The best sales teams use metrics for data-driven decision-making. If you focus too much on the wrong KPIs, you’ll end up with inefficient campaigns that can burn resources.
It’s the same for managers tracking too many KPIs. You don’t want to end up with analysis paralysis. The question now is, which sales KPI should you track?
Let’s take a closer look...
Why Businesses Need to Track Their Sales KPIs
KPIs standardize how a business views success. If you’re a sales rep, you’ve probably experienced a sales manager getting too focused on metrics that don’t make sense.
With a well-defined sales KPI, sales teams have a specific target to aim for. Sales leaders or managers have metrics to gauge sales activity. All tasks become aligned.
Think of sales KPI as a detailed roadmap toward revenue growth. Let’s say, business A only focused on conversion rates as their KPI. Meanwhile, Business B had a more holistic sales KPI.
What ends up happening is business A’s sales team would only focus on closing leads that are already in their pipeline. Potential prospects slip through the cracks. Sales become stagnant.
Business B had KPIs for lead generation, customer retention, and quota attainment. This means their sales team also focused on prospecting, nurturing, closing, and post-sales support.
Business B’s sales team didn’t only focus on sales negotiations for prospects in their pipelines but also included up-selling or cross-selling to current customers, resulting in massive growth.
KPIs vs Sales Metrics: Should You Care About the Difference?
Sales KPIs and metrics are often used interchangeably. The truth is they are entirely different from each other but equally necessary to the growth of your business.
KPIs help sales teams define a specific business goal. Let’s say your goal is to close 2,400 sales a year. That means you can set the sales KPI to 200 sales each month.
Sales metrics on the other hand provide a quantifiable way to measure sales performance. It could be the number of sales activities done, leads converted, or cold email responses.
Your broader business goals don’t have to rely heavily on the individual performance that sales metrics track. It’s necessary for setting up the proper sales commission structure for your team.
12 Most Important Sales KPIs to Track
The most important sales KPIs help you ensure long-term, predictable, and sustainable revenue. They maximize your ROI, reduce customer acquisition costs, and improve the average customer lifetime value (CLTV). Here’s an in-depth look at these sales KPIs:
Customer Acquisition Costs (CAC)
Customer acquisition costs track how much money was spent to acquire a single customer through any means. It could be through lead generation, inbound marketing, and cold outreach.
This KPI is essential as it’s needed to calculate the net profit of your business. Let’s say your business has three lead-generation vehicles: social media ads, SEO, and email marketing.
You notice that the customer acquisition costs are higher for social media ads. That means scaling paid ads on social media is an inefficient way to spend marketing resources.
With this insight, you have a few options. For example, you could double down on paid ads and A/B test strategies that could make it more effective or, focus more on SEO and email.
Sales Opportunities and Leads
Not all leads are the same. Some offer more revenue opportunities than others. Looking into sales opportunities and leads gives your reps insights into leads they should prioritize.
For a more streamlined look into sales opportunities and leads, you’ll need a CRM that offers a 360 view of all leads in your sales pipelines. Enter Instantly CRM.
With Instantly CRM, you see a bird's-eye view of all interested leads, the value of those leads in that pipeline, the value of leads that booked a meeting, and the value of the deals closed.
Sales reps can use the lead data in Instantly CRM to get an in-depth view of each lead, their company descriptions, pain points, and other crucial details. This ultimately helps them not only see their opportunity value but how to convert each prospect as well.
Monthly Sales Growth
As the name suggests, the monthly sales growth KPI measures the growth of your business per month. It acts like a goal post, letting your sales team get a clear view of what targets are achieved, close to being achieved, and metrics that aren’t looking too good.
The monthly sales growth KPI has two functions—tracking profit and tracking the progress of your overall business goals. Increased profits are a direct result of better sales performance.
Better sales performance means reps are on track and hitting their KPIs. It’s also a great indicator of what strategies to keep, which ones need improving, and which ones to let go of.
To calculate the monthly sales growth, use the following formula:
((Monthly sales - previous monthly sales) / previous monthly sales) x 100
Establishing realistic monthly sales growth targets enables your team to stay grounded and not be forced into burnout trying to meet expectations.
Customer Lifetime Value
The customer lifetime value shows the projected revenue that you can generate from customers throughout their relationship with your business. Tracking this metric helps you strategize on how to spend on this customer for marketing or outreach efforts.
For example, if a customer has a high CLTV, you can use that customer as a basis to build your ideal customer profile or buyer persona. That means the next time reps do prospecting, they know exactly which prospects can bring the highest potential revenue for the business.
Tracking CLTV also helps reps segment customers and how much to spend for customer acquisition campaigns. Here’s the formula for calculating CLTV:
CLTV = Gross margin percentage x retention rate x average revenue per customer
Sales Cycle Length
It’s necessary to know how long the average sales cycle is for your team and your prospects. Tracking this KPI lets you find out what sales cycle length leads to the most closed-won sales.
Sales cycle length is also important as an individual sales metric. Let’s say one of your sales reps is closing deals in record time. But, you find out that the leads they close end up unhappy.
That could mean that the sales rep is giving customers unrealistic expectations to close sales faster. Once customers see the disconnect, they end up dissatisfied and leaving.
If that’s the case, then a longer sales cycle might be necessary for better discovery calls. This also provides reps the opportunity to align their unique selling propositions to prospect needs.
Monthly Recurring Revenue & Annual Recurring Revenue
If you’re in SaaS, monthly recurring revenue (MRR) and annual recurring revenue (ARR) are non-negotiable KPIs you need to track. Both tell businesses what they can expect to make each month and year from recurring revenue or subscriptions to their service.
Here’s how you calculate for both MRR and ARR:
MRR = Total paying customers monthly × average revenue per customer that month
If your customer base remains relatively consistent, you can just multiply the MRR by 12 to get the ARR. However, that isn’t often the case due to cancellations. So, to solve for ARR you need:
ARR = (Total revenue from annual subscriptions) + (additional recurring revenue) − (cancellations)
Sales Per Rep
Sales per rep is a performance KPI that measures the sales generated per sales rep. It’s a necessary metric to measure individual and sales team performance, trends, and strategies.
Managers use this KPI to set realistic sales targets, identify top-performing reps, and which reps need one-on-one coaching or sales training. But, this can be a double-edged sword.
For example, top performers would be incentivized to work better to sustain their numbers. Meanwhile, underperforming reps might view this as a negative.
That’s why it’s essential to enable your sales team by providing all the tools and resources needed to even the playing field. To calculate sales per rep, use this formula:
Sales per rep = Total sales / # of sales made by rep
New Leads in Pipeline
Pipelines filled with new leads are often a good sign of sustainable growth. But manual lead generation can take reps hours in a day. Instead, reps should focus on dollar-productive tasks.
Luckily, lead generation tools like Instantly B2B Lead Finder can automate and streamline the entire process. Reps only need to spend minutes finding leads that match their ICP.
B2B Lead Finder also has an evergreen feature that saves your search criteria. It then automatically adds leads to any campaign and removes any duplicates.
That means reps can automate the entire lead generation process from prospecting to outreach when combining B2B Lead Finder and Instantly.ai.
Customer Retention and Churn Rate
Businesses get more revenue from existing leads than new leads. That’s why it’s important to not only focus on customer acquisition but also customer retention.
Existing customers already know your brand. They trust you and are more likely to buy more products because of this. The better the customer retention, the higher the CLTV, and the lower the customer attrition.
On the opposite side is the churn rate. This measures the percentage of customers who stopped buying products or using your services.
Great customer retention lets businesses up-sell and cross-sell to existing customers. This improves predictable revenue and maximizes ROI. The longer customers stay with you, the more likely they become patrons loyal to your brand.
To calculate customer retention, use the formula:
Customer retention = (total number of customers at the end of the year – net new customers in the current year) / (# of customers at the start of the year) x 100
Sales by Channel
There are several ways to generate leads for your business. You can get leads from inbound content marketing campaigns, cold outreach, or even live events.
Knowing which of these sales methodologies earns you the most sales lets you prioritize and optimize the best-performing channels.
Paired with metrics like sales per rep, managers can get a more holistic view of the sales performance of each individual and the sales team as a whole.
For example, you might get more leads from paid ads on social media. However, you notice that inbound marketing leads often lead to more sales. That could mean marketing content doesn’t align with sales.
These insights help managers understand which strategies to focus on. The formula for sales by channel is:
Sales by channel = (Sales by channel method / total revenue) x 100
Quote-to-Close or Demo-to-Close Ratio
Sending a quote to prospects means they’re a few nudges away from conversions. However, there might be underlying issues with your reps’ sales negotiation tactics if quotes or demos don’t convert.
The quote-to-close or demo-to-close ratio is the percentage of deals closed and won compared to the number of quotes your reps send prospects.
Remember, just because prospects ask for a quote doesn’t mean they’re fully committed to your product or service. Chances are they still have reservations or objections. Here’s the formula:
Quote-to-close ratio = (# of closed and won deals / # of quotes) X 100
Upsell and Cross Sell Rates
Studies suggest that cross-selling accounts for 21% of the value businesses get from revenue. Cross-selling and up-selling improve the average order value (AOV) and CLTV of customers.
Tracking upsells and cross-sell rates can help you identify what type of strategy works best for what specific segment of your customer base.
Let’s say you're selling SaaS for marketing agencies. Thanks to tracking upsell and cross-sell KPIs, you find out that project managers respond positively to a product feature upsell.
Sales reps can leverage that information to align their unique selling propositions that target the needs of project managers. To calculate upsell and cross-sell rates:
Upsell% = Upsell revenue / total revenue
Cross-sell% = Cross-selling revenue / total revenue
TL;DR
Understanding what sales KPIs to keep track of lets you focus efforts on best-performing strategies, find top-performing sales reps, and align concepts of success with your overall business goals. To recap, here are 12 essential KPIs every business should track:
- Customer acquisition costs and sales opportunities help you focus on the right leads using the most cost-effective channels.
- Monthly sales growth and CLTV let you see if you’re on the right track to achieving your overall business goals and find potential underlying issues in your sales strategies.
- Sales cycle length and MRR determine what sales methodology is most effective at closing leads that generate the most recurring revenue for your business.
- Sales per rep and new leads in the pipeline give an overview of how effective your reps are at closing prospects and sustaining pipelines.
- Customer retention and upsell/cross-sell rates help you nurture and provide value to existing customers to improve their CLTV and AOV.
- Sales by channel and quote-to-close ratios track how effective your sales reps are at negotiating with prospects and which channels result in the most conversions.
If you need a tool that can help you track essential sales KPIs and help with improving the results of your outreach campaigns, Instantly CRM is a must-try. Start for free today.
