Sales team performance can be tracked using dozens of metrics. In this article, we'll summarize 6 essential ones that will help you optimize your sales process, effectively educate your salespeople, and improve results.
1. Customer Lifetime Value
CLV, or Customer Lifetime Value, answers the question of what average earnings you can expect to earn from a customer over their entire life cycle. It will also help you predict revenue if your customer base will grow or decline over time.
Example: the average lifetime of your customer is 10 months and the average earnings are EUR 10,000. So the average earnings per month is 1 000 EUR. You currently have 250 customers, so you earn an average of EUR 25 000 per month. This allows you to track your average monthly earnings with each customer you add or drop.
2. Customer Churn Rate
Churn rate or churn rate is especially crucial for businesses whose customers pay the same or similar amount each month. A typical example is software development companies that offer software as a service (SaaS).
Customer churn rate represents the number of customers who stop using your services over a predetermined period of time (for example, a month, a quarter, or a year). If the churn rate is increasing or stays high for a long time, take this as an incentive to improve your service and find ways to retain customers.
You calculate the churn rate by dividing the total number of customers you had at the beginning of the month by the total number of customers lost for that month.
3. The average length of the sales cycle
Average sales cycle length is the time it takes a customer to go through the entire sales cycle from lead to close. This metric will provide you with data to find ways to shorten the sales cycle. In fact, the less time a customer spends at each stage of the cycle, the better.
Example: if you find that on average customers spend 5 days in the opportunity and offer phase, 20 days in the negotiation phase and 5 days in the closing phase, this is a clear signal that you need to speed up the negotiation process.
The average length of the sales cycle is likely to vary across the team and across individual salespeople. If you're a sales manager, this metric will give you a clue as to which activities to mentor salespeople in.
4. Lead-to-Opportunity Ratio
This metric evaluates the quality of your leads (that is, leads that have shown initial interest in your products), i.e., whether your leads are relevant to your business. If you find out from the metric that the quality of your leads is low, you need to adjust your lead generation method. For example, refine the definition of your target audience or look for leads in other places.
To track lead success, calculate how many of your leads have progressively become opportunities (i.e., customers who have moved further down the sales funnel and want to meet for a sales meeting). The higher the percentage, the better.
5. Opportunity-to-Lead Ratio
This metric tells you how effectively your salespeople are closing deals. You track the process from sales meeting to close and, as with the previous metric, you observe the percentage of opportunities that you are able to turn into closed deals.
Again, track this metric separately for individual salespeople and for the entire team. For example, you may find that a portion of salespeople are not closing, so you can provide them with sales negotiation mentoring.
6. Average revenue per salesperson
Finding out how much one salesperson earns you on average is key to setting their salary and commissions. But this metric will also help you set realistic goals for your salespeople and see if your team's results are increasing over time, or which period and under what conditions salespeople are performing best.
If you find that they're not doing so well, you can look for ways to improve results. For example, through training, adjusting the commission system or the sales process.
For more metrics that are worth tracking for individual salespeople, check out our Sales Driver hub for sales managers. All are best tracked if you use a CRM system. You can find all your sales data clearly in it and quickly get a handle on which ones you can analyze in detail.