What gets measured gets managed.
Do you measure enough essential sales metrics – or not enough? Are you getting valuable information from what you measure – or just a bunch of numbers with little meaning?
Do your metrics matter?
You can measure and analyze hundreds of sales activities and customer actions. Watching the numbers climb is cool. Seeing them drop is frustrating. But just measuring metrics – and being on that roller coaster of emotions – won’t help salespeople and the organization realize success.
What will help is a solid grasp of the metrics you can measure, those that matter most for your organization and the best ways to use the data you gather.
Here’s help:
The goal of tracking sales metrics
Sales metrics are relatively easy to track whether you use an elaborate, custom-built CRM or sales system or a detailed Excel spreadsheet. Numbers in, answers out. That’s why it’s tempting to measure everything.
But metrics are only valuable when they give you insight on what leads to success and what contributes to failure. So the goal of gathering and analyzing the metrics should be to understand where to deepen your sales efforts and where to let up.
Properly managed, metrics should help your sales organization spot trends, uncover inefficiencies and capitalize on efficiencies.
Sales metrics that matter most
Nearly all metrics matter in some context. But not all metrics will matter to you.
The sales activities most critical to closing deals vary by industry, organization and even salesperson.
You can track and react to loads of metrics, but the critical few that are under your control and are the best predictors of sales success (or failure) are where you want to focus the bulk of your attention and resources.
Here are 19 metrics that matter. Harvard Business School researchers found some of them have the greatest impact on sales success. Some are perennial indicators of performance. Others are gems that can unlock the key to the next positive shift in closing. They can stand alone or be combined to get your full metrics picture:
Total sales in time frame
Tracking sales within a set time frame – fiscal or calendar year, quarterly, monthly or seasonally – helps set a baseline. Then you can forecast more effectively and are better prepared to look at metrics year-over-year, quarter-over-quarter, month-over-month, etc.
Sales cycle length
The sales cycle length is the amount of time it takes prospects to become customers. When you gather and study how long it takes them to get through your pipeline – from leads generated, opportunities, proposals, win rate, size of sale – you can better monitor salespeople and their abilities to reach quotas.
Regularly assessing the sales cycle length allows you to recognize new bottlenecks (because slowing patterns emerge), deals that won’t happen (because they’ve been in there too long) and opportunities to speed up the cycle.
Conversion rates
Your conversion rate can be used throughout the sales cycle. You can measure the percentage of prospects who complete a specific action you require for them to move to the next stage in your pipeline. Or you can just measure the ultimate action and goal: making the purchase.
If you keep metrics on conversion rates throughout the cycle you can can get insight into how salespeople are performing. For instance, if someone’s conversion rate is lagging between qualification and proposal accepted, you can work with the salesperson to develop proposal writing and presentation skills.
Sales by product or service
This metric is straightforward. It’ll tell you what’s selling and what isn’t.
You can watch for buying trends, quality issues, needs for changes in supply. It can help you plan for the next sales cycle, knowing what needs to move and what might not be able to move.
Sales by source
This is valuable metric for sales and marketing professionals. It can help you identify the marketing and demand generation efforts that work best and those that might need to be revamped or trashed.
The key is to look at the quality of leads that come in from a lead source, rather than quantity.
Lead response time
The life of leads doesn’t last long, so it’s important to respond to them quickly before the competition moves in. In fact, companies that respond to online leads within an hour are seven times more likely to qualify the lead than others that respond later, according to Harvard Business School research.
You can only increase response time if you track it and work to improve it. Keep metrics for online and offline leads.
Percentage of salespeople hitting quota
The percentage of salespeople hitting quota is an indicator that all stars align – or don’t. This metric helps organizations see if salespeople have been trained well, capitalized on good leads and are able to align prospects’ needs with the right solutions. It could also point to gaps in training, lead and demand generation and pipeline inadequacies.
Opportunity win rate
You want to keep tabs on the opportunities salespeople have both closed and lost. Divide that total by the opportunities won to get your opportunity win rate.
This helps leaders recognize the salespeople who have the biggest troubles converting opportunities. When you identify salespeople who tend to lose opportunities late in the funnel, you can help them with coaching on managing objections, gaining commitment, negotiating and closing skills.
Time spent selling
To maximize selling time, you need to know how salespeople spend their time. Some studies show salespeople only spend about a third of their time selling.
Give salespeople a CRM or calendar system to track their daily sales activities. Analyze their tracking to find out where they might be able to streamline, minimize unnecessary efforts, leverage smarter tactics and spend more time selling.
Quality sales meetings attended
Appointments are key to realizing sales goals, but they aren’t tracked much. Organizations that do track meetings use this formula:
- Set goals for meetings within a specific time frame (perhaps a portion of your typical sales cycle length, a week, month or quarter)
- Define “quality.” For instance, is it a meeting with a prospect who has a spoken need? A prospect in your geographical area? A prospect who’s attended a webinar?
- Plug the meetings into the CRM system or report meetings that meet the criteria
- Pull and asses the metrics, and
- analyze the actual quality of the meetings.
New vs. returning customer sales
New sales are exciting – a big deal. But a healthy business has both sales from new and returning customers. You want to track that yours is healthy.
Of course, this metric and ratio will be different for most companies, but sales to existing customers are usually more likely and profitable. Still, no sales organization can fully depend on existing customers to reach goals. So it’s important to set targets for new sales and keep track of the new vs. returning ratio.
Average deal size
For the average deal size, divide the total number of deals by the total dollar amount on those closes. Keeping an eye on this metric will help you see if contracts are getting larger, smaller or remain status quo.
Then you can determine if salespeople are making too many concessions to close deals or are negotiating well or exceptionally.
Percentage of salespeople hitting quota
This metric can help prove or disprove that your quotas are on target. A general rule of thumb says about half of your salespeople should hit quota and half shouldn’t.
If 90% of salespeople consistently hit quota, it’s too low. On the flip side, if 10% hit quota time after time, you’re expectations are too high. But it’s important to consider current variables in your market, industry and economy when analyzing this metric.
Sales funnel leakage
You want to look at where prospects drop out of your funnel at the highest rate. Track stage-by-stage conversion rates.
You might see that half the qualified prospects agree to a discovery call and then half of those take a demo. Just 5% buy. You can see the steep drop off and understand where you need more coaching or better qualifying.
Customer acquisition cost
When you track your new customer metrics, it’s smart to also watch the cost of acquiring a new customer (which can help you determine the goals for sales to existing customers vs. new customers).
You can divide all the costs of acquiring a new customer (marketing materials and salespeople’s time and efforts) by the number of customers won in the time that money was spent.
Sales cost to revenue ratio
When you know how much it costs to acquire a customer, you want to consider how profitable the sale is to the company. Look at salespeople’s salaries, commissions and expenses, plus lost opportunities or leads that were let go in favor of the sales you won.
Compare those numbers to revenue. Then use the metric to assess your sales efficiency. You might even compare it to an industry average.
Actual vs. forecasted
Sales forecasting is an art and science. The prediction of what will happen in the next selling period is based on experience (art) and the existing data (science). So it’s important to keep metrics on the deviation from the original target to what was actually achieved.
Regularly comparing actual to forecasted sales can help you increase sales productivity by reworking the quota to line up with what’s possible whether salespeople are falling short or smashing goals.
Customer lifetime value
Some experts say customer lifetime value is the most important metric to help you understand your customers and their impact on your business. At the very least, you’ll need these data points to create and continually monitor this vital metric:
- cost to acquire a customer
- cost to service and retain a customer
- time spent trying to acquire a customer
- amount spent by customer, and
- a projected amount spent (based on account history).
Sales preparedness
Many organizations don’t measure this, but it’s a valuable way to gauge how good your training is. In the Harvard Business School study, researchers asked sales leaders and salespeople how prepared they felt going into meetings. The more they were equipped with tools, strategies and training skills, the more successful they were.
Make your metrics reports matter
Now you know that metrics that matter most to individual and organizational success. But that doesn’t mean everyone who needs to know those numbers will actually care about or understand what you have to share.
They’ll more likely be interested and find meaning in your metrics if your reports:
- Share more metrics, fewer measures. A measure is a number that counts something (“We closed 17 sales last quarter”). A metric is more useful and relevant because it includes a comparison (“We closed 17 sales last quarter, five more than the same quarter last year”).
- Focus more on performance metrics, less on outcome metrics. Outcome metrics are done, over, finite. It’s too late to do anything about them (“We made $100,000 in sales today”). Performance metrics give a better idea of what drives the success or failure (“For the last week, we averaged 10 sales meetings per day, which is above our target of eight, and it’s contributed to the $100,000 daily sales”).
- Know what you want to learn before you measure. With the ease of gathering and spitting out data, it’s simple to dump and try to use all the data that’s available. Don’t do it! Whittle down to the data and metrics that have the biggest impact on your sales organization’s success. It might take time to identify the most important factors. But as you do find those, eliminate reports on the superfluous metrics.
- Tell a story. Your organization’s financial gurus love numbers. Everyone else, not so much. When you report the sales metrics, make it visual, with eye-catching information and charts coupled with sales stories that bring the numbers to life with images of salespeople and the customers they’ve helped.
