Sales KPIs (key performance indicators) are essential for measuring the success of your sales team and its individual members. But not all sales teams are created equal—every team will have to adopt a different set of KPIs depending on their sales goals, sales strategies, and sales performance.
How do you choose the right KPIs to unlock growth and drive your business forward? Read on to find out.
Sales KPIs are measures that sales professionals can use to track and assess their performance and how close they are to reaching their sales goals. Sales teams can use KPIs to evaluate the performance of their team, department, organization, or individual sales reps.
The objective of identifying sales KPIs is to optimize the sales process. KPIs allow sales teams to set benchmarks for future goals and quantify the effectiveness of a certain part of or the entire sales methodology. With the right KPIs in place, sales managers can easily drop inefficient or costly sales strategies, set more realistic goals, and ramp up training for sales reps who are lagging behind.
The terms “sales metrics” and “sales KPIs” are often confused with one another. Technically speaking, all sales KPIs are sales metrics. However, while sales metrics are defined as quantifiable data that represent the performance of particular people, processes, or sales efforts, not all kinds of sales metrics can be counted as “key metrics.”
Simply put, sales metrics may give you the facts about your performance. But if they’re not attached to a specific goal, they don’t really tell you much. KPIs, on the other hand, are metrics that tell a story and give actionable insights into your operations.
There is such a thing as having too many KPIs. If you try to track everything, you could hit analysis paralysis fast. This is when you have so much data to wade through that it slows you down and keeps you from making any decisions.
Instead of combing through each and every sales metric for answers, it’s best to pinpoint just a few key metrics. When developing your KPIs, ask yourself the following questions:
Step one to choosing the right KPIs is narrowing down your goals as a sales team and as a company. Are you looking to increase your monthly or annual revenue? Do you need to reduce customer churn? Do you want to boost customer lifetime value? Are you bleeding money during the customer acquisition phase?
Figure out which goals you want to prioritize first, then come up with the KPIs to help you achieve these goals.
Once you have your goals in mind, it’s time to look at what it will take to reach those goals. For example, if you want to hit a revenue number, how many sales do you need to close within a given amount of time to reach it? And with that in mind, how many sales opportunities should you have in your pipeline?
Now, it’s time to choose the sales metrics that will help you understand how well you’re moving toward your goals. Choose no more than 10 KPIs so as not to overwhelm your team.
SMART is a popular acronym that outlines the characteristics of effective goal setting. It stands for Specific, Measurable, Attainable, Relevant, and Time-bound. By following these guidelines, you can create KPIs that are clear, productive, and attainable.
To create specific and sensible sales goals, ask yourself the following questions:
The point of coming up with KPIs is so that you have something you can tangibly track. So, your sales goals must always be measurable.
An example of a measurable sales goal would be a 15% increase in your number of sales qualified leads.
It’s good to have big dreams for your team and your company. But if you set impossible, unattainable goals, you could set your team up for months of anxiety and disappointment. You want your goals to motivate your sales reps—they’re something to work hard for but are within reach.
Your goals need to be relevant to your overall business strategy. There are some goals and KPIs that only benefit the sales department but have a minimal impact on the wider business strategy. Your goals don’t necessarily have to benefit everyone, but they still have to be relevant to your business’ vision and mission.
When you set goals and KPIs, you need to have a finish line in mind. Set a time period in which you can work towards achieving your goals. Most teams set quarterly or annual goals or markers. This doesn’t just make your KPIs easier to track—having a clear end in sight can also be a great motivator for your sales reps.
Sales teams can improve their performance by tracking and measuring some of the following KPIs:
Sales qualified leads or SQLs are prospects who have shown an intent to buy. They are considered the highest ranking leads, as they have been qualified to meet certain requirements that make them a good fit for your product or service.
Before becoming SQLs, leads are first identified as marketing qualified leads (MQLs). MQLs are leads who have engaged with your company and have the potential to become customers. Once an MQL shows enough intent and willingness to talk to a sales team, they become an SQL.
Lead generation is the very first step in the entire sales process. Leads are people who may be interested in your product or service but have not been qualified yet. As such, sales reps must respond to leads as quickly as possible if they want to turn them into MQLs and eventually SQLs.
Lead response time is the average time it takes for sales reps to follow up with someone after they show interest in your business, such as by completing a form fill or making a phone call.
The ideal lead response time for following up on phone calls is five minutes or less. According to studies, the first businesses to respond to leads get up to 50% of sales.
Here’s how to calculate lead response time:
Time/date of new contact – time/date of follow up = number of minutes/hours/days to respond
Number of minutes/hours/days to respond to all contacts / number of contacts = Average number of minutes/hours/days to respond
If you want to see how effective your online presence is, make sure to track your visitor-to-lead conversion rate or the rate at which visitors to your site become leads.
When using this metric, remember to clearly define what makes a visitor a lead. For example, is it determined by signing up for a demo, subscribing to a newsletter, or filling out a form?
Customer onboarding is a term that describes the process of welcoming, training, or engaging new clients. Onboarding can also involve answering customer queries and concerns or making sure they understand how to make the most out of your product or service.
For SaaS companies, tracking onboarding and demo calls is highly important for closing deals. It helps individual reps gain deeper insight into the efficiency of their sales process.
Sales cycle length is defined as the average amount of time between a prospect’s first touchpoint to the moment the deal is closed. In essence, it tells you how long your reps take to close a deal and whether your sales process needs optimization.
This KPI can help you forecast revenue based on how many qualified leads you have in your sales pipeline at a given time. Sales cycle length is calculated by dividing the total number of days it takes to close a deal by the total number of deals closed.
Also known as sales per rep, this KPI lets sales managers monitor how each sales rep is performing individually. This can help individuals set a baseline and set their own personal goals.
Customer acquisition cost (CAC) measures how much it costs your business to acquire new customers. CAC is computed by adding all the costs related to sales and marketing and divided by the number of new customers gained within a certain time period.
Naturally, businesses should aim for a low CAC, as this indicates a more efficient customer acquisition process. Tracking your customer acquisition cost also allows you to understand which of your customers are easier to convert and which types need more effort and money to acquire.
Working hand in hand with CAC is customer retention rate or the number of customers that make a repeat purchase within a certain amount of time. Customer retention can offset a high CAC, as retaining current customers takes far less money than generating new customers.
According to a study by the Harvard Business Review, a 5% upshoot in customer retention rates results in a 25–90% increase in profits. Customer retention rate is computed the following way:
Also known as customer attrition or customer turnover rate, customer churn is defined as the percentage of customers who leave your business within a time period. Passive churn describes the percentage of customers who depart due to expired payment methods or payment failures. Revenue churn, on the other hand, is the percentage of monthly recurring revenue (MRR) that is lost to services being canceled.
This is another set of metrics that is particularly important to SaaS companies that want prospects who have a higher chance of staying on board. It also helps companies identify the points in their customers’ journey where it is pertinent for sales or customer success teams to check up on them lest they decide to switch to another service provider.
Also known as MMR growth rate, this metric measures how much your revenue increases or decreases month to month.
This is an important metric to measure because it allows sales leaders to recognize sales revenue trends each month. It also helps them pinpoint dead months and peak seasons better and what factors contribute to these.
Customer lifetime value refers to the total revenue a business can expect from one customer over the course of their relationship with the business. A customer’s lifetime value increases the longer they continue their relationship with a business, make purchases, and engage with the brand.
This metric is highly valuable to those in charge of customer satisfaction and support, as it is their job to maintain customer loyalty by addressing issues and providing recommendations to customers.
This is a measure of all expected revenues from active sales opportunities within a time period. Measuring this metric is important because it allows you to make a quick assessment of the efficacy of your pipeline, as well as the likelihood of your sales reps reaching their sales targets.
This measures the impact of a new product’s sales on the sales revenue of existing products. Essentially, it tells you whether the introduction of new products to the market is killing the chances of your old product line making a sale.
Tracking cannibalization rate allows sales teams to strategize on making older products more exciting to customers, such as offering old products at a discounted rate. Cannibalization rate is calculated by dividing the number of sales losses for an existing product by the sales of the new product.
This is defined as the likelihood of a customer to recommend your business/product/service to someone they know. This is one of those metrics that can be measured through feedback forms and customer interviews, especially after a customer finishes an order or subscribes to your email list.
Customer advocacy can be subdivided into three tiers:
To calculate your net promoter score, subtract the percentage of detractors from the percentage of promoters.
For SaaS and other online service providers, this metric measures how much time customers spend using your software.
This metric shows you how engaging your product or service is and what you can do to keep customers on your page or in your software for longer. The shorter the product/service usage, the more likely customers are to end their subscriptions.
What makes an effective sales KPI? There is no one-size-fits-all answer, as the effectiveness of a given sales KPI will vary from business to business.
However, there are several characteristics that all successful KPIs share—they are specific, measurable, attainable, relevant, and time-bound. If you can make sure your KPIs meet these standards, you’re on the right track to improving your sales performance.
If you’re looking for a revenue intelligence system that can help you track, analyze, and leverage your KPIs more efficiently, learn more about People.ai’s revenue intelligence solutions.
Revenue intelligence is a new, AI-driven software category designed to help sales teams leverage B2B selling activity to improve buyer engagement and accelerate revenue outcomes. Revenue intelligence systems provide teams with real-time, actionable insights from each and every stage of the buyer’s journey and collate it into a centralized database that is accessible to all relevant teams as a single source of truth. This reduces the risk of data silos and friction between teams and unlocks revenue growth. Learn more about People.ai’s take on the future of revenue intelligence or get a demo today.
According to KPI.org, Key Performance Indicators (KPIs) are “the critical (key) indicators of progress toward an intended result.” KPIs help organizations improve strategically and operationally, provide a point of focus, and set an “analytical basis” for decision making.
The first step in determining which KPIs you should track for your business is by identifying SMART goals. This means creating goals that are specific, measurable, attainable, relevant, and time-bound.
KPIs can be divided into several different types, including inputs, processes, outputs, outcomes, and projects.