping you make informed decisions about where to focus your efforts.
Customer Acquisition Cost: What are you spending?
Another important KPI is customer acquisition cost (CAC). This figure shows how much you spend to bring in a new customer, including all your marketing and sales expenses. To find CAC, divide your total sales and marketing costs by the number of new customers gained in a specific period.
Consider a fitness studio that spends heavily on social media ads to attract clients. If they discover their CAC is high compared to what new members spend, it may spark a conversation about finding more cost-effective ways to attract customers or focusing on member retention instead.
Evaluating CAC helps you understand if your spending aligns with the revenue generated from new customers. If your CAC is high, consider reviewing your marketing methods or boosting your efforts to keep current customers happy.
Customer Lifetime Value: The bigger picture
Another key metric is customer lifetime value (CLV). This KPI estimates how much revenue you can expect from a single customer over the duration of your relationship. To calculate it, you multiply the average purchase value, the average purchase frequency, and the average customer lifespan.
Imagine you run a subscription box service. By calculating CLV, you can see how valuable a long-term subscriber is to your business. Understanding this number can help you decide how much you’re willing to spend to acquire new customers while identifying opportunities for upselling or cross-selling.
Knowing your CLV gives you a clearer idea of how much you can invest in marketing to attract new clients, ensuring that your strategies are sustainable.
Sales Cycle Length: Timing is everything
Moving on, let’s discuss sales cycle length, which tells you how long it takes to convert a lead into a paying customer. To measure this, track the time from the first contact to the closure of each deal.
For example, a tech company might notice that they regularly take too long to close sales. After reviewing their sales cycle, they may find that follow-ups aren’t happening as promptly as they should be. By proactively addressing this issue, they could work to shorten their sales cycle and bring in revenue more quickly.
If you notice your sales cycles are longer than expected, consider training your team on effective follow-up strategies and create clear processes for each stage of the sales cycle.
Pipeline Value: Potential revenue
Next, let’s explore pipeline value, which refers to the total potential revenue currently in your sales pipeline. By keeping track of this KPI, you can make better forecasts about your upcoming revenue.
Returning to our scenario with the fitness studio, imagine they constantly assess their pipeline value. If they see a significant amount of revenue potentially coming in from interested leads, it reinforces the need to prioritize those sales efforts and maybe even enhance their follow-up approach.
Knowing your pipeline value helps you identify which deals are likely to close soon, so you can focus your resources effectively and make better decisions about where to direct your efforts.
Win Rate: Success rate
Let’s now discuss the win rate, which measures the percentage of deals that lead to successful sales. You can calculate this by dividing the total number of closed deals by the total number of deals pursued, including losses.
For instance, a real estate agency can benefit greatly from tracking its win rate. If they find their win rate is lower than average, it can indicate areas for improvement in how they engage with clients or address objections. By regularly monitoring this figure, they can spot trends and adjust their strategies accordingly.
A solid win rate is a good indicator that your sales techniques are working well and that you’re effectively meeting your customers’ needs.
Lead Time for sales: How quickly do you close?
Next on our list is lead time for sales, which measures how long it takes from the moment a lead enters your pipeline until they become a customer. This metric is vital for assessing potential delays in your sales process.
Think about a company that creates custom t-shirts. If they see their lead time is longer than expected, they might realise that they’re getting bogged down at the design approval stage. By streamlining this process, they can close deals faster and better serve their customers.
You can track lead time for sales to identify bottlenecks and work to improve areas of your sales process that might slow things down.
Customer Retention Rate: Keeping customers happy
While attracting new customers is essential, retaining existing ones is just as critical. The customer retention rate tells you what percentage of your customers continue to buy from you over a certain period. A high retention rate usually means that customers are satisfied and loyal.
To calculate this, take the number of customers at the end of a period, subtract the new customers gained during that period, then divide that by the number at the start of the period.
For example, a subscription-based business that regularly monitors this rate can spot trends in customer behaviour. If they notice retention dropping, they might decide to implement loyalty rewards or special offers to keep customers coming back.
Focusing on customer retention not only enhances loyalty but also improves overall revenue, as happy customers are likely to make repeat purchases.
Wrapping Up
Tracking sales performance through these critical KPIs offers valuable insights that can help your business grow. By regularly looking at numbers like sales revenue, average deal size, and customer acquisition cost, you can clearly see what’s working and where you need to improve.
Make it a habit to review these KPIs regularly. By taking this data-driven approach, you’ll be able to make smart decisions that lead to healthier sales performance over time. Which KPI will you focus on next to boost your sales efforts?
By implementing these insights, you can create a stronger sales strategy, leading to happier customers and increased revenue over time. Keep your sights on those indicators, and you’ll set your business up for growth and success.
Onsight’s mobile sales app boosts sales performance by making order management simpler and speeding up sales processes. It also provides real-time tracking, which is helpful when you’re monitoring important KPIs. If you’re interested in seeing how it all works, sign up for a free trial.
