As a sales professional, it’s important to know which metrics matter most. Here are the 5 key sales metrics you need to track to close more deals and hit your quota.
I remember when I first started out in sales. I was so focused on closing every deal that I didn’t pay attention to any other metric except for my total number of closed deals. It wasn’t until my manager sat me down and showed me the importance of tracking other key sales metrics that I realized how much valuable information I was missing out on.
Since then, I’ve made it a point to track the following key sales metrics:
What are sales metrics?
Sales metrics are performance indicators that help businesses track progress and identify areas needing improvement. Common sales metrics include conversion rate, average deal size, and win rate.
By tracking these metrics, businesses can gain insights into which sales strategies are working and which need to be tweaked.
Additionally, sales metrics can provide early warnings about dips in performance, allowing businesses to take corrective action before it’s too late.
Why are sales metrics important to track?
Tracking sales metrics is important because they can reveal whether or not you’re meeting your goals.
They help you figure out if your goals are actually achievable and what you can do to improve your chances of reaching them.
Sales metrics are important to track because they provide data that can be used to assess whether goals are realistic and what an organization can do to improve the likelihood it will achieve its goals.
Sales metrics also give insight into areas where the sales process can be improved for greater efficiency, growth, and ability to close deals. By tracking sales metrics, organizations can identify potential improvements in performance and employee engagement.
How To Choose Sales Performance Metrics To Track
There are dozens of sales KPIs you can measure, but just because you can, doesn’t necessarily mean you should.
The most important sales and performance indicators for finance leaders and sales teams to track are revenue and profit.
When choosing which sales productivity metrics to track, consider those that are related to strategic goals, tailored to your product and sales process, and which match your performance goals. By doing so, you can help your sales team stay focused on key activities and better monitor progress towards meeting objectives.
By choosing the correct key performance indicators, you can more accurately measure your growth and ensure that your sales managers are focusing on the right tasks.
So much of the sales process relies on your instincts. But you can’t rely on your gut feeling alone.
Measuring your sales team’s sales performance will help you uncover any issues in your pipeline, as well as help you improve revenue forecasts.
This is why the VP of Sales and CFO can be such powerful partners. If you can provide them with the insight they need, you can boost your sales team’s productivity and help them hit their revenue targets.
But your active role in the sales cycle begins with tracking the right numbers.
When it comes to choosing metrics, it’s important to consider your specific business—your pricing structure, your marketing strategy, and your sales process.
The following 10 key metrics will help you evaluate individual rep performance as well as the sales team performance:
1. Annual Recurring Revenue (ARR)
ARR (Annual recurring revenue) is the total revenue your company generates each year. This is a key performance indicator (KPI), that you should follow for any SaaS company that is subscription-based.
It tells you how much money your customers can expect to pay in a given year. If ARR is tracked historically, it can be used to assess a company’s growth as well as assist in long-term forecasting.
The ARR calculation
Annual Recurring Revenue (ARR) = (total contract value / number of contract years)
2. Average Revenue per User(ARPU)
The average revenue per user (ARPU), or the average revenue per account, is the amount of money a company makes per subscriber, user or account during a given time period. It is calculated by multiplying the total revenue for the time period by the number subscribers, customers, or accounts during the period.
Calculation of ARPU:
ARPU = Total revenue for a given time period / Average number of subscribers.
This KPI can be useful for a few reasons. Your ARPU can indicate that your revenue is holding its value if it is increasing. You might be able to avoid steep discounts to get customers on contracts or to not have to scramble to reach your number at quarter’s end.
Your highest ARPU customers can help you determine your product-market fit. If you notice that cybersecurity or telecommunications firms are among your highest ARPU customers, it may signal that you should double down on those segments. They’re likely to be willing to pay a premium for the value your product offers.
3. Quota Attainment
Quota attainment means exactly what it sounds like. It is the percentage of closed deals (either in terms of revenue or number) that a sales rep has achieved relative to their quota for a specific time period. It can be measured in terms of a sales cycle, whether it is per month, quarter, or year.
Calculation of quota attainment
Quota Attainment = (number closed deals or revenue in given period) / (quota during that period)
This is an important metric for revenue forecasting. It allows you to track how deals have been closed against targets and to identify sales representatives that might benefit from additional coaching or guidance. The reps’ quota achievement percentages can be tracked over time and could indicate the need to change the team structure.
This number doesn’t stay the same throughout the month or quarter. Therefore, you should keep it in line with your manager/rep and measure it during one-on-one sales meetings. This will allow you to monitor whether your team is consistently moving deals through the pipeline throughout the current quarter.
4. Win Rate
The win rate is the percentage of closed deals within a given time period.
The win rate calculation
Win Rate = Total # of won opportunities / Total # of closed opportunities (both won & lost)
Analyzing the changes in win rates over time can help you gauge the performance of your sales reps and determine how much pipeline coverage is necessary to reach your sales targets.
5. Conversion Rate
The conversion rate is the percentage of qualified leads that lead to closed-won sales deals.
The conversion rate calculation:
Conversion percentage = (# leads converted into sales / Total qualified leads)
This key metric, when tracked over time can measure how well your team converts leads into new customers. It can also be used to improve the quality of leads by aligning sales and marketing teams. Monitoring conversion rates and the characteristics of leads over time will ensure that your company is selling to the right buyers and continues to grow.
Businesses with multiple sales stages and longer sales cycles will benefit from tracking the conversion rate between each stage. How often does a net new lead turn into a qualified sales pipeline? How often does a qualified sales pipeline turn into revenue?
This will allow you to improve your revenue machine. If your historical conversion rate from new leads to qualified sales leads is low, you might need to adjust your top-of-funnel messaging and instrumentation to attract a different group of leads with more specific qualifications.
Analyzing conversion rates by the lead source is another way to do this. Sales teams should track the origins of deals in their sales funnel to get an idea of which sources convert to new customers, which get stuck, and which get lost.
6. Length of Sales Cycle
The average time it takes for a customer to move from opportunity stage to closed deal is called the sales cycle length. This metric is useful for sales teams to determine if there are any bottlenecks in the sales process. These can delay or even lose deals. It can also help streamline the sales process for better forecasts and a higher close rate.
Sales organizations should also monitor the time deals remain in each stage of the sales process. This will allow them to identify at-risk sales opportunities and determine if they need to be discarded or if they have any options.
7. Average Sales Price (ASP) or Average Deal Size
The average deal size and average selling price refers to the average dollar amount for each closed deal.
The ASP calculation:
Average Selling Price = (total $ of closed transactions over a specified time period) /(total #)
A company would sell $65,000 if it closes three deals in a quarter at $60,000, $60,000, and $75,000 respectively.
This metric shows how well your revenue teams are able to go upmarket and land bigger deals. Are you reaching customers with larger pockets? Are your sales teams capable of managing complex sales cycles that have higher price tags?
To understand where the most profitable deals are, it is important to track the average deal size by total business over the given time period (monthly or quarterly).
8. Average profit margin
The average profit margin is essentially the pulse of your company. This KPI tells you how your business is doing.
The average profit margin is calculated by dividing the net income of your company by its net sales.
Calculating the average profit margin:
Average profit margin = net sales
Add your total expenses to the total revenue to calculate your net income. The net sales are calculated by subtracting the total refunds or returns from the total sales.
To gain insight into the performance of each business segment, the average profit margin can be measured by product, region, and rep.
9. Deal Slippage
Deal slippage is the failure to close deals within the expected timeframe. A deal that was in the commit for Q1 but is pushed to Q2 because of budget freezes or project stalling, is considered a slip.
This misconception is that all slippage is bad. Every company experiences deal slippage. It is important to know your average slip rate so you can plan for it.
10. Churn rate
Churn rate is the number of customers who cancel or refuse to renew their subscriptions within a given time frame.
Calculation of the churn rate:
Churn Rate = Number of churned clients / Total number of customers
Subscription businesses with customers should monitor customer churn. Your net growth will be zero if you lose customers as quickly as you gain them. This is why it is essential to protect your customer base, provide a great customer experience, and continue to innovate to add value.
It can be difficult to identify accounts at risk of churning. This can often require complicated spreadsheets. However, new sales technologies revenue teams have more visibility into renewals at high risk so they can take a proactive approach in preventing churn.
Conclusion
If you’re not tracking these 10 key sales metrics, you could be missing out on valuable information that could help you close more deals and hit your quota. Make sure to start tracking them today!
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