Whether you are the leader of a large sales team or a small business owner with a sales team of one, it can be a helpless feeling not working if the sales process is working properly. Properly setting up sales KPIs can help a business owner determine if there are issues in their sales process.
Often, this feeling of despair is accompanied by confusion. “Where am I on the wrong track?” or “How can I fix my sales process?”. The first step to solve the issue of a sluggish sales process is correctly measuring it.
To help measure this process, you will need to be looking at the right key performance indicators (KPIs). In this article, we will provide you with a list of all the sales process KPIs you’ll need. By learning these, you can make sure that your pipeline is running smoothly and efficiently.
Metrics To Consider When Developing A Sales Strategy
As you develop your sales strategy, there are a series of metrics that you should consider tracking. There are sales pipeline metrics that measure the efficacy of your pipeline. Examples include the number of leads generated by your sales process, the average number of days it takes to convert a lead, and the average amount of time your sales team spends with each lead.
What Are The Main KPIs Of Sales?
Sales KPIs are a set of agreed-upon, quantitative measures used to assess the performance of a sales organization. After choosing your goals and identifying what actions to measure, it’s time to choose how to measure your progress. Choose the metrics that will offer the best insight as to how each goal is progressing.
Then choose those as your main KPIs.There are many KPIs that sales teams use to analyze their success at different steps in the sales pipeline including conversion rate, average order value, sales order value, average order size, average sales order size, number of orders per customer, number of orders per week, number of orders per month, number of orders per quarter and number of orders per year.
However, most sales teams agree that there are seven big KPIs of sales that are the best measurements to use to determine whether your sales strategy is going in the right direction. These big seven KPIs are win-rate, sales cycle, average deal value, deal profitability, ratio of leads to sales-qualified leads, customer lifetime value, and pipeline stage conversion.
If you are able to understand and analyze all of these KPIs, you are well on your way to creating a great sales pipeline.
What Are The 7 Key Performance Indicators?
1. Win-Rate (Opportunity To Close)
Win-rate is another term for conversion rate. Conversion rate from Marketing Qualified Lead (MQL) to Sales Qualified Lead (SQL) is important because it helps you to see whether you need to focus on improving the marketing team or the sales team. To improve win-rate, sales personnel need to identify and speak to the right type of prospects.
When you make goals in terms of conversion/win rate, the goal is to have a certain number of deals won by achieving a certain conversion rate. For example, the goal of the campaign could be to increase monthly revenue by $1000. You will need to calculate the conversion rate that you would need to achieve to translate your leads into $1000 of sales.
When you create a win-rate-based campaign, the target market for this campaign is people who purchase average value products.
2. Opportunity To Close Time
Sales cycle length, or the time from opportunity to close, is the time from when an opportunity is initiated to when it is closed. Put another way, it is the time it takes from when a prospect first enters your pipeline to when they make a purchase.
Sales cycle metrics help you determine what works and improve your sales process moving forward. Generally, you want this KPI to be as short as possible. However, there is no one-size-fits-all best sales cycle. The length of the sales cycle can vary greatly depending on several factors. These factors often include the type and size of your business along with what you are selling.
Businesses that offer simple, cheap products can expect a much faster sales cycle than those that offer complex, bespoke services.
Although the ratio of leads to sales-qualified leads is an important metric to track to determine performance, the sales cycle will tell you how quickly you are converting prospects into customers. Within the sales cycle KPI, there are quite a few smaller KPIs that are worth measuring.
Deal Profitability reflects how much profit your company generates from each sale.
Opportunity Win Rate measures how often you can convert opportunities into closed deals. This is important for increasing customer lifetime value and pipeline stage conversion rates.
Customer Lifetime Value (CLV) is how much money a customer is worth over their lifetime with your company.
Pipeline Stage Conversion Rate reflects the percentage of leads that have moved through each different stage of the sales process.
Sales To Support Ratio indicates how much resources you are using to generate sales compared to the number of sales you are generating.
Revenue By Product Line shows which products are contributing the most revenue for your company.
Customer Churn measures how often customers leave your company.
3. Average Deal Value
The average deal value is a statistic that reveals the average dollar amount of sales made per opportunity. Quite simply, it is the amount you make in each transaction.
This is almost universally imporatant. If your average deal value is too low, margins may be impacted along with your ability to break even. If your deal value is too higher, it may impact the total sales cycle length. This is also an important KPI to identify trends over time.
4. Deal Profitability
Deal profitability is the profit your company makes on a deal after you have calculated the deal expenditures. To calculate the profitability of a sale, add up the total amount of projected expenditures and deduct it from the value of the sale.
Knowing deal profitability will help you decide if you’re spending too much marketing on customers who spend too little. This will allow you to target higher-value clients, promote high-value products, or reevaluate your marketing strategy for promoting low-cost product lines.
5. Ratio Of Leads To Sales-Qualified Leads
The ratio of leads to sales qualified leads tracks the rate at which your sales team marks new leads as viable and moves them further down the sales pipeline.
This measures the quality of the leads generated. If your company generates its leads, this ratio can help you adjust your lead generation strategy. If you buy your leads, this can help you decide to find a new company to buy leads from.
At times, the issue maybe you aren’t attracting prospects with a high probability of becoming customers. The resulting low ratio of leads to qualified leads alerts you to potential flaws in targeting campaign effectiveness. This metric also helps determine which salesperson (or team) has the best understanding of the customer persona. You can then promote their approach as a best practice for your sales team.
The ratio of leads to sales qualified leads can also be used to determine how many raw leads you need to generate to keep momentum within your sales pipeline.
The first step is to qualify a lead and determined that they have the potential to convert into a customer. The next step is to provide a quote, measure your quote-to-closure ratio, and then close the deal.
6. Customer Lifetime Value
Another important KPI is customer lifetime value (CLV). CLV determines the total value of a customer relationship by taking the customer’s entire relationship with the company into account.
CLV is important to track because it helps you determine profitability from a customer over time. This metric can be a key to determine the overall business health.
CLV calculation is based on four key factors: purchase volume, frequency of purchase, average order value, and customer age. These factors are combined to create a CLV score. The higher the CLV score, the more valuable the customer is to your business.
There are several ways to increase your CLV: by increasing sales leads or conversions; by improving your marketing efforts; or by retaining high-value customers longer. However, to maximize your CLV, it’s important to understand how your customers behave and what factors influence their decision-making.
7. Pipeline Stage Conversion Rate
The conversion rate between each stage in the pipeline is important for measuring the success of a campaign. Before looking at this metric, you should create a conversion rate goal. To calculate how many deals should be won to reach your goal, divide the number of deals won by the conversion rate for that stage.
Each pipeline stage should be designed to increase the number of sales won. The conversion rate determines whether that design is working. Conversion rate is a measure of how well the website’s content is converting visitors into customers.
Choosing Your KPIs
It’s a complicated task to choose the right KPIs to use to evaluate the sales process; however, the most important thing to remember is to check your KPIs frequently. Choose KPIs that you will be able to understand quickly and on the go so that you can check them once a week. When it comes to choosing the right KPIs, quality is much more important than quantity.
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