Sales team performance can be tracked using dozens of metrics. In this article, we'll summarize 10 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.
Don't forget to analyze your losing trades as well.
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.
7. Monthly sales growth
Monthly sales growth is a key metric not only for the store, but for the business itself. Thanks to its monitoring, the management can quickly catch the problems that are hidden behind the stagnation of growth and start responding to them.
Determine the realistic monthly growth you want to achieve and present it to the sales team. For example, according to the following formula:
((Current Month Sales - Previous Month Sales) / Previous Month Sales) × 100
8. Average order value
Thanks to this metric, you will find out how much your customers spend on average during one purchase. You calculate it simply by dividing the total sales by the number of customers.
What good is such a metric? One of the most effective ways to increase profits is to sell more to customers. In the sales team, you can use this number to develop new business strategies or predict the value of new leads.
9. Sales by contact channel
If you track successful deals all the way to their inception, you will gain valuable data for the direction of the deal. Start by defining the most common channels through which you acquire new business. Whether they are active channels such as PPC advertising or cold calls, or passive ones such as organic website visits or random passersby near your store.
Then use the formula for each channel:
(sales from specific channel / total sales) × 100
For example, you will find out which channels are promising for you and worth stepping into them even more.
10. Product Performance
And finally, one key but still often neglected metric. It helps you figure out which products and services have the most value for you and which are lagging behind. You cannot tell the true performance of a product just by the number of sales - cheap products that are sold in thousands of units may not yet be among those generating the highest turnover.
You can find out Product Performance simply by calculating which products and services generate the most turnover for the period you specify. Then find out why these products are so successful. Is it due to marketing campaigns, social trends, or the quality of the product, which is significantly ahead of the competition? Think how you can multiply or apply success elsewhere.
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.
