Data is an essential component for high-performing sales teams aiming to achieve their objectives effectively. Sales leaders have access to a wealth of valuable data in systems such as Customer Relationships Management (CRM) and Enterprise Resource Planning (ERP). This data can be utilised to boost sales, profits, and team size or outpace competitors.
Identifying impactful data points and key performance indicators (KPIs) is the most difficult part. Once determined, these metrics allow teams to analyse outcomes and take appropriate actions to meet or surpass their goals.
KPIs are utilised differently by sales managers and sales representatives. Sales Managers mainly focus on broader metrics that reflect the overall performance of the team, such as shortening the sales cycle or raising pipeline value. Conversely, sales representatives focus on daily objectives, such as scheduling more meetings or closing enough deals to meet their targets. The main objective is to convert these KPIs into a clear, actionable plan of action that can significantly enhance the company’s success when executed correctly.
Well-defined KPIs offer small and medium-sized businesses (SMBs) a strategic framework for identifying growth opportunities, efficiently monitoring progress, and optimising limited resources. SMBs can gain a competitive edge and foster sustainable success.
Why do KPIs matter in sales?
Sales KPIs transform raw data into actionable metrics that help monitor growth and evaluate performance. They can access team or individual performance, financial results, or deal outcomes. Companies use these KPIs to track their sales team’s performance, refine sales processes, and boost income. Additionally, KPIs offer several other benefits, such as:
- Improved decision-making: KPIs provide managers with real-time data to make informed decisions. They help optimise resource allocation, enhance the sales processes, and identify growth opportunities. Effective use of KPIs is crucial for fostering long-term success, especially for SMBs.
- Clear alignment with business goals: KPIs assist sales teams to establish specific, achievable objectives. By providing clear targets, they help sales representatives concentrate on activities that significantly impact outcomes, such as boosting sales or enhancing customer retention.
- Enhanced team productivity: KPIs help monitor team performance against deadlines. Early identification of problems enables timely adjustments, ensuring projects stay on track and objectives are achieved. This fosters increased productivity.
The 7 Key sales KPIs to monitor
#1. Sales growth
Sales growth is crucial for a business to succeed. A monthly sales dashboard tracking this metric allows leaders to identify and address problems promptly. Setting realistic monthly goals for sales growth ensures the team stays motivated and aligned with the company’s objectives.
The formula is:
Monthly sales growth = ((Sales for the current month - Sales for the previous month)/Sales for the previous month)*100
#2. Lead conversion rate
The lead conversion rate measures the percentage of leads that result in sales. This KPI assesses the sales team's effectiveness in turning prospects into customers and identifies the marketing channels yielding the most leads. Managers can benchmark the lead-to-sales process efficiency using this metric. The formula is:
Lead-to-sale% = (Total number of sales/Total number of leads)*100
#3. Customer Acquisition Cost (CAC)
The Customer Acquisition Cost (CAC) is the total amount of money a company spends to acquire a new client. For an accurate calculation, it includes all sales and marketing costs, such as overheads and salaries. Businesses should aim to reduce acquisition costs while increasing average revenue per customer and customer lifetime value. The formula is:
Customer Acquisition Cost = Total sales and marketing cost/Number of new customers
#4. Average deal size
Monitoring average deal size helps teams identify which products or services provide the highest profit. Managers also use this data to evaluate the performance of individual sales representatives, identifying who secured the most profitable deals. The formula is:
Average deal size = Total revenue from new deals/ Total number of new deals
#5. Sales cycle length
Average sales cycle length measures the time taken to close a deal from initial contact. This metric helps evaluate the efficiency of your sales process. Once a baseline is established, businesses can focus on reducing cycle time.
The formula is:
Sales cycle length = Total number of days to close all sales/Total number of new deals
#6. Customer retention rate
The customer retention rate reflects the percentage of customers who continue using the company’s services or renew their contracts. A high retention rate signifies customer satisfaction and recurring revenue. The formula is:
Customer retention rate = ((Number of customers at the end of the period - Number of customers acquired during the period)/ Starting number of customers)*100
#7. Sales target achievement rate
This KPI compares the actual sales performance against set targets, providing insights into progress. A sales scoreboard is an effective tool for tracking individual representatives’ achievements. This metric identifies areas for improvement and ensures everyone stays focused. The formula is:
Sales target achievement rate = (Sales for the current period/Sales target)*100
How to track KPIs effectively?
Choose appropriate KPIs: Select KPIs aligned with your business objectives. Tracking the right metrics ensures you focus on what truly matters.
Utilise KPI tracking tools: Leverage tools that offer real-time data, visual reports, and predictive analysis to streamline KPI tracking and gain valuable insights.
Regular reviews and realignment: KPIs require ongoing evaluation to stay aligned with business goals. Regular meetings provide opportunities to evaluate performance, foster teamwork, and make strategic adjustments.
Actionable tips for SMB growth
Start small
Tracking too many KPIs at once can be overwhelming. Focus on a few key KPIs that align with your business requirements and refine your approach over time.
Involve the sales team
Collaborate with the sales team in choosing and analysing KPIs. This fosters engagement, ownership, and performance improvements.
Use historical data
Use past performance data to identify patterns, set realistic goals and prepare for future challenges.
Conclusion
Monitoring and evaluating sales KPIs is crucial for devising effective strategies and achieving continuous improvement. The seven KPIs discussed above are fundamental indicators of business performance and provide actionable insights for growth. For SMBs just starting, exploring tools and resources such as Smart Moves can help improve sales performance and achieve desired outcomes.
Bonus: Sales Performance Review Template
By tracking essential KPIs and discovering useful insights, this rating-based template will assist sales managers and representatives in evaluating performance. This template offers an organized assessment to increase both individual and group productivity. Click here to download your template now!
