Diaa El All By Diaa El All • April 12, 2018

The 12 Most Important Sales KPIs

To understand sales performance, you must go beyond looking at the basic measurements and turn to the most important KPIs. To some extent, this involves thinking about your unique business goals. However, whatever your business and whatever you are hoping to achieve, certain sales KPIs are always relevant.

Examining these will show you what is going well, where you have improved, and where you need to make changes.

12 Most Important Sales KPIs You Must Keep Tracking

  1. Sales Growth
  2. Average Deal Size
  3. Cost of Customer Acquisition
  4. Average Sales Cycles
  5. Cost of Sales
  6. Opportunity-to-Win Rate
  7. New Client Rate
  8. Existing Client Engagement
  9. Activity per Rep vs Win per Rep
  10. Funnel Stage Ratio
  11. Sales Velocity
  12. Customer Retention Rate

 

1. Sales Growth

 

Sales growth is a particularly important KPI, as it relates directly to your two main sales goals. For this reason, you can use the KPI in two different ways.

Primary Sales Goal: Increased Monthly Sales

 

The primary sales goal of any business is to increase monthly sales. You figure out if you have achieved the goal by comparing how many sales you gained to how many you expected (or wanted) to gain. When you express this number as a percentage, it is easier to understand how close you are to your target and to compare different months.

Bear in mind, though, that whereas sales growth is a simple way to determine the success of a month, alone it tells you nothing about why sales are higher or lower. To understand the trends up or down, you need to explore potential causes: number of leads, performance of sales reps, and new marketing campaigns, for instance. Considering the following KPIs will also bring you closer to determining a cause.

Secondary Sales Goal: Increased Month-over-Month Growth

 

Your secondary sales goal is likely to improve month-over-month sales growth. To calculate your performance, you need to compare sales growth from the current month to the previous and then convert the result into a percentage.

In fact, there is no reason to limit the calculation to sales. You can use different metrics to find out about any type of growth that matters to your business. Examples include revenue, subscriptions, and active users.

When using the calculation, you must consider the size of the numbers you are using. When you’re working with small numbers, even a minor difference will lead to a large percentage. It’s important to remember that this can prove insignificant and you will not actually have seen real growth.

Another shortcoming of this calculation is that it tells you nothing about the reason for growth or a drop. Again, you need to incorporate more KPIs to discover this information.

All the goals you set for your business and your teams should always be SMART goals. This will help you know you’re on track. It will contribute to a healthy level of motivation (which quickly drops if goals are not realistic and achievable). It will increase accountability.

 

2. Average Deal Size

 

Average deal size refers to the average price of all your closed deals. As well as giving you a better idea of how much you can expect per deal, this enables you to identify deals that are likely to fall out of this range.

For instance, you should flag any deals that are three times larger or more than average. This is because such deals tend to have smaller win rates and stay longer in the sales funnel. To improve your chances of winning such deals, your sales team must know of the opportunity and the challenge.

Equally important, is to note trends of average deal size. A greater number of smaller deals than normal could suggest that your sales team is focusing its efforts on these easier-to-close deals. Alternatively, it could be a sign that reps are overusing discounts. A little digging into your sales practices should reveal the reason for the trend.

Then, if it is problematic (for example, the trend is contributing to lower month-over-month growth), you can take action to reverse it.

 

3. Cost of Customer Acquisition

 

You already know the simple equation to calculate cost of customer acquisition (COCA):

Total costs to acquire new customers / Total number of customers acquired

This gives you a basic idea of how much you are spending per customer. The problem is that it’s inaccurate. To find the true cost of customer acquisition, you need to include more elements in the equation (you certainly need to include the COLA – Cost of Lead Acquisition, one of our beloved 15 Marketing KPIs)

 

Total marketing costs to acquire customers
+ Wages for both sales and marketing teams
+ Cost of sales and marketing software
+ Cost of other services used by either department
+ Additional expenses
/ Total number of customers acquired

 

To improve this KPI further, analyze every channel and every campaign separately. This involves determining the costs associated with each campaign or (for channels) adding the costs of various campaigns together. Then, when you implement changes to your strategy, you’ll be able to see how this impacts COCA.

 

4. Average Sales Cycle

 

Your average sales cycle is how long it takes your team to win a deal. This could span a matter of days, weeks, or even months. Knowing this number will help you better identify which of your leads are most likely to become buyers and which will probably never convert.

Turn your attention to buyers with lower than average cycles to find ways to reduce your average sales cycle. Examine their journeys to find out why it was shorter. For instance, you find that the sales rep employed different tactics or the buyer took a distinct journey through marketing.

In addition, you can shorten the sales cycle by examining where individual sales reps are experiencing bottlenecks. You can then provide these employees with the training they need to improve.

 

5. Cost of Sales

 

Calculating the cost of sales will give you a more accurate picture of your sales ROI. Key here is to ensure that you are taking all costs into consideration, just like with COCA. Otherwise, you may consider that you have a higher ROI than you actually do.

Once you know your cost of sales, think of potential ways to reduce it. For instance, you could research how to lower production costs, how to change your marketing strategy to be more cost effective, or where it would be possible to raise prices. Experiment with different options to find what works for your business.

 

6. Opportunity to Win Rate

 

Opportunity to win rate is a KPI that is particularly important to examine for individual sales reps. This is because opening an opportunity to a sale requires different skills to closing a deal. You may find that some of your team members are excellent at one but struggle with the other.

By calculating how often each sales rep closes and then comparing this rate to your team as a whole, you can identify who needs further training and support. It may even be an option to allocate some team members to opening and others to closing. Either method will improve your opportunity to win rate.

 

7. New Client Rate

 

New client rate is useful as a comparison from month to month, as you’ll see if you are expanding your customer base over time. However, this is even more valuable when you compare it to your number of new leads. For instance, if you receive a larger amount of leads one month but your new client rate stays the same, something is not right. It could be that marketing is sending leads to sales too early or it could be a failure on the part of sales.

On the flip side, you may find the opposite. If you have the same amount of leads as normal but your new client rate grows, your practices are clearly working better than before. Examine what your team changed and implement it across the board in the future.

 

8. Existing Client Engagement

 

Ensuring that clients remain engaged will lower your churn rate. Being that retention is always less costly than acquisition, it makes sense to measure your existing client engagement as part of your sales KPIs.

There are many ways to measure engagement, but you need to bear in mind that different actions have different values. For instance, activity on social media tends to weigh much less than an email interaction. Plus, the type of email interaction matters: a response or click-through is worth more than an open, but all three are more valuable than a solicitation.

Other engagement activity to add to your calculation could include website visits, enrollment in loyalty programs, phone calls, referrals, and sales. Giving each a value that you consider appropriate will allow you to both determine individual engagement and plan a strategy to improve engagement.

 

9. Activity Per Rep vs Wins Per Rep

 

Activity per rep refers to the number of tasks a member of your sales team completes within a certain time frame. Wins per rep refers to the number of deals the rep closes within the same period. By comparing team members, you can see whether individuals are participating in activities that are beneficial to closing sales.

Be aware that the top activities for closing deals could be the same for everyone or they could differ according to the sales rep.

 

10. Funnel Stage Ratio

 

The part of the funnel that matters for sales runs from marketing-qualified lead (MQL) to sales-qualified lead (SQL), then from SQL to opportunity, and finally opportunity to win. The most important KPI about the sales funnel is the ratio of leads at every stage.

smarketing funnel, Sales KPIs, lead generation

Image Source

You don’t want to lose too many leads between stages, but you need to accept that you will want to remove some. Bad marketing leads need to go, as do leads that keep losing score points. (You do have a lead scoring system in place, we hope).

If you notice a drop off in leads at any stage in the funnel, examine your practices to determine the cause. Consider factors like

  • how long it takes sales reps to respond to leads in each stage,
  • if your sales team is connecting leads with marketing material,
  • and if leads are responding better when they receive a special deal.

 

11. Sales Velocity

 

Sales velocity shows you how fast and how many leads are successful converting to customers.

 

Number of leads
x Conversion rate percentage
x Average deal size)
/ Average number of days to close

 

To improve your sales velocity, the first thing you need to do is shift your focus to nurturing leads rather than just generating more leads. Also consider the quality of the leads that marketing is sending to sales. If far more leads are arriving than are converting, it is likely that they are not sales qualified. The two departments may need to discuss what criteria move an MQL to an SQL.

Another thing you can do to improve sales velocity is to increase deal size. This involves thinking about pricing, only using discounts when necessary, and ensuring that sales reps are offering the most appropriate products or packages.

A final thing you can do is decrease your sales cycle. Experiment with increasing or changing touchpoints to find out what works best for your business.

 

12. Customer Retention Rate

 

To increase retention, you need to improve the interactions you have with your clients in sales and marketing as well as in customer service. Reach out to customers to find out what your brand is failing to give them.

  • Is your service lacking?
  • Do you resolve issues fast enough?
  • Do you reward loyalty?
  • Do you stay in touch?

You can detect this by checking if sales is consistently providing helpful material that continues to nurture converted customers. In other words, you don't want to assume your customers will never go seek greener pastures. Delight your customers so they become evangelists.

By monitoring these KPIs on a regular basis, you will notice changes immediately and be able to take the appropriate action. Regular monitoring will also help with determining the cause of any changes. Use the data you gather to guide both your marketing and sales strategies and to make adjustments whenever necessary.

 

Not happy with what your sales KPIs tell you? 15 minutes with our inbound sales expert could save you the frustration.

 

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