Sales teams are one of the biggest sources of revenue generated by a company. However, without clear sales metrics, to measure team performance, many sales orgs can work inefficiently, leading to declines in revenue and productivity.
Tracking sales metrics helps you to make sense of your sales data so your team can hit their goals and targets. But with so many KPIs and metrics to choose from, it’s tricky to know if you're tracking the right sales performance metrics.
In this guide, we'll review what sales metrics are and explore the different KPIs that you can track to help meaningfully measure sales performance.
What are sales metrics?
Sales metrics are data points that can be used to measure the effectiveness of your sales activities. They can be looked at on an individual or team level to assess whether your team are meeting their sales goals.
Tracking sales metrics helps you assess whether your current sales processes are working effectively. For example, if your sales metrics are showing that sales reps are consistently missing their sales targets, you may need to reassess your strategy.
What are key performance indicators (KPIs)?
Key performance indicators (KPIs) are metrics that are crucial to your sales team's success. This means that they directly contribute to meeting your business's overall revenue goals.
To get a complete view of your team's performance you should track both KPIs and sales metrics. This combined approach helps you understand the whole sales process.
For example, if you only monitored one metric like total revenue, it would be impossible to understand why that figure goes up or down. On the other hand, if you only tracked sales activities, like cost per sale, without considering the end result, it would be difficult to measure how this is affecting the end result.
How do sales metrics support sales performance?
Sales metrics are data points that help to measure your sales team’s performance and potential. It's a way of assessing whether your sales initiatives are getting the desired results and whether your current methods are successful.
Sales expenses can quickly add up. So if your reps are using methods that are costing both time and money, sales professionals can use the metrics below to measure return on investment (ROI).
Key sales metrics that every business should track
There are lots of different sales metrics that businesses can track, so it can be hard to know which ones are most essential.
Let's explore some of the important metrics that sales organizations can measure to boost sales productivity.
Total revenue
A company's total revenue is a figure that represents the entire income generated from an organization's sales team. Also known as gross sales or turnover, total revenue is a key sales metric that sales leaders can use to evaluate your business's financial success.
For example: If a company sells 100 units of its product for $20, then its total revenue will be $200.
Percentage of revenue generated by new business
This metric refers to the percentage of revenue brought in by new customers. It is usually looked at over a monthly or quarterly period and provides insight into a business's growth.
This sales metric provides great insight into your company's growth and success. If your company is failing to bring in new customers and generate income from fresh leads, then it’s likely that your current sales methods aren't working
For example, if a business earned $1000 in total sales and $500 of this came from new customers then its new revenue generated percentage would be 50%. This is an easy way to measure how successful a company's marketing and outreach efforts are.
Market penetration
Market penetration is your total customer base compared to the total market potential. This metric gives you an idea of your overall market potential.
From this, you can see any potential revenue and growth opportunities. This helps you improve current methods and look for new strategies to increase your market share.
As an example, imagine that a company has a product that appeals to a market of 10,000 consumers. They currently have 1,000 customers, so their market penetration rate is 10%.
Existing customer revenue
This is income earned from existing customers, either through cross-selling, upselling, repeat orders, or expanding contracts. Tracking this sales metric helps you assess customer satisfaction and provides insight into the success of your company's efforts.
Retaining and growing your existing customer base is more cost-effective than acquiring new accounts and customers.
If your company has a total revenue of $50,000 and $10,000 of this came from new business, then, 80% of a company's income is generated by existing customers.
Average customer acquisition cost (CAC)
Average customer acquisition cost (CAC) refers to the total cost of both sales and marketing expenses when onboarding a new customer. Your CAC is a good measure of how successful your sales and marketing efforts are.
If costs are high then you can see if money is being spent inefficiently. This can help you realign your sales and marketing teams to cut costs and boost productivity.
For example, your sales team has spent $10,000 in expenses and brought in 10 new clients in the last 12 months. This makes your CAC $1,000.
Year-on-year growth
This metric compares how much revenue a company has brought in compared to previous years. Year-on-year growth (YoY) helps sales managers assess whether their sales team is hitting their targets by comparing their progress to previous years.
For example, your sales team brought in $20,000 in revenue last year and $25,000 this year. This makes YoY growth 25%.
Average customer lifetime value (ACLV)
Average customer lifetime value is a sales metric that measures total revenue that your business can expect from a single customer throughout their relationship with your company.
It considers several factors including customer behavior, purchase frequency, and average order value. These provide valuable insights into each customer's value to the business, so that they can make informed decisions about customer acquisition and retention strategies. This helps to maximize long-term profits and sustainable growth.
Net promoter score (NPS)
Net promoter score (NPS), measures your customer satisfaction by assessing how likely they are to recommend your business to others.
This helps you to better understand your customer's experience with your product or service. If you are hearing about the same issues over and over then you know that something needs to be addressed. You can then have your sales representatives change their approach or invest in new sales tools that will help boost customer satisfaction.
Number of deals lost to competition
This metric shows the total number of deals that have been lost to competitors.
Deals lost is an important sales metric as it helps you to visualize lost opportunities. Businesses are at risk of losing up to 30% of their sales opportunities to their competitors. By tracking the number of deals lost you're able to identify potential pain points or common issues that are causing you to lose these leads.
Cost of selling
Cost of selling, also known as a sales expense ratio, is a sales performance metric that measures the sales and marketing expenses incurred by your company. This is usually calculated as a percentage and helps you examine your current profit margins.
This metric helps you measure and track the efficiency of your sales teams. If operating expenses are high then it's harder for your sales reps to drive growth through new leads and customer acquisitions.
Average sales cycle length
Average sales cycle length refers to how long it takes for potential customers, or leads, to travel through the sales funnel. A sales cycle is completed once a deal is closed and the lead becomes a customer.
Some businesses will have a longer sales cycle than others. For example, B2B sales often have longer sales cycles than B2C because the final decision is made by a group rather than an individual. Keeping track of this average can improve sales forecasting and allow you to effectively manage your resource allocation.
Weighted pipeline value
Sales pipeline metrics help you reveal the overall health of your sales teams. A weighted pipeline value shows the estimated value of deals as they move through your sales pipeline.
The probability of a deal closing will depend on what stage of the sales pipeline a lead is on. For example, if the lead is still at the top of the sales funnel, then it's quite unlikely that a sales rep will close the deal any time soon. However, if they're in the negotiation stage, you could increase the likeliness to around 50%.
Tracking sales pipeline metrics helps give businesses an accurate view of cash flow and revenue projections. You can also spot where leads are getting stuck and address ways to improve these stages in your sales pipeline.
Annual contract value (ACV)
Annual contract value is the amount of revenue that a single contract brings in over 12 months. It's easy to measure and is a great way of predicting your company's total income. It also helps you identify high-priority customers that you’ll want to create strong relationships with to ensure repeat revenue.
For example, if a customer has signed up for a 5-year contract at $5000 then your annual contract value is $1000.
Win rate
A company's win rate refers to the proportion of successful deals they secure compared to the total number of potential opportunities.
You can calculate your win rate by evaluating each sales rep individually. Or you can take a broader approach and evaluate your sales team as a whole as well as the sales manager in charge.
Tracking win rates based on product, market, and target audience helps you pinpoint the chances of success for each opportunity. This helps businesses identify and direct resources toward opportunities with high conversion potential.
Average lead time response
Your average lead response time is how long it takes for your company to respond to new leads. This metric is important because the faster your company responds to a new sales lead, the more likely a lead is to convert.
Many businesses set their sales reps targets to improve average lead response time. By tracking sales productivity metrics, you can improve customer retention by building stronger relationships. Studies have shown that 50% of B2B sales are won by the vendor who responds to a customer query first, so speed is essential when trying to win new customers.
Email engagement rate
Email engagement rate helps businesses measure the level of interaction between their email messaging and recipients. Unlike other metrics like response rate, email engagement takes into account actions like opening the email, video plays, and link clicks.
Engagement with messaging is a crucial sales metric as it helps you understand how effective your sales process is. If your messaging isn't reaching your clients then your sales representatives must consider new approaches. Tailoring messaging is often a team effort, and a low engagement rate can be a sign that your marketing and sales teams aren’t as aligned as they should be.
For example, if you sent 100 emails and received a total of 200 engagements (e.g., 100 opens and 100 clicks), your email engagement rate would be 200%.
Leading and lagging indicators
Before you start to track sales metrics, you need to learn how to make sense of your raw data points. This is where leading and lagging indicators come into play.
Leading indicators look ahead in an attempt to predict future outcomes while lagging indicators look at the past. Some may argue that there's little point in focusing on historical data, however, they are very useful for confirming changes in trends. Unlike leading indicators, which may not always be accurate and can be misleading.
SaaS sales KPIs
Software as a service (SaaS) is a business model that provides customers access to specific applications as opposed to physical items. It often follows a subscription model, which requires businesses to track different sales metrics.
A SaaS company is a recurring revenue business meaning that revenue comes over an extended period, otherwise known as the customer lifetime. This business model relies on customer satisfaction. If a customer is happy with the service, they will stick around for a long time. But if a customer is unhappy, they will churn quickly, meaning the business will lose money on the investment that they made to acquire that customer.
David Skok explained that instead of solely focusing on acquiring the customer (the "first sale"), you must also focus on keeping them (the "second sale").
Let's review SaaS metrics in more detail:
Customer acquisition cost
CAC is a common sales metric that a range of businesses track. But, it’s especially useful for SaaS businesses to help them calculate the sales and marketing costs required to acquire one new customer.
Examples of acquisition costs include:
- Inbound marketing like content creation and SEO
- Sales and business development
- Events and trade shows
- Paid advertising
- PR packages.
Cost per acquisition (CPA)
Although it sounds similar to the above term, cost per acquisition (CPA) is different from CAC.
CPA is how much money you need to spend to convert a lead to a customer. This includes everything from lead acquisition to free trials, and registration fees.
CPA and CAC are closely related and your CPA is often a leading indicator of your CAC.
Many SaaS companies provide a freemium version of their software or product. Therefore you need to include the costs of this in your CPA. It can take months to recuperate the costs of these free trials, so companies need to consider this when offering free trials.
By focusing on this metric you can better manage cash flow, and work out how long you need to retain a customer to ensure that you make a profit.
Average revenue per user/account (ARPU/ARPA)
Average Revenue Per User or Account (ARPU/ARPA) is the mean amount of revenue that is generated by a single user, customer, or account. Typically it is calculated on a monthly or yearly basis depending on the business or industry.
For example, if you offer monthly contracts, calculate it per month. But if most of your contracts are annual, calculate it per year.
Monthly recurring revenue (MRR)
Your monthly recurring revenue represents the total amount of predictable revenue you expect to make each month. This is one of the most important sales metrics for sales leaders to track as it predicts your future growth and revenue.
Monthly recurring revenue is calculated in two ways:
- Adding up the monthly revenue brought in by customers
- Multiplying ARPA by the number of paying customers.
The first method does take more time but it is often the most accurate. For example, if one customer is paying $100 per month, and another is paying $200 per month, your MRR would be $300.
The second method is easier, especially if you have a lot of customers all paying different rates. If you have five customers and your ARPA is $150, then your MRR would be $750.
When calculating your MRR, you need to leave out one-off payments like implementation and/or limited support fees. These can skew your data leaving you with inaccurate results. You also need to consider any quarterly, semi-annual, and annual plans.
For example, a new customer may sign up for a year-long contract in December that totals $1,200. If you tally up your MRR on a customer-by-customer basis that month, you might incorrectly add $1,200. Instead, the additional MMR is $100.
Churn rates in SaaS
Churn rate refers to the percentage of customers that cancel their recurring subscriptions. You can choose to calculate this on a monthly, quarterly, or yearly basis depending on your most common type of contract.
As an example, imagine that the majority of your customers are on semi-annual plans. When looking at the data you see that in January, you have 400 customers, but in June, you have 500 customers.
Your churn rate equals -100 / 500, or -20%. This means that you're gaining more customers than you're losing.
Revenue churn
Churn can be a real problem for SaaS businesses, regardless of the type. Revenue churn is the amount of revenue that you can lose due to customers canceling their subscriptions.
This is used instead of customer churn when assessing high and low priority accounts. For example it's probably preferable to lose three customers, each paying $40 per month, than one customer paying $300 per month.
Negative churn
Negative churn is an exception to the rule. It's a term popularized by David Skok that describes when your expansion MMR exceeds your churn MMR.
Negative churn can help businesses to grow exponentially due to lower customer acquisition costs and higher revenue.
Track sales metric with Capsule
With so many metrics to consider, it can be easy to get overwhelmed. Fortunately, Capsule offers an expert solution.
Sales pipeline management software created a structured sales pipeline that allows you manage leads as they progress through the sales funnel. Sales reps can make detailed notes about the sales journey including objections, extra costs and average revenue generated.
This makes it easy for your team to calculate metrics so you can track them throughout the month, quarter or year. Capsule’s CRM helps you to build your sales pipeline with features like:
- Multiple pipelines to help you segment leads into logical groups creating custom pipelines.
- Drag-and-drop functionality so you can easily move prospects between stages of your sales pipeline.
- Real-time visibility that helps to identify productivity issues or unmet quotas within your sales pipeline.
- Timeline management features allow you to set specific timelines for each stage to ensure your team keeps deals active.
- Velocity control helps you to visualize sales and make informed decisions about new sales opportunities.
- Agile reporting with in-depth and actionable reports.
Watch our easy to follow tutorial to learn more about how Capsule can help your track metrics and manage leads.
Conclusion
Businesses track sales metrics to better assess how successful their business is. Sales productivity is crucial when it comes to growing your business, but if you don't know what is and isn't working, you won't be able to make the changes you need.
Tracking the sales process can be tricky and that's without keeping sales metrics in mind. Fortunately, some tools can help make things simple.
Plecto and Capsule CRM are expert software solutions that help make sales strategy and customer relationships quick, easy, and simple. They integrate seamlessly so you can keep track of your metrics wherever and whenever.
With a range of payment options available, it’s easy to get started with Plecto’s sales solutions. Make the most of both platforms and try Capsule free for 14 days and discover how it can help your business grow.
