Why care about sales metrics?
Simple: they show progress and highlight areas for improvement. Sales metrics tell you if you’re growing or stagnating, so you can make informed decisions that drive sales growth and revenue.
But let’s face it, with so many metrics out there, it’s easy to get stuck in analysis paralysis, where you’re not sure which activities and results to measure. It’s like being at an all-you-can-eat buffet with too many options than needed.
You need to focus on the metrics that matter to your business and goals. So in this article, we’ll be looking at important sales metrics to track to better understand how your efforts are impacting your results and what more you could do to increase your sales.
Revenue-Related Sales Metrics
These metrics help you measure how much money your business is making and where it’s coming from, so you can adjust your marketing and sales strategies as needed.
Monthly/Quarterly/Annual Recurring Revenue
Your monthly, quarterly, or annual recurring revenue (i.e. MRR, QRR, or ARR) is a measure of how much money your business has earned over a month, quarter, or year.
And for many (if not most) businesses, these revenue numbers are the absolute bottom line of your sales performance. They let you know if your sales efforts are paying off revenue-wise and how much money you can expect to bring in over a certain period.
For instance, if your business earned an average of $40,000 per month over the past year, you can expect every month this year to bring in at least that amount of revenue. You can also expect that if you increased marketing and sales efforts or the number of salespeople in your team, you could likely increase that number.
Average Deal Size
Your average deal size helps you understand how much money each customer brings in on average. You get to identify which type of customers bring you the most money and how much to invest in marketing to those customers.
For instance, if you find your highest paying customers (or customers with the highest average deal sizes) typically come from a particular industry, say manufacturing or telecommunications, you can focus more of your resources on targeting buyers in those sectors.
Imagine you’re selling a product for $300 and it costs you $90 to produce. Your gross margin in this case would be 70%, as your profit (before taxes and other expenses) is $210.
Gross margins (or gross profit margins) measure the difference between your total revenue and costs. It gives you an indication of how much money you’re making on each sale compared to the costs associated with producing the product or service.
You can calculate it by subtracting your total costs from your total revenue and then dividing it by the total revenue. That is, following our example above, gross margin = ($300 – $90)/$300 = 0.7, or 70% if you multiply the result by 100 to get a percentage.
If you find your gross margins are low, it’s a sign that you need to work on reducing costs or increasing prices. And if the margins are high, you could consider investing more in marketing to increase sales or hiring additional sales professionals to increase average revenue.
Customer Lifetime Value (LTV)
LTV is an estimate of how much a customer’s relationship with your business is worth over a particular time frame. You could also describe the total amount of revenue they’ll generate over their entire lifecycle with your business.
This metric helps you know how much it makes sense to spend on marketing and sales efforts to acquire a customer. For instance, if you spend $1000 in marketing to acquire a customer who generates $20,000 in revenue over their lifetime with your business, that’s a great return on investment in many (if not most) cases.
Knowing the LTV of your customers also helps you determine which ones are worth investing more resources in.
Annual Contract Value (ACV)
ACV measures the average value of all contracts signed in a given year. It’s similar to your LTV in that it tells you how much money your customers are worth in the long run.
But unlike the LTV, ACV is a measure of the total value of all contracts signed in a given year. It gives you an indication of how much your current customers are worth and what kind of deals you should be looking to close.
For instance, if your ACV is low, it could mean you need to focus more on targeting higher-value customers or negotiating bigger deals. Or if it’s high, you know you’re signing high-value contracts and could consider investing more in marketing and sales campaigns to bring in even bigger deals.
Sales Activity Metrics
Sales activity metrics measure the activities and behaviors of your sales reps. These metrics help you understand how much time they’re spending on each lead, how many leads they’re converting, and how effective their outreach is.
Number of Sales Calls/Meetings
The number of meetings or calls your sales reps make is an important metric that can give you an indication of how effective their outreach is. It helps you understand how much time they’re spending on each lead and whether or not they’re maximizing sales opportunities.
Let’s say you’re a sales leader with a team of 10 reps. How many meetings or calls do they need to conduct every week to hit their sales targets? Are they making enough calls to reach their sales goals? Or are they spending too much time on each lead?
Your conversion rate is the percentage of leads that become sales, and it’s one of the simplest sales metrics to track.
For example, if you have 100 leads and 10 of them become customers, your conversion rate is 10%. Knowing this number helps you understand how successful your sales efforts are and, more importantly, where you need to focus your resources to improve sales performance metrics.
Your conversation rates can indicate a wide range of issues, from prospecting issues to pricing and packaging issues. It can also be a sign that your sales reps need additional training or you need to focus more on lead nurturing and qualification.
But generally, high sales conversion rates indicate that your messaging and targeting are spot on, while low conversion rates could mean you’re not reaching the right people, or you need to improve your sales process.
Sales Cycle Length
How long does it take you and your team to close a deal? That’s the question your sales cycle length metric helps you answer.
Sales cycle length measures the average time it takes for a lead to go through your entire sales process and become a paying customer. Knowing your sales cycle length helps you identify any bottlenecks in the process, determine where customers are dropping off, and fine-tune your sales process to make it more efficient.
For example, when you examine your average sales cycle length, you might find that leads are dropping off at the proposal stage. This could indicate that you need to tweak your proposal process or that your team needs more training on how to present proposals.
Or you could find that customers are taking too long to make a decision, which could suggest that your marketing team needs to provide more sales enablement content to help you close deals quicker.
Win rate is the percentage of deals your reps win compared to those they lose, and it gives you an indication of how successful your sales team is at closing deals. You can calculate it by tallying up the number of deals won and dividing it by the total number of deals, and then multiplying it by 100 to get the percentage.
For example: if your reps make 15 attempts to close a deal and win 10 of them, then your win rate would be 66.7%. That is, 10 divided by 15 x 100.
The higher the win rate, the more successful your sales team is at closing deals and quota attainment.
A low win rate could be a sign that you need to improve your sales process, messaging, or some other element in your process, while a high win rate could be an indication that your sales team is skilled and effective.
MQL Vs. SQL
How many of your website visitors sign up for your newsletters, ebooks, and other resources? And how many of them request more information about your product or sign up for demos and free trials?
Knowing your MQLs (Marketing Qualified Leads) vs. SQLs (Sales Qualified Leads) helps you answer these questions.
An MQL is a lead who has indicated some interest in your content or sometimes even your business but hasn’t yet expressed the intent to purchase. A good example is someone who downloads an ebook or signs up for a newsletter but hasn’t yet requested a product demo.
An SQL, on the other hand, is a lead who has requested more information from you or taken an action (like signing up for a demo) that indicates they are likely to become a customer.
In the end, monitoring these two metrics help you understand how effective your marketing and sales campaigns and teams are at generating leads at the different stages of the buyer’s journey.
Customer Engagement Metrics
Ever wonder how interested your customers are in the products and services you offer? For instance, as a SaaS business, how often do they log into their account, read your emails, or use your product? Or how long do they spend using your product each time they log in?
That’s where customer engagement metrics come into play. Customer engagement metrics measure how engaged or active your customers are with your business, and they can indicate how interested or loyal they are.
Customer Acquisition Cost (CAC)
Your customer acquisition cost (CAC) is the total amount of money you spend to acquire a new customer.
It’s a sales data metric that gives you an insight into which marketing channels are the cheapest or most cost-effective, and which ones are too expensive and need to be optimized.
For instance, you might find that LinkedIn Ads are the most effective for generating leads and customers, while Google Ads are more expensive and require more optimization to get the cost down. Or you could find that organic search is the cheapest and most effective way to get new customers.
Whatever the case, tracking your CAC over time helps you better understand the effectiveness of your marketing channels in relation to their costs.
You can calculate your CAC by adding up all the costs associated with acquiring a new customer and dividing it by the number of customers acquired.
For example, if you spend $20,000 on marketing and acquire 50 customers, then your CAC would be $400.
Customer Retention Rate
Do you know how many of your customers are loyal to you and stick around for a long time? And do you know why they stay for however long they did?
Knowing your customer retention rate is often the starting point when you’re trying to understand why customers stay with your business. It’s a sales data metric that measures the percentage of customers who continue to use your products or services over a certain time period.
You can calculate it by dividing the number of customers at the end of a given period by the number of customers you had at the beginning of the same period. And then multiply the result by 100 to get the percentage.
For example, let’s say you had 100 customers at the beginning of the month and 90 customers at the end of the month, your customer retention rate would be 90%.
A high customer retention rate would mean that you have an excellent product or service that customers are happy with. A low retention rate could mean you need to improve user experience (UX), look into ways to make your product more relevant, or address customer service issues.
In the end, your retention rate tells you how successful your business is at retaining customers, and can help inform product and marketing decisions.
Net Promoter Score (NPS)
Imagine having a metric that could measure how likely your customers are to recommend you to their friends and family.
That’s what the net promoter score (NPS) does. It’s a customer satisfaction metric that measures the degree to which customers would recommend your product or service to others.
NPS is calculated by asking customers to rate their experience on a scale of 0-10. Those who give you anything from 0-6 are considered detractors, while 7-8 are passives, and 9-10 are promoters.
A simple way to calculate your NPS is by subtracting the percentage of detractors from the percentage of promoters.
For example, if you have 20% promoters and 10% detractors, then your NPS would be 10.
The higher the score you get, the more satisfied your customers are with your product or service and the more likely they are to recommend it.
A high NPS means that you have a loyal fan base who can help spread the word about your business. A low NPS means that you need to improve customer experience or address any issues that could be causing customers to have a negative experience.
Overall, NPS helps you understand customer loyalty rates and discover areas where you can improve customer experience.
Customer Churn Rate
When it comes to running a successful business (especially a subscription-based business), one of the most important metrics to track is your customer churn rate.
Customer churn rate measures how many customers leave your business within a certain period of time. You can calculate this by dividing the number of customers lost during a given period by the total number of customers you had at the beginning of that period. And then multiply the result by 100 to get your churn rate as a percentage.
The higher your customer churn rate, the more customers are leaving your business, and the less money you’re making. A high churn rate could mean that your product or service isn’t meeting customer expectations, or it could be a sign of poor customer experience. Or it could be something else entirely—and that’s why checking your churn rate is important; you get to identify the root cause so you can address it.
What Tools Track and Measure Sales Metrics?
There are many software tools and platforms you can use for tracking sales metrics. From CRM systems to sales analytics platforms, data visualization tools, and so on. There’s a lot out there to pick from, but we’ll look at just three here:
If you’re looking for an easy-to-use CRM system, Insightly is a great choice. Like any other CRM software, it helps you track customer relationships and sales activity, giving you insight into what works and what doesn’t.
But one factor that sets Insightly apart from many other CRM systems is its AppConnect feature. It lets you connect Insightly with popular apps like Gmail, Zendesk, Slack, and so on, so you don’t have to manually enter customer data or other sales-related information.
Insightly Pricing: $29 to $99 per user/mo
Close is our favorite CRM system—for obvious reasons—and it offers powerful sales analytics and reporting features.
A major benefit you get with Close is that you can easily track how well your team is doing with key metrics like sales pipeline growth, close ratios, average deal size, and so much more.
You can also see custom reports for your sales opportunity funnel, even narrowing it down by pipeline or by sales rep, so you can see the specific sales strategies, efforts, and tactics that are working and which ones aren’t.
Close Pricing: $25 to $129 per user/mo annually, or $29 to $149 per user/mo monthly.
Pipedrive comes with a suite of tools for sales management, marketing automation, and other sales-related activities.
It uses a Kaban-style view of your sales process, which makes it easy to see how far along each deal is in the pipeline. And this is important because it helps you identify deals that are stuck and need attention—or those that are almost closed and need a nudge to get across the finish line.
Plus, it comes with a mobile CRM app for Android and iPhone devices, so you can take your data with you anywhere and stay on top of your sales activities.
Pipedrive pricing: $9.90 to $59.90 per user/mo annually, or $11.90 to $74.90 per user/mo monthly.
How to Use Sales Metrics to Drive Revenue
Let’s now address the elephant in the room: what do you do with all this data? The answer is simple: use sales metrics to drive revenue. And here’s how to do that:
Set Measurable Goals and Benchmarks
When a goal isn’t measurable, it becomes hard to track progress and make improvements. You’d typically find yourself working so hard without much to show for it—because you don’t have solid data to measure against.
For example, let’s say you’ve set the goal to increase customer retention for a subscription-based or SaaS company. How will you measure if this goal has been met? What’s the sign that’ll tell you that customer retention has improved?
You might think, “well, I’ll know customer retention has improved when I see users and existing customers leaving more positive reviews.” But that’s not enough because you might still be losing users while those A+ reviews are coming in.
Bottom line: you need to establish a specific number or benchmark, so you can measure your progress against it.
Regular Monitoring and Tracking of KPIs (Key Performance Indicators)
When you regularly monitor and track your most important sales metrics and leading indicators, identifying areas that need improvement becomes easier.
For instance, if you notice your close rate is way lower this month than it was last month, you can dig deeper to determine what caused the drop and address it.
It could be because prospects are finding your pricing too high due to a new industry competitor, or because your sales team isn’t sending enough follow-ups. Whatever the case, it’s important to monitor the data so you can uncover any issues and quickly respond to any changes.
Interpret the Data in Context
Sales data is often useless if you can’t interpret it in context.
For example, let’s say your reps have increased the number of calls they make—or are sending more cold emails than usual—but the close rate for the month is still low. That fact alone doesn’t tell you anything, because there could be other external factors at play that are affecting the numbers.
It could be that your reps are talking to the wrong prospects, the product isn’t meeting customer needs, or competitors have better prices.
The point here is this: avoid looking at data in isolation. Instead, tie each data point back to other relevant internal and external factors to gain a better understanding of what’s really going on.
Identify Areas of Improvement and Optimization
In the end, your goal is to use data to optimize your sales team’s performance and streamline processes. So, what areas can you address?
It all depends on the issue you’re trying to solve. For instance, if your new customers are dropping off after a few weeks, you might need to look at your onboarding process and provide better customer support.
Or if high-intent sales leads keep choosing your competition, look at your sales funnel to see what stages need improvement. Are prospects dropping off at the same stage or is it different each time? If you can identify a trend, you can focus on that area and optimize it.
Keep Your Eyes on Metrics That Matter
So far, we’ve covered why it’s important to track, measure, and analyze sales metrics.
But with so many metrics and sales KPIs to track, it’s important to focus on the ones that matter most, so you don’t waste time on data that are not relevant to your business.
Here’s a brief recap of some of the most metrics we’ve highlighted as the important ones to focus on:
- Customer Churn Rate for understanding customer loyalty
- Sales Cycle Length for gauging sales efficiency
- Net Promoter Score for evaluating customer experience and loyalty
- Average Deal Size for understanding how much customers are buying
- Win Rate for understanding the success of sales strategies
- Conversion Rate for measuring how well your messaging is resonating with customers
If you haven’t started already, now’s the time to begin tracking and analyzing these metrics. They’ll help you identify areas of improvement, set goals and benchmarks, optimize your sales process, better understand customer behavior, and ultimately drive more revenue for your business.