Sales KPIs that Bring Order to Chaos

The journey of managing a sales team can be chaotic. Balancing between onboarding new customers and retaining existing customers is a clear challenge. Each day can be a flurry of activity. Sometimes sales leaders might wonder, “Am I even moving the needle?” In these scenarios, it’s important to see beyond the day-to-day and measure performance against a benchmark and set of standards. That’s where Key Performance Indicators (KPIs) come in.

Imagine you enter a maze blindfolded. Will it be possible to make it out of the maze? It’s possible, but it’s difficult to do. If you do reach the other side, it will be even harder to retrace your steps and figure out how you got there. It’s only when you remove the blindfold that you can make real, timely progress. In addition, if you’re handed a map, you can make the journey repeatedly. The equivalent of this kind of clarity of vision and clear direction for a sales team (or any team, really), can be found in the right KPIs.

KPIs are a series of metrics that indicate progress toward a desired result. Once we have these measurements, we can begin to make adjustments and understand where we are compared to where we want to be. The visibility that KPIs and proper reporting offer is a key component of the visibility principle in The Scalable Business Framework™.

Top 12 KPIs for Sales Teams

Below is a list of 12 KPIs that every sales team should track. There are more useful metrics for sales teams that you may want to consider later on, but these are a great place to start.

1. Total Revenue

Total Revenue is the true top-line number for sales performance. While it may be tempting to focus on more advanced metrics, the other metrics all ultimately point to Total Revenue as their goal. For example, increasing the win rate is beneficial, but if the total revenue goes down, it means sacrificing deal size and potential margin for more deals, which doesn’t move the needle. Similarly, growing the average deal size without an increase in total revenue simply means selling less frequent, larger deals, which also doesn’t make a real impact.

Monitoring Total Revenue over time allows the sales team to identify trends in their revenue growth capability. If the team’s efforts fail to increase top-line revenue, their focus needs to change.

2. Average Deal Size

Average deal size, along with the next several metrics, is valuable for understanding what constitutes a typical deal and for developing sales strategies for the team. Average deal size is calculated by dividing the total revenue for a period by the total number of deals during the same period. This provides the dollar value per sale that we can expect from a closed deal. This information is useful in multiple ways. First, it allows companies to use this information to plan sales targets by understanding the typical deal size a salesperson could handle in a given period of time. Second, average deal size can assist in forecasting by understanding the value of deals a company could expect or manage in the future. Moreover, when broken down by source or product type, reviewing average deal size can help identify trends regarding which channels or products generate higher order values. Lastly, understanding average deal size can help when analyzing why some deals were higher and some were lower.

3. Sales Cycle Length

The next metric that can help inform sales strategies is sales cycle length. This simple metric is the average number of days it takes for a deal to move from start to close. This measure is powerful when used in comparison with several items. First, rep-by-rep comparison can help expose potential issues in how a team member handles their pipeline. Additionally, this knowledge is useful when projecting future revenue, especially when combined with the average deal size. Lastly, sales cycle length is valuable when it can be broken down into the time spent in each stage of the deal. Understanding this can expose whether certain portions of the sales cycle are adding unnecessary time to the length of time it takes to close the deal.

4. Win Rate

Deal win rate is another valuable metric to reference when developing sales strategies. Win rate is especially powerful when combined with other metrics and segmentation. Win rate can let organizations know which sales reps perform better under the same circumstances and can help shape coaching efforts. Additionally, win rate can reveal which lead channels are warmer than others and might be worth additional investment. Win rate can also help organizations identify if they are focusing on the wrong opportunities. It’s possible the team may be spending time on deals they are unlikely to win, and less time on deals they are more likely to win.

5. New Lead Volume

The combination of the previous three metrics can provide powerful predictive insights. An example is using new lead volume to predict revenue. If you know the sales cycle length, win rate, and average deal size, you can use new lead volume as a leading indicator to help calculate what revenue will be at the end of the deal cycle. Using this information can help organizations update their strategy based on these predicted results.

6. Annual Growth Rate

If you aren’t growing, you’re dying. Understanding the impact of business efforts as they relate to business growth is critical. Knowing the organization’s growth rate for the year can help establish expectations and trends. When these trends are upended either positively or negatively, it can be a cause to dive a little deeper. Taking this metric and segmenting it into products and divisions can expose reasons behind rapid or declining growth. These reasons could be internal or external, but without visibility into the trend, the root causes can’t be identified and solved.

7. Churn Rate

Churn rate is the percentage of customers that stop working with an organization over a specific period. Typically this is measured in months and viewed as a monthly churn rate. The inverse of this measure is called retention rate. Measuring churn rate gives insight into the effectiveness of retention metrics. It also reveals if there is a major retention issue at a company. Working on these issues consistently should positively impact the churn rate over time. Companies will have a natural churn rate baseline – churn will never be zero. However, organizations are missing a huge opportunity if they don’t prioritize customer retention – retained revenue is cheaper than new revenue. Working closer to that baseline is the goal.

8. Recurring Revenue Measures (ARR and MRR)

Recurring revenue is critical for businesses that seek to grow. Developing a strategy for a business to achieve consistent revenue retention is critical for scalability. This is where recurring revenue measures like Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR) come in. Identifying recurring revenue opportunities for an organization can help develop this strategy to grow those efforts. These metrics can be used as a basis for compensation, for companies that want to focus on building retention in their product and service offerings. Distinguishing between one-time and recurring revenue can help focus sales reps on the right products and services to sell in order to ensure a successful growth strategy.

9. Net Dollar Retention

Net dollar retention measures the degree to which a company retains revenue from a group of customers over time. This is measured typically using MRR with the addition of upgrades over the defined time period and with the subtraction of churn or downgrades over that time period. This is divided by the starting MRR to get a percentage total. If a company has an NDR of 150% over 1 year, then they were able to retain the MRR from 1 year ago and even expand it by 50%. If NDR is less than 100%, then the revenue gained during the same month in the previous year is not fully retained. This metric highlights how well the company can retain and uplift the revenue of existing customers.

10. Customer Acquisition Cost

Customer acquisition costs (CAC) measure the costs of obtaining new customers. This includes marketing and sales expenses, promotional activities, events, digital ads, salaries, and commissions during a set period of time. The CAC is then divided by the new customers acquired during that period of time. This highlights the average cost to bring on new customers. Comparing this to a customer’s lifetime value can be insightful in determining which marketing and sales efforts are the most effective.

11. Sales Activity

Many times, it is important to measure the execution of the sales process and not just the results of the sales process. Measuring sales activity is a healthy way to understand how the team is interacting with prospects and existing clients. Typically, all outreach activities, like calls and activities, are measured. These totals can be compared across reps to identify successful trends. Additionally, it’s helpful to understand expectations for how much outreach is required to convert a lead or close a deal. This can help coach salespeople to know when to keep pushing and when to move on.

12. Sales Exceptions

Exception management is a powerful tool in the arsenal of any sales manager. Identifying and standardizing the desired sales process is the first step. This allows managers to then measure when records (leads and deals) fall outside of the optimal process. Here are some examples of exception metrics that can quickly diagnose potential pipeline issues:

• Stuck Deals – deals stuck in the same stage for 60 days.
• Reality Check – Close Date of this month without activity in the last 7 days.
• Time Between Stages – If deals are sitting in one stage for too long, there may be something to update with the process.
• Quota Attainment – How is the team/rep pacing to attain quota? Pairing this with the value of the current pipeline and the projected close rate can highlight where some issues could arise.

Visibility Leads to Victory

In order to make sense of and navigate the sometimes maze-like environment of sales, teams need clear visibility into the results and progress of their processes. Utilizing these Key Performance Indicators (KPIs) can provide invaluable insights for sales teams, helping them identify trends, make informed decisions, and ultimately drive revenue growth. By focusing on metrics such as total revenue, average deal size, sales cycle length, win rate, and new lead volume, sales teams can gain a deeper understanding of their performance and make strategic adjustments to achieve their goals. Embracing KPIs as guiding beacons can bring clarity to the chaos of daily sales activities and pave the way for sustained success.

Utilizing a scalable system like Salesforce or Hubspot can transform an organization by enabling accurate tracking of these measures. If you want to enhance your sales success and drive business growth using Salesforce or Hubspot, consider partnering with the experts at Fast Slow Motion. They can guide you through the process and help you implement sales strategies that deliver results.