Sales KPIs often vary from one organization to another. Depending on the goals a business aims to achieve, from trying to win market share in an already existing market to creating a new market after identifying a need, sales KPIs can differ.
Sales KPIs are also dependent on the sales strategies a business has. For example, some companies rely on in-house sales, while others on call center sales. Some even rely on partner channels for selling a product, while others follow a mixed approach.
Apart from this, the industry in which an organization works and the complexity of its product also impact the kind of KPIs and organization measures.
A single-use software product would rely more upon product sales KPIs like visitors to sales conversion rates.
Also, a product like life insurance might get more buyers via face-to-face interactions such as meeting personally with an agent. In contrast to this, simple car insurance can be bought online sans the need to visit someone personally through an in-house application infrastructure and dealership partnerships.
But overall, as a sales manager, tracking and measuring the performance of your sales team is the key to success. But not all metrics are created equal, and you need the right key performance indicators (KPIs) to help you achieve your business goals.
In this article, we’ll discuss 32 important sales KPIs (along with examples and formulas) that you can start tracking to improve your organization’s bottom line. But before, a quick look at the basics.
Understanding the Importance of Sales KPIs
As per Gartner, sales Key Performance Indicators (KPIs) are metrics that help sales teams measure their effectiveness and efficiency, with the overall goal of improving business methodologies and processes to drive sales.
A sales key performance indicator can help teams and their leaders gauge how effective their efforts are. Sales KPIs are the metrics by which an organization can evaluate its performance against its sales and organizational goals. By measuring the right sales KPIs, organizations can optimize their processes and help the sales team with business objectives. It can even help sales reps prioritize their selling efforts.
Sales KPIs are more than just numbers. They help organizations assess how well the sales process is. It further helps them gain an insight into the functioning of the sales departments and some potential roadblocks the sales reps might face in their sales journey- from getting a lead to making them your repeat customers.
It acts as an essential measurable metric that can demonstrate a company’s performance against its set objectives. It also gives an idea about how an organization is faring against its competitors.
Apart from that, sales KPIs acts as scorecards for measuring a company’s financial health.
By measuring the sales KPIs, an organization can also explore business opportunities. For example, let’s say you want to launch a new product. Maybe you test it out with a handful of clients and use your sales KPIs to validate your business model before launching it on a large scale.
Below we have listed the top 32 sales KPIs that are crucial to the sales department of an organization. For your understanding, we have categorized the KPIs into various categories based on the stage at which your leads are.
Lead Generation and Qualification KPIs
1. Visitor to Lead Conversion Rate
Understanding your leads’ conversion rates is essential for understanding how your sales department performs and which stages and activities have the highest return on investment for your business. The visitor-to-lead conversion rate lets you measure how well your site attracts visitors and inspires them to take desired actions.
It is defined as the ratio between the number of visitors on a website and how many become leads.
Even though the term “lead” varies as per organizations, it is generally defined as any person or business entity who has shown some interest in an organization’s product or services by taking a specific step such as filling out a contact form, subscribing to the email newsletter, or even doing something as simple as downloading any marketing content.
The formula for calculating visitor to lead conversion ratio is:
2. Marketing Qualified Lead Conversion Rate
Another important sales KPI that should be measured is the lead to Marketing Qualified Lead (MQL) conversion rate, defined as the percentage of leads who meet your marketing teams’ basic qualifications. The leads that cut through this stage are considered qualified and passed on to the sales team for further nurturing or follow-ups. It even offers organizations a chance to build the interest of leads into their products or services. For example, some MQLs might not be ready to buy your product yet. But they can certainly help build the sales pipeline, which can be leveraged upon in the future.
3. MQL to Sales Qualified Lead Conversion Rate
The MQL-to-Sales Qualified Lead (SQL) conversion rate is another important metric that the sales teams should measure. It is defined as the percentage of leads that have become sales qualified via marketing activities, campaigns, and sales team efforts. Here, SQL is a marketing lead that is most likely to convert to customers. This metric gives sales managers an insight into the marketing and sales alignment.
[Also read: MQL vs SQL]
Sales Opportunity Conversion KPIs
1. Opportunity-to-customer Conversion Rate
This is also an important part of the sales KPIs that every sales manager should measure. It is defined as the percentage of qualified leads or opportunities that finally convert into customers. This important sales KPI can help the sales department evaluate how and when leads are converting and aid organizations in improving each step of the sales process.
2. Sales Cycle Length
A sales cycle length is the amount of time between your first point of contact with a prospect to closing the deal. Ideally, it varies as per industry, target segment, and product. For example, a B2B organization might take longer to complete this cycle compared to a B2C company. Generally, the shorter the sales cycles, the better. Tracking this metric is essential for setting sales targets and forecasting revenue. Other benefits include having a full picture of the time, effort, and resources required on average to win each customer. If your Sales Cycle Length is longer than average, you may need to improve your sales processes. Reasons for abnormally long sales cycle length include poorly qualified leads, insufficient sales training, inappropriate sales channels, poor sales enablement assets, or a free trial period that is too long.
Here’s the formula to calculate sales cycle length:
For example, a B2B company estimates that it has closed ten deals over a total period of 1,240 days. This means that the average sales cycle length for this company is 124 days or four months.
3. Slip Rate
Slip rate is defined as the percentage of deals that have failed to close within a stipulated time. While every organization slips some deals, very few make the efforts to identify it. Being aware of the slip rate and having an intelligent tool to help organizations identify the lost opportunities can help organizations recover at the right time.
4. Opportunity-to-Win Ratio
The opportunity to win ratio helps managers comprehend their success rate in converting qualified leads into closed ones. This metric can give organizations insight into valuable data that the sales team can further use for the selling process. Managers can use this KPI both on an individual and team level.
Formula for measuring opportunity to win ratio is-
For example, if you got 20 leads in October, and won 8 deals in October, your Opportunity to Win Rate for October would be 8 / 20 = 40%.
5. Sales Linearity
Sales linearity as a KPI allows organizations to have a firmer grip over their fiscal health. A constant check on this key sales KPI can help organizations drive better margins and eliminate chances of discounting at the last moment. It even helps organizations create better revenue streams and build better cash flow margins. Sales managers must strive to achieve this aspirational target for several reasons like relief from heavy discounting at the last moment, having more predictable revenue that can allow more strategic and sound investments, having better cash flow.
6. Sales Pipeline Coverage Ratio
This KPI can help managers keep a close eye on the business’s health and ensure their reps are on track to hit their quotas. It can even serve as early warning signs to major potential threats to your business if taken seriously. Multiple factors can impact your company’s ideal pipeline coverage based on parameters like your product, the segments you serve, how long your sales cycles are, and much more. In short, there’s no one-size-fits-all pipeline-coverage approach.
For example, let’s say your sales target for the year is $1M, and the pipeline for deals closing this year is $3.5M. So, your pipeline coverage ratio will be 3.5.
7. Call Show Rate
The call show rate is yet another important sales KPI that organizations must measure. By this, sales managers can find out if the product pitch is enticing enough or not. This sales metric can prove to be an essential factor because sales is ultimately a numbers game. It can even aid organizations to know if they are even getting the right kind of prospects in the pipeline or not. Besides, the impact of follow–up emails or calls can also be gauged by this sales KPI. Also, it can help decision-makers know how good the sales reps are at their job- from listening to the customers to scheduling the right product demo.
Deal Closure KPIs
1. Close Ratio
Close-ratio is defined as the efficiency of a sales team in closing the sales. It helps teams or managers quantify the effectiveness of the sales team’s outreach strategy. It is calculated by dividing the closed deals by the number of opportunities the salesperson had during a period.
Here is the exact formula for close ratio calculation:
For example, a salesperson closed ten deals out of the 50 leads they had been working with. The closing ratio, in this case, is 10 / 50 * 100 = 20%.
2. Sales Volume by Location
By comparing sales volumes across locations, including physical stores and online transactions, sales managers can see the demand for their products and figure out the causes for a weak market in some places. For example, let’s say that a company launches a new product, hoping that metro cities will generate maximum demand. But as per data, tier 2 and 3 towns get them more lead conversions. Knowing this can help them make important decisions like hiring contractual field sales employees because setting up office operations might not be the best course of action. Measuring this sales KPI can help an organization customize a specific product or service for a particular region, especially in areas with low sales volume.
3. Client Acquisition Cost
Another commonly used sales KPI is the measurement of the cost of client acquisition. It is defined as the total cost incurred in convincing a lead to buy your product or service. It can include various business expenses like marketing, sales rep’s salary, travel, etc. Businesses often push this metric aside, which is not a good practice because it is essentially a reflection of your business model. If it costs more to acquire customers than what they are contributing to revenue, you need to work upon your method for obtaining new customers.
The formula for customer acquisition cost is as follows:
Sales and marketing expenses are the advertising and marketing spend, commissions and bonuses paid, salaries of marketers and sales managers, and overhead costs related to sales and marketing over the measurement period.
The number of new customers is the total number of acquired customers over the measurement period.
4. Sales by Contact Method
The sales by contact method as a KPI gives the decision-makers insight into the most successful contact methods that aid sales teams in generating sales. Examples of sales contact methods include phone, email, or in-person communication. Sales managers can use this KPI to change their sales process and target only specific channels. For example, the sales team can reduce their efforts on low yield, high-cost contact methods.
5. Pipeline Velocity
Pipeline velocity considers how a sales team prospects, conducts demos, and moves the deal through the various stages of the sales cycle. By monitoring this critical sales KPI, managers can grow their business and help it thrive. With the help of this metric, decision-makers can even find out ways of accurately optimizing every stage of the sales process. This, in turn, can lead to higher conversion rates.
6. Duration Per Stage
Duration per stage is a great sales KPI, regardless of an organization’s go-to-market strategy. After acquiring a lead, it becomes paramount for organizations to optimize the time to move through the funnel. It even helps to create an ideal alignment between the sales and the marketing arm of any company.
7. Average Deal Size
The average deal size or the average selling price refers to the average amount an organization spends on each closed deal. This metric is indicative of your teams’ ability to go upmarket and land more significant deals. It even helps sales managers ponder the sales team’s ability to manage complex sales cycles that carry hefty price tags.
8. Average Profit Margin
Average profit margin measures the “pulse of your business” and tells sales managers about their company’s performance. It is calculated by dividing the company’s net income by its net sales and can also be measured by product or region to gain insight into how each business segment is performing. A “good” profit margin depends on various factors, like what industry is your company in? Are you a new company? What are your long-term goals?
These factors can all impact your average profit margin. One of the best ways to determine your profit margin goals is to look at the average profit margin by industry.
Restaurants, for example, should aim for a profit margin of about 6-9%. The construction industry profit margin is about 5%. Other business sectors may have higher margins.
Our Tip: Don’t compare your average profit margins to another business’ unless they’re in the same industry as yours. Also, consider the same period (it’s not the same to compare margins during a recession with margins during stable economic times).
9. Sales Growth
This sales KPI is usually measured as a percentage and aids the sales team’s ability to increase revenue over a period of time. It is a key metric and influences the formulation and implementation of business strategy. Measuring the sales growth aids policymakers in understanding if their selling strategy is working or not. In other words, it can act as a rallying call for your entire team.
Sales growth is displayed in a percentage and is calculated with this formula:
10. Revenue by Channel
Revenue by channel is defined as the increase in revenue or sales that a business gets by partnering with third parties such as external sales teams. It provides excellent leverage to companies and provides a broad reach for your business. For example, a health insurance firm might be getting more clients by partnering with an external insurance agency.
The sales team thus needs to focus more on expanding its agency partnerships or incentivizing sales agents.
[Also read: The basics of incremental sales]
11. Revenue by Product
At times certain products give more sales to an organization. Thus, revenue by-product becomes an important sales KPI and must be measured by an organization. For example, an insurance firm selling different kinds of insurances can be getting more sales by selling car insurance with fewer investments compared to the more crucial ones like health insurance. In this case, the organization can begin trimming down expenses incurred on other products and take more effort to upsell car insurance.
12. Revenue by Territory
Digging into this sales metrics further can uncover incredible insights. A great one to start with is: Where in the world did your sales come from? This sales KPI tracks sales by specific regions to tell you which markets are most receptive and valuable. It’s important to track sales by region because every great sales process starts by understanding your ideal customer. And a significant part of that can be where they live. Additionally, you might want to segment your sales data even further to track sales by demographics and other factors that help you understand your ideal customer profile. Sales managers who craft the overall sales plan can use this KPI to see how specific campaigns are doing and help sales managers optimize their targeting.
1. Upsell and Cross-Sell Rates
Upselling and cross-selling help improve average order value, generate revenue and profit at a lower incremental cost. Managers can also use this metric to identify whether certain verticals respond well to specific product or service pitching. Looking at when, how, what, and to whom your reps are upselling or cross-selling can help the sales team adjust their efforts accordingly. It can also help set ambitious sales targets for individuals.
2. Churn rate
Honestly, churn rate is a very scary sales KPI, but also an important one. A customer churn rate is defined as the number of existing customers a business loses during a specific period. Sales managers can use this sales metric as an opportunity to dig into what led the existing customers to leave and take preventive steps to reduce churn.
Here’s an Annual Churn Rate Example:
Users at start of the year: 50,501
New users added during the year: 16,765
Users lost at the end of the year: 27,890
Annual churn rate for the year: 27,890/67,266 = 41.5%
3. Gross Profit Margin
This sales KPI is often expressed as a percentage of sales in organizations. It aids decision-makers in gaining an insight into the true profitability and financial health of a company, along with helping them compare their business models to their competitors. Decision-makers can even re-evaluate their selling approach by calculating the gross profit margins. An important fact to remember before making decisions based on this sales KPI is that figuring gross profit margin or setting goals for it does not necessarily translate to an increase in profitability.
Here is the formula for calculating the gross profit margin.
Example of Gross profit margin:
Let’s say that company XYZ is into SaaS sales. If XYX reported $10 million in total revenue for a particular year, and the cost of its services includes various expenditures like marketing, promotions, etc., comes to a total of $4,000,000. We can use the above formula to find the gross margin for XYZ.
Gross profit margin = ($10,000,000-$4,000,000) / $10,000,000
Gross profit margin = 60%
6. Net Promoter Score
NPS as a sales KPI can help managers gauge customer loyalty, satisfaction, and enthusiasm with a company’s services or products. It is generally calculated on a scale of one to ten and helps businesses improve their services, customer support, delivery, etc.
The Net Promoter Score is calculated as the difference between the percentage of Promoters and Detractors. Note that the NPS is not expressed as a percentage but as an absolute number.
7. Average Revenue Per Account (ARPA)
Calculating ARPA can give sales departments a good idea of revenue generation or sales growth required on a per-account basis. This comes in handy when placing value on new leads and opportunities. It can also help forecast revenue based on the number of customers they can acquire over some time. It is calculated by dividing the total revenue by the number of customers a business has.
Here’s the formula for calculating ARPA:
For example, if your MRR is $35,000 from 10 customers, your ARPA will be $3,500.
8. Brand Mentions
Simply put, brand mentions can act as a significant source of leads and even additional sales. It can also help organizations gauge customer opinion concerning a product or service. Sales managers should encourage their customers to go vocal about their experience with your offering.
9. Customer Lifetime Value (CLV)
CLV is an indicator of the profit that an organization stands to gain throughout its relationship with a customer. Simply put, it is the monetary value placed on an organization’s relationship with a particular customer. Focusing on CLV helps improve customer retention while driving repeat sales.
Formula to calculate CLV:
Here’s an example.
Profit generated by the customer each year = $1,000
Number of years that they are a customer of the brand = 5 years
Cost to acquire the customer = $2,000
The customer lifetime value of this customer would be:
$1,000 (annual profit from the customer) X 5 (number of years that they are a customer) less $2,000 (acquisition cost) = $3,000 = CLV.
That is, $1,000 X 5 – $2,000 = $3,000.
10. Repeat Customer Rate
Repeat Customer Rate is an important sales KPI and lets you know the proportion of customers who have come back to you for buying a product or service. It is usually expressed as a percentage and helps businesses evaluate their overall customer experience. Keeping track of this sales KPI also helps the sales team cut down on their expense of acquiring more customers, as the cost of retaining old customers is less costly than the cost of acquiring new customers. It lets organizations sell more with less effort.
You can use the following formula to calculate the repeat customer rate.
For example, if you have 2000 customers complete a purchase in the past week and 500 of them were returning customers, your Repeat Customer Rate is 25%.
11. Net Retention Percentage
Net retention percentage is also an important sales KPI for managers wanting to keep their current customer base stable. It often goes hand in hand with the churn rate and helps the sales and customer success teams achieve customer satisfaction and growth.
12. Existing Client Engagement
Excellent after-sales services are crucial in ensuring long-term business success. It is here where this significant sales KPI comes to the rescue. It helps organizations maintain a good rapport with their existing clients and enhances the word-of-mouth publicity for a brand or company.
Different companies prioritize different goals and objectives, and the way they measure success will reflect those metrics. As you learn, grow, and change as a company, so will your sales KPIs. However, the above sales KPIs are an excellent place to start with.
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