Your sales strategy is only as good as your sales metrics. Both in terms of strategically selecting which metrics to track, as well as what those numbers end up being.
When you first start tracking your sales and marketing processes, you’ll quickly see there’s a lot of data that you could be tracking. Tons of information is organically generated by the daily work of your sales team.
Modern sales and marketing tools allow you to easily track all kinds of KPIs and metrics, from simpler metrics like the # of leads or $ revenue generated, to more complex metrics like the average number of touchpoints to close a deal from a cold lead.
So what are the most important sales metrics that you should be tracking?
In this article, we explore the most useful and essential sales metrics to track in order to support your sales team to produce the best possible results.
First, what do we mean by sales metrics?
Sales metrics refer to data points that help gauge the productivity and efficacy of a sales process, sales rep, or even the entire sales department. Sales metrics can indicate the trajectory of your overall sales to help in planning. Or they can be used to pinpoint current issues in your sales process.
Metrics vs. KPIs:
KPIs (or key performance indicators) are basically sales metrics with a specific benchmark (e.g. 20% close rate). Sales managers will typically set KPIs for the most important sales metrics to help monitor and evaluate salesperson performance and to help set sales goals.
Whichever way you refer to these data points, they are invaluable for measuring the actions your sales reps are taking, the results they’re getting, and the overall success of your pipeline and process.
Sales metrics are the cornerstone for strategic and data-driven decision-making, By helping you make objective and accurate decisions based on numerical data.
Types of Sales Metrics to Measure
There are three main categories of sales metrics that your sales team should be tracking:
Sales Action Metrics (inputs): how many prospects are you finding, number of sales calls you’re scheduling, number of email followups being sent?
Sales Result Metrics (outputs): What is your total sales volume? you are average revenue generated per lead?
Success Rate Metrics (efficacy): How successful are your sales input metrics at generating sales calls? How many sales calls turn into a proposal? What’s your close rate?
To put it simply: your sales action metrics are the steps you take, or sales activities you complete, which serve as the inputs into the sales equation and is the area that you have direct control over. Then your sales result metrics are the resulting outputs of those sales activities. And finally, your success rate metrics are for the overall efficacy of your sales pipeline – basically how effective your sales process is at bringing a lead through each stage of the sales funnel.
An analogy would be with a car for your sales process. The input is gasoline (sales activities), the output is the miles you drove (sales results), and the m efficacy is how many miles per gallon your car gets (how efficiently you convert through the sales pipeline).
Common Sales Metrics to Measure
Sales Action Metrics (inputs)
Lead Follow-up Percentage
Sometimes in sales you’re held back by a lack of leads. In other cases, the issue is not fully utilizing the leads you have. Tracking lead follow a percentage is helpful for differentiating between the two, and can help indicate how reliable different sales people are at following through on their leads.
Total Lead Follow-up Percentage = (100 x Total Leads Followed-up With) / Total Leads
# of Booked Meetings/Demos
Most businesses drive sales through some kind of sales meeting or product demo. This means that in general, the more you schedule, the more sales you make (assuming equal quality leads).
# of Proposals Sent
Now that you’ve had the sales meeting/product demo, it’s time to send the proposal (or contract). Keep track of the number of proposals sent in total and also broken down by sales person. This will help show you how effective your sales process is at converting leads from initial meeting to sent proposal, And how effective each sales person is at giving the pitch.
Total # of Sales Emails Sent
Another useful input and lead indicator to track is the total number of sales emails being sent over a given time period. While this metric doesn’t correlate as strongly as some of the previous metrics they do still trend in the same direction. This data point is also helpful for gauging how much sales work is being done (call side of the calls and proposals). In some cases where you’re having trouble converting leads at a particular point in the pipeline, you’ll be able to use this metric to assess whether the issue is the lack of email communication with the lead.
Sales Result Metrics (outputs)
Total Sales Revenue
This one is pretty straightforward. Total sales revenue is your most important output metric in the one that you should always optimize for first and foremost. When you make changes, always see how they affect the bottom line.
# of leads generated
Tracking the number of leads generated is a useful output metric for the work of your SDR’s (or for your sales people if they also do your prospecting). It’s also a number that you’ll need to calculate some other metrics below.
Average Deal Size
You can increase sales in three primary ways. Selling to more people. Selling more often. Or by making higher value sales. Tracking average deal size will show you how you’re doing on the last one.
Average Deal Size = Total Sales Revenue / Total Number of Sales
For SaaS Companies
SaaS companies track sales slightly differently than a typical business. Here are two components of tracking sales revenue for SaaS companies.
MRR (Monthly Recurring Revenue)
Most software products are sold as a monthly subscription, so calculating the monthly revenue is helpful as you build up your user base and the corresponding subscription dollars. If your product includes options for paying annually or quarterly, then you can calculate MRR by dividing the amount of those sales by 12 (or 4 for quarterly).
Average Revenue Per User
The closest equivalent for software companies to the metric of deal size is called ARPU (average revenue per user). Basically, the amount of dollars you’re getting for each of your customers on average.
ARPU = Total Revenue / Average Number of Users or Customers
Success Rate Metrics (efficacy):
Sales Conversion Rate (%)
The percentage of leads that enter your sales Funnel and make it through to a completed purchase gives you the overall sales conversion rate. This is the most important success rate metric, so track this one if nothing else.
Sales Conversion Rate (%) = (Number of Leads Entering Funnel) / (Number of Sales)
Sales Cycle Length
Sales cycle length refers to the timeline from initial prospecting all the way through to closing the deal, with a whole bunch of extra steps in between. Knowing this data point is vital for being able to make predictions about revenue or the number of new customers you have coming up, or even to create a marketing budget.
Average Sales Cycle Length = Total Number of Days to Close All Deals / Total Number of Deals
Customer Lifetime Value
Customer lifetime value, or LTV, refers to the total amount of revenue generated from a single customer during the course of their entire relationship with you. LTV is one of the most important metrics for being able to create a marketing budget (knowing how much you’ll make from the new customer overtime so you know how much you can spend). Fortunately most CRM systems can calculate LTV automatically.
Customer Lifetime Value = (Average Order Value) x (Average Number Annual Orders) x (Average Customer Timeline, in Years)
Average Churn Rate
Churn measures the customers who start using your product/service and then cancels, quits, or doesn’t re-order. this helps you make more accurate predictions by taking into account the customers you organically lose overtime into your sales projections.
Average Churn Rate = (100 x Number of Customers Lost) / Starting Number of Customers
Sales Metrics Average Churn Rate
% of Sales-Qualified Leads (SQLs)
The amount of revenue sales revenue you can generate is significantly influenced by the quality of leads you’re engaging. That’s why calculating tracking the percentage of leads that are SQLs is so important.
% of Sales-Qualified Leads (SQLs) = (Number of SQLs) / (Total number of Leads)
The IOE Framework of Sales Optimization
When it’s time to optimize a sales process (or to troubleshoot one) it’s important to check each of the 3 categories of metrics. Here is how to use the IOE framework to keep it simple and straightforward. Below that you will see an example of applying this process to an underperforming sales rep.
The IOE Framework
1. Inputs – Tasks your team do on a daily basis to close deals and generate revenue.
2. Outputs – Quantifying the results that are generated by your sales department.
3. Efficacy – The percentage of leads moving between the main steps in the sales cycle.
Example: troubleshooting an underperforming sales rep
First, measure the inputs, outputs, and efficacy metrics. Get up-to-date numbers on the sales metrics you have chosen to track from each of the 3 categories. You can see the previous two sections of this article for more details about specific metrics you can use to measure.
Second, compare the results for this particular sales rep against your averages or KPI benchmarks. You’ll likely see one main metric category in which they’re underperforming, and likely several of the specific metrics are off. Both of these provide useful information. The metric category gives you some high-level broad strokes about what the issue is or at least where to start, and the specific metrics that are low will give you more precise info about what to troubleshoot to bring the numbers up (often with a more technical approach).
Specifically…if the issue is a lack of inputs, then it means the sales rep quite literally isn’t doing the work they need to be doing, for whatever reason.
If the issue is with efficacy, then the problem more likely originates from an issue in the sales process or how tools have been set up.
If the issue is with sales outputs, then this typically means the issue is how this sales rep is executing the process or their overall skill level (especially if the other metrics are on par).
If they’re not booking calls from their email follow-ups, then it might be how they’re emailing leads.
If their conversion rate is low, but just at the very tail end of the sales process, then it might be that they aren’t very good at closing deals.