More sales data isn’t always better. You need a clear focus on metrics that matter. Here are 9 critical sales KPIs to drive confident decisions and grow revenue.
April 5, 2023 | Time to read: 8 minutes
Ever been overwhelmed by the sheer volume of sales data you’re tracking — and confused by the metrics that matter? You’re not the only one. Research firm McKinsey highlighted this as a troubling trend recently: Too much data and no focus has made it difficult for sales leaders to reach clear “aha” moments that drive confident decisions and sustainable growth.
Fortunately, there’s a clear path forward. To ensure you’re maximizing the ROI of tools, teams, and customer relationships, zero in on sales key performance indicators (KPIs) that make the most of what you have while delivering recurring revenue: a combination of tried-and-true targets, like lead conversion rate, and those that measure long-term value, like customer and employee retention.
Below, we give you everything you need to know about sales KPIs that ensure a healthy, productive, and growing business.
What you’ll learn:
- What are KPIs in sales?
- Why are sales KPIs so important?
- What are the most important sales KPIs?
- What sales KPI dashboards should you use?
SALESBLAZER COMMUNITY
Join the largest and most successful sales community.
What are KPIs in sales?
Key performance indicators (KPIs) in sales are the metrics used to measure how closely the performance of a sales team tracks to predetermined goals and how this performance impacts the business as a whole. This includes metrics like average leads generated per quarter and deal conversion rate.
Why are sales KPIs so important?
Instead of different reps focusing on different metrics — or leaders eyeing a definition of success that sales reps aren’t thinking about — KPIs keep everyone aligned on the metrics that contribute to company growth. It’s important to note that KPIs themselves are not sales targets, but metrics that gauge activity with significant business impact. Sales leaders define target KPIs to ensure teams are tracking to specific revenue goals.
Here’s an example: Joy’s Toys, a toy manufacturer, is focused on growth but doesn’t have a clear target KPI for lead generation that incentivizes reps to keep their pipelines full.Fast-forward a quarter or two and its revenue is “stop-and-go” with reps scrambling to find new opportunities after periods of focusing only on closing deals already in the pipeline. As a result, company growth stalls.
Competitor Saul’s Dolls, on the other hand, has mapped out a clear path to revenue growth that includes target KPIs for lead generation,quota attainment, and customer retention. These are shared with every rep so they can prioritize their time and efforts on prospecting, nurturing, and closing deals with new customers while upselling existing customers — and no critical sales effort is ignored. With this focus, Saul’s Dolls is more likely to hit or surpass its revenue goals.
What are the most important sales KPIs?
Historically, KPIs for sales have focused on core targets like new leads in the pipeline, number of closed dealsper quarter, and individual quotas. These are still important, but they often hinge on unpredictable one-off sales. To ensure your company is generating long-term, predictable revenue and maximizing ROI, it’s important to track both foundational sales KPIs and those that gauge the lifetime value of customer and employee relationships.
Here’s a closer look at the most critical sales KPIs:
1. Annual contract value (ACV)
What it measures: The average sales amount of a customer contract over the course of a year.
Why it’s important: ACV helps sales reps and managers identify opportunities for upselling and cross-selling that increase customer contract value and, ultimately, company revenue. If upselling or cross-selling are not possible (due to product portfolio, pricing structures, etc.), a low ACV may indicate a need for new customers that can drive revenue growth.
How to calculate: (Total sales value of contracts in a year) / (number of contracts) = Average ACV
2. Customer lifetime value (CLV)
What it measures: The value of all purchases, including upsells, cross-sells, and renewals, that a customer makes over the course of their relationship with your company.
Why it’s important: CLVis a clear indicator of how successfully your team is building the kind of trusting, value-first, and loyal customer relationships that lead to upsells, cross-sells, and renewals, and, as a result, predictable revenue.
How to calculate: (Average purchase value per year) x (average number of purchases per year for each customer) x (average customer lifespan in years) = Customer lifetime value
3. New leads in pipeline
What it measures: The number of new leads added to each rep’s pipeline during a single quarter.
Why it’s important: Based on your conversion rates (four deals closed for every seven leads, for example), you will likely need a specific number of leads to hit sales targets. If reps’ lead count falls below your target KPI, it can be a sign that you need to spend more time on prospecting.
4. Average age of leads in pipeline
What it measures: How long leads remain in the pipeline without becoming a closed deal. Usually calculated per rep.
Why it’s important: Reps know a full pipelineis a healthy one — but only if leads are actively moving toward a sale. Stalled deals are a drain on rep time that could be spent moving more viable deals down the pipeline. If you see a trend in stale leads for a particular rep, consider examining their pipeline and remove leads unlikely to close.
How to calculate: (Total age of all active leads per reps) / (Number of active leads) = Average age of leads in pipeline
SALESBLAZER COMMUNITY
Join the largest and most successful sales community.
PRODUCT PAGE
