Sales metrics play a key role in keeping track of company success and measuring both individual and team performance. They can help the company set and then measure progress towards sales goals and are vital for overall growth. But what sales metrics are important to consider to take a sales team or company to the next level?
Revenue metrics
Revenue metrics are key performance indicators (KPIs) that measure the financial performance and effectiveness of a company’s sales efforts. They are used to evaluate the overall success and profitability of a product or service and are typically not solely dependent on an individual or sales team. Here are six key revenue metrics to track.
Total revenue
Total revenue is simply the total sales generated by one or many products or services over a given period. Calculations of total revenue depend on the number of products or services involved, but typically look like:
Total Revenue = Number of products or services sold x Product price
Total revenue is the most commonly tracked metric since it usually dictates most major decisions within a sales team or even a company as a whole. When compared with company costs and expenses, it usually gives a good indication of the success of the products or services used in the calculations.
Sales growth rate
Sales growth rate is a KPI that calculates the percentage increase in revenue over a defined period and it helps assess the sales team’s ability to drive consistent growth. Calculate sales growth by subtracting the net sales of the prior period from those of the current period. Then, divide the result by the net sales of the prior period and multiply the result by 100.
Sales Growth Rate = (Sales from prior period – Sales from current period) / Sales from prior period X 100
Sales growth rate not only allows a company to assess periodic financial performance, it allows it to adjust future sales strategies, speak to the general profitability of the business, and its performance relative to competitors.
Average deal size
This metric measures the average value of each sale and is calculated by dividing the total revenue by the number of deals closed.
Average Deal Size = Total value of closed won deals / Number of total closed deals
Average deal size helps to identify current performance and plan for future growth including how many deals need to be closed to reach revenue targets.
Net revenue retention (NRR)
Net Revenue Retention is a percent amount that takes regular or expected revenue over a set period (usually a month or a year) and factors in any changes that happen over that period. An NRR of over 100 percent indicates an increase in revenue, whereas an NRR of under 100 percent indicates a decrease.
With a monthly period, NRR calculations start with monthly recurring revenue (MRR). Also needed is Expansion MRR (additional revenue made in that month from product expansions, upsells or customer increases), Contraction MRR (decreases in monthly revenue from customers downgrading products) and Churn MRR (loss of revenue from losing customers). The calculation of NRR can then be written as:
% Net Revenue Retention = ((MRR + Expansion MRR – Contraction MRR – Churn MRR) / MRR) x 100
The same can be done with values over any time period, such as with yearly recurring revenue to find NRR over a longer period.
Repeat customer rate
Repeat customer rate is the percentage of current customers who have purchased the product or service more than once. A low value means a high number of new customers being gained, which could either indicate expansion or high customer turnover. Alternatively, a high value means most customers are repeat buyers, which could indicate lack of growth but also high customer satisfaction. Repeat customer rate is calculated as follows:
% Repeat Customer Rate = Customers who have purchased more than once / Total customers x 100
Average customer lifetime value
Average customer lifetime value is the average amount of revenue generated for the company by one customer over their entire time using the company’s product or service. It can be calculated with:
Average Customer Lifetime Value = Average Purchase Value x Average Number of Purchases per Customer
This value helps sales teams better understand their customer retention and if they need to make changes to increase customer satisfaction. It is often less expensive to retain customers than seek out more, so this is an important metric to consider.
Sales Performance Metrics
Sales function performance metrics usually concern an entire sales department and can help gauge the effectiveness of sales strategies and approaches. Here are seven key sales performance metrics to track.
Lead to opportunity conversion rate
Lead-to-opportunity conversion rate is the percentage of new leads that turn into opportunities. In other words, it measures how many potential customers in contact with the company have a high likelihood of purchasing a product or service. This percentage can be calculated as follows:
% Lead to Opportunity Conversion Rate = Number of Opportunities / Number of Leads x 100
Market penetration rate
The market penetration rate is a percentage that compares the number of customers of a company to the total available number of customers in the market. It helps companies understand how much of their audience is being reached and can also be useful in comparing their success to that of their competition. It is calculated as:
% Market Penetration Rate = Existing Customers / Possible Customers x 100
Sales conversion rate
This metric determines the percentage of leads or prospects that convert into paying customers. It helps evaluate the effectiveness of the sales process and the quality of leads.
Sales Conversion Rate = Total number of sales / Total number of qualified leads X 100
Understanding the sales conversion rate through a well-defined sales funnel helps to determine expected revenues and the number of prospects/leads/opportunities required in each stage of the funnel.
Sales cycle length
Sales cycle length is the length of time it takes to fully convert qualified leads into paying customers. As expected, sales teams should aim for shorter sales cycle lengths, since selling a product to a potential customer takes less time. Sales cycle length is an average value calculated as:
Sales Cycle Length = Number of Days for all Deals / Number of Deals
Sales win rate
Win rate measures the percentage of deals won compared to the total number of opportunities pursued. It helps evaluate the sales team’s effectiveness in closing deals.
Sales Win Rate = Prospects that became customers / Prospects that did not become customers
Win rates offer sales teams insights into the strategies, sales representatives, and time periods that are more likely to convert prospects into customers. They also indicate whether businesses are targeting the right buyers within a specific market.
A low win rate can imply two potential scenarios: the sales team is underperforming and requires corrective measures, and/or the company is pursuing prospects who are not an ideal fit for its product or service.
Average annual contract value
Average annual contract value is typically used by companies offering yearly or multi-yearly subscription-based services. It is the average revenue generated by one customer over a year, usually excluding initial fees or one-time costs. It can be calculated as:
Average Annual Contract Value = Total Contract Value / Number of Years in Contract
Year-over-year growth
Year-over-year (YOY) growth is a percentage value that compares a company’s current growth during a twelve-month period to the growth during the previous twelve-month period. It is dependent on the period values of the company during these two periods and can be calculated as:
% YOY Growth = ((Current Period Value / Previous Period Value) – 1) x 100
Individual and Team Performance Metrics
Individual and team performance metrics look at the achievement of sales team members or the team as a whole and evaluate their performance in a more specific way. Here are thee crucial individual and team performance metrics to measure.
Pipeline coverage
Pipeline coverage is a ratio between available sales opportunities and quotas. It helps sales teams understand how secure their pipeline is and whether they will still meet quotas if opportunities change.
A low ratio is typically indicative of either a difficult quota or a lack of sales opportunities for the product or service offered, and thus, one goal of a sales team might be to change marketing strategies to increase their pipeline coverage. Pipeline coverage is calculated as follows:
Pipeline Coverage = Number of Opportunities in one Period / Number Quota for that Period
Win rate
Win rate measures the total number of sales closed out of the total possible sales. It is usually an individual metric and can help sales teams assess how successful each member is. It is notably independent of a period and is considered an overall measure of effectiveness. The win rate can be calculated as:
Win Rate = Sales Closed / Total Number of Possible Sales
Quota attainment
Quota attainment is a measure of how well an individual can reach sales goals in a specific period. A low quota attainment value could be an indicator of two things: subpar individual performance or unrealistic quotas, both of which are useful for managers to understand and adapt around. Quote attainment is calculated as follows:
Quota Attainment = Total Individual Sales in one Period / Individual Sales Quota for that Period
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Using training to increase sales performance
Sales metrics provide valuable insights into the performance and effectiveness of a company’s sales function. By tracking and analyzing these metrics, businesses can make data-driven decisions to optimize their sales strategies, improve revenue generation, and drive growth.
Performance metrics can also provide insights into where sales teams need additional training to improve their effectiveness. Organizations that have invested in sales training say that upgrading the skills and knowledge of their sellers increased productivity, provided higher resilience during downturns, improved customer buying experience, encouraged more customer loyalty, and emphasized best practices.
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