How To Measure Sales Performance
Sales managers want to be effective leads for their sales teams. Many direct duties of these sales leaders are designed to improve an organization’s overall sales performance.
One part of the job is making sure the sales team as a whole, and each sales rep is meeting set goals.
But how can sales managers gain insight into the sales productivity of their sales team?
What are Sales Performance Metrics?
We live in a digital world where every step of the sales cycle can be quantified and tracked.
When this sales data is organized correctly, it will clarify how your sales team’s performance aligns with expectations and goals.
Lagging indicators measure what sales teams have already accomplished. This might include sales metrics like total revenue, net sales, or average contract value.
Leading indicators show what sales reps are doing presently. These sales metrics may track things like cold calls made or quotes sent.
Both categories of sales productivity metrics can prove useful for sales organizations.
Some companies maintain a sales metrics dashboard – digital or otherwise – to help sales reps and leadership visualize progress in key sales metrics.
Why Track Sales Metrics?
Data mining the performance of a sales team can take time and effort. Why is tracking sales metrics important?
Collected sales data can provide useful insights into a company’s sales strategy. Sales metrics are statistics that can be tracked over time to:
- Improve sales performance
- Increase customer satisfaction
- Boost a team’s sales performance
- Subject the data gathered to more advanced analytics that will help the company understand its potential and identify ways to scale, such as data commercialisation.
Of course, it takes some work to eliminate all the noise and track the specific sales metrics important to your business.
These sales key performance indicators are the totals, averages, and trends of specific pieces of data that identify how your sales performance is progressing.
Key Performance Indicators (KPIs) a Sales Manager Should Watch
Let’s review some of the most important sales metrics a sales leader can track.
These data points will prove useful in helping sales organizations get the data they need to maintain sales productivity.
Number of New Customers vs. Existing Customers
Every sales organization is concerned with sustained sales growth, which often translates to bringing on new customers while also pursuing repeat business from existing customers.
By tracking these two types of customers as a sales metric – new to existing customer totals – a sales leader can see if there may be a customer retention issue and make needed adjustments.
A low level of new customers from leads in the sales funnel might mean that the sales and marketing teams need to identify new ways to generate interest in the company’s products or services.
Lead Generation Sales Metrics
Other sales metrics relate to the tracking of customer acquisition cost factors.
You can break down each step of the sales cycle to identify where to make adjustments.
Number of Leads Contacted
Sales performance metrics can focus on the number of leads contacted, which may show you how active sales reps are.
It may indicate that there is something amiss with your sales pipeline.
Lead to Opportunity Conversion Ratio
Only some leads will result in a sales opportunity. Measuring the rate at which your sales reps convert leads into sales opportunities can speak volumes.
Lead-to-opportunity rate can help you determine if your sales strategy is working as it should or if there is a disconnect.
Number of Quotes or Demos Given
When a customer asks for a quote or demo, there is enough interest there that they are considering your company.
If quotes and demos aren’t translating into purchases, there may be an issue with the product price or demonstration process.
Number of Closed Deals
Understanding this number will help you project the number of leads needed to generate sales revenue.
If your win conversion rate over time rises, your sales team becomes more effective.
Revenue Sales Metrics
Some sales metrics target the money generated; the numbers here help you see where you stay profitable.
Revenue Targets Reached
Being able to measure sales goals reached helps to see directly how well your sales team is performing.
When combined with other sales metrics, it might help you see that your sales quota expectations are too high.
When sales targets are set at a reasonable level, it helps keep sales teams engaged and motivated.
This sales performance measurement gives a bird’s-eye-view of the money generated by the team or one sales rep.
However, it may need to consider things like returned products and discounts. So, it should be used in tandem with other revenue measurements.
Average Profit Margin
Sales performance metrics that look at a profit rather than total revenue may give a clearer view of the health of your business sales efforts.
Take total revenue minus expenses and divide it by total sales minus returns to get the average profit percentage.
This figure can be measured by products sold, salesperson, or sales region to discover the most efficient growth areas.
Average Revenue Per Account
Sales metrics that examine account average revenue show how valuable a single customer is to the company.
If a customer’s revenue total is greater than your company’s average revenue, it indicates they are a valuable customer.
It might move the sales team to provide extra focus to retain that customer.
Annual Recurring Revenue and Monthly Recurring Revenue
Sales metrics highlighting subscription-based revenue generated by a business will give insight into predicted growth.
Over time sales forecasting may help a business operate more efficiently, and it may help show where adjustments need to be made to the sales process moving forward.
Customer Lifetime Value
This sales metric will show how productive your continuing sales processes are.
It can also reveal if marketing should alter its methods or focus when split into demographics.
Other Sales Productivity Metrics
Consider other sales metrics that give you valuable lagging indicators to align your strategy.
Average Deal Size
Sales metrics that show expected revenue from a client can help you plan. This is especially useful for companies trying to grow their business.
Divide the total number of deals by the value of those deals to get the average.
This measurement may show what deals are too small to be worthwhile or too large to be risky if they fail.
Average Sales Cycle Length
Sales reps may operate on their own sales cycle length, which is valuable information if one sales rep closes deals in three weeks and another takes two months.
Of course, there are a lot of factors that are involved besides sales cycle length. The rep that takes longer to complete the sales cycle produces a higher customer satisfaction rate.
Sales analytics can effectively measure sales reps’ performance and help the sales management team make informed decisions.
When sales managers strive to measure sales performance metrics, they can use their sales KPIs to help their sales teams reach new heights in sales growth.