Your business plan probably includes general strategies for making sales at your new or growing company. But unless you have a specific list of metrics you’ll monitor on an ongoing basis, you’ll find it nearly impossible to determine whether or not your chosen tactics are actually helping you reach your overall growth goals.
In the sales world, these metrics are called key performance indicators (KPIs), and they’re an important part of creating benchmarks against which your team can hold itself accountable.
Choosing the right metrics is one part art and one part science. So if you’re not sure how to get started, don’t worry—here are 10 sales KPIs every business should focus on for growth.
1. New Leads
This is perhaps one of the most important KPIs to track since a steady flow of new leads is essential to the health of your sales pipeline—and your business in general.
Sourced from leadsquared.com
Tracking this metric is easy once you have a sales analytics system or CRM dashboard in place. Simply add the number of new leads added to your system over a set period and compare it against your historical performance. If you see a decline, this could indicate emerging issues with your sales process.
Taking this a step further, you will want to attribute these new leads to a particular sales team member or marketing campaign. This way you can get a better idea of who or what is performing versus what is not.
2. Conversion Rates by Funnel Stage
Although new leads are important, not every person who enters your sales funnel will become a customer. Instead, they’ll begin as visits (or initial contacts through other channels), before becoming leads, marketing qualified leads (MQLS), sales qualified leads (SQLs), opportunities, and then closed-won customers.
Sourced from hubspot.com
It’s natural to lose some prospects at each stage of your conversion funnel, as they self-select out of your sales process. But as a business owner, you want to know where this attrition is happening so that you can test new ways to provide value and decrease the attrition rate at that particular stage in the sales process.
For example, if your website doesn’t do a good job explaining your key features or unique value proposition, the leads that enter your funnel are less likely to be qualified. If there are weaknesses in your sales team’s approach, leads may not become opportunities at the rate they should.
Conversion rates by funnel stage are typically expressed as percentages. If 600 leads entered the top of your funnel and 400 of those leads made it to the second stage then 67 percent of leads entering your funnel make it to stage two.
To improve upon those numbers further, you need to understand more about those 600 initial leads. Who are they? What source drove them into the funnel? What touchpoints did they receive once entering the top of your funnel?
At ChamberofCommerce.com, we pull in as much data as possible about our marketing and sales processes to better engage with potential customers. We leverage business dashboards like datapine to analyze data points from sources like Salesforce CRM, Google Analytics and GetResponse.Having this data in one place gives our department heads the ability to see which campaigns and strategies should be scaled and which ones need to be tweaked for better performance.
3. Average Order Value (AOV)
Next, take a look at the average value of the orders placed by your customers. You can get quite granular with this analysis by breaking AOV down by product type, customer type, or location type. But you’ll still be able to derive some insight from looking at overall AOV.
Here’s the calculation: Total sales revenue over a set period / total number of orders placed = AOV.
As an example, if your company produces $25,000 of revenue in one month and completes 50 orders during that time, your AOV is $25,000 / 50 = $500
4. Customer Churn
Customer churn is a deceptively complex measurement. At its core, churn is the percentage of customers that leave your service during a set period of time (for example, over a month, a year, or a quarter). If, for example, you start a month with 200 customers and lose 10 of them by the end of that month, your churn is 10 / 200 = 0.05, or 5%.
As the sophistication of your sales team and its analytics tools increases, you can go into greater depth with this KPI, looking into elements like revenue churn, churn type (such as active vs passive churn), or cohort analyses.
But even at this basic level, monitoring churn gives you important insight into how long customers stay with your business on average. If you see churn increasing, this could indicate problems of overselling or unclear communication in the sales process.
5. Customer Lifetime Value (CLV)
Customer lifetime value (CLV) provides an estimate into what you can expect a new customer to spend while they remain with your business.
Let’s take a SaaS company as an example. Say you sell a single product at a monthly fee of $29. If you know—because you monitor your churn—that your customers remain with you for two years on average, then your CLV is: $29 per month x 24 months = $696.
6. Customer Acquisition Cost (CAC)
Another critical metric to know is how much it’s costing your sales team to sign a customer. Continuing with our SaaS example from above proves why this KPI is so important.
If your CLV is $696 on average, but you’re spending $750 to bring on a customer, you’re losing money. Knowing your CLV allows you to determine exactly how much you can spend reaching customers in order to stay profitable.
To gauge CAC, total up all of the money your company spends on marketing, advertising, and sales activities over a set period and divide that by the number of customers acquired.
Again, you can get more sophisticated with this measurement by taking other variables (such as time and overhead) into consideration. You’ll also want to take the length of your sales cycle into consideration to ensure all customer acquisition costs are appropriately accounted for. But for starters, even tracking this metric at its most basic level will give you the insight needed to make smarter choices for your business’s growth.
7. Closed-Won vs Closed-Lost Opportunities
This KPI is where the rubber meets the road for your sales team. If they’ve progressed a new lead through your sales funnel to the point where an opportunity is created (or if they’ve drummed up a new opportunity from an existing customer), how likely is it that the opportunity will actually produce revenue?
At the end of a set period, measure the number of opportunities you’ve closed successfully against those you’ve lost. This ratio will give you useful insight into your sales team’s performance at a critical deal-making moment.
8. Sales Volume By Location
Take a look at your sales volume across multiple locations—like at various retail stores vs online. This will show you where your products perform the best and where demand is lacking, which you can use to better tailor your product offerings and buyer journeys for each particular area.
Sourced from fool.com
9. Net Promoter Score (NPS)
Net promoter score (NPS) is a numeric value used to determine the likelihood of customers referring your products and services to other people in their network.
Sourced from teamsupport.com
To measure your NPS, send simple surveys to your customers using the numeric scale above, or develop in-app surveys or ads that display as pop-ups on your website after a purchase is made. You can even work an NPS survey request into your customer service scripts after an order is completed.
Keep an eye on your overall score. If it’s lower than a 9, you have issues that need to be addressed before they can prevent you from growing.
10. Your Competitors’ Prices
One final metric to keep an eye on is your competitors’ prices.
Sourced from singlegrain.com
Observing changes in your competitors’ pricing might give you clues into how products are performing for them, or that they’re gearing up to run sales. You can then beat them to the punch or offer an even better arrangement to win over new business.
Certainly, you don’t want to act just because your competitors are. Treat this as one data point you consider alongside all of the others listed here as you plan the KPIs that’ll help fuel your business’s growth.