Executive summary:
Sales metrics can be divided into three categories:
- Company-wide metrics
- Sales function and processes metrics
- Sales rep performance metrics
"You can't manage what you don't measure" – this old saying still holds its weight, especially for high-functioning sales teams like yours.
You're well aware of the importance of measurement, but let's face it – nailing down the right metrics can be a bit of a challenge.
To start off, let's set the record straight: not all metrics are created equal. It's not about drowning in a sea of data; it's about focusing on those key metrics that provide genuine insights into your sales performance.
From conversion rates that uncover the effectiveness of your lead-to-customer journey, to the pivotal Monthly Recurring Revenue (MRR) that reflects your business's financial health – we're going to discuss the metrics that genuinely make a difference.
If you've ever wondered which metrics are worth your attention, you're in the right place. Read on as we analyze, clarify, and present the details on the metrics that hold real significance.
What are sales metrics?
Sales metrics are the compass points that gauge the performance of your sales processes, your teams, and individual sales reps. They're like those trusty breadcrumbs that tell you whether you're heading in the right direction or if it's time to switch things up.
These metrics come in two flavors – lagging indicators, which show off the work that's already been put in – think calls made and emails sent. On the flip side, we've got the leading indicators, which give you a sneak peek into the future – imagine revenue projections and sales broken down by lead source.
In essence, sales metrics are your secret sauce for understanding what's working, what's not, and where the sales magic is happening.
What are the sales metrics to track for high-performing teams?
Sales metrics can generally be divided into three categories:
- Company-wide metrics
- Sales function and processes metrics
- Sales rep performance metrics
However, keep in mind that this list is not exhaustive, but only indicative of the most important metrics.
Company-wide metrics
Company-wide metrics are data points that’s shared amongst all the teams and is indicative of the general financial and sales health of the company.
1. Total revenue
Total revenue is the total amount of sales across products and services. This can be measured on any time scale, mostly monthly, quarterly, and annually.
It can be calculated using two different formulas:
2. Net Revenue Retention (NRR)
More and more sales teams are now focusing on retention and expansion of revenue. So this metric becomes extremely important to track.
NRR is a measure of how your existing customers have grown in revenue.
To measure NRR, there are a few data points you need to have:
- Starting Monthly Recurring Revenue: existing monthly recurring revenue
- Expansion MRR: Additional monthly revenue from upsells, cross-sells from your existing customers
- Churn MRR: Monthly recurring revenue that’s lost due to churn
- Contraction MRR: Opposite of expansion MRR - revenue lost due to existing customers paying lesser
With these data points, you can calculate NRR by
If NRR is more than 100%, it means you’ve expanded MRR with your existing customers. If it’s less than 100%, it means you’ve contracted.
3. Average Revenue per Account/Customer/Product
This is the average revenue brought in by a single account, product, customer, service.
4. Lifetime Value (LTV)
This is the maximum value you can extract out of every customer. This is critical to know because it’s way more expensive to acquire a new customer than to retain an existing one.
5. Net Promoter Score (NPS)
What’s the likelihood that your customers will recommend your product to others?
That’s NPS. This is generally on a scale of 1-10. Any customer in the 8-10 range is a champion and everyone else is a detractor.
The closer NPS is to 100%, the more satisfied your customers are.
Sales function and processes metrics
1. Sales cycle length
It is the time taken between the first interaction of the prospect and deal closure. This is generally shorter for SMBs and longer for enterprises.
2. Conversion rate
This is a measure of how effectively your sales team converts leads into customers.
This can be done for specific time periods - monthly, quarterly, annually.
3. Sales expense ratio
It’s important to understand how expensive your sales organization is. This is the metric that will throw light there. The higher your sales expense ratio, the lower your profits.
4. Average Annual Contract Value
This is the average value extracted from a customer over a period of one year.
5. Year-on-year growth
This can be calculated for any other metric. For eg, Y-o-Y revenue growth, Y-o-Y ACV growth etc.
Sales rep performance metrics
1. Quota attainment
This gives you an idea of how well your sales rep is performing. A low attainment could mean a bunch of different things:
- Target is too high
- You’ve hired the wrong kind of sales rep
2. Win rate
This is the measure of how efficiently your sales rep can close qualified opportunities. While it sounds very similar to conversion rate, it isn’t.
3. Pipeline coverage
This is the total pipeline (number of deals) needed to hit quota in a specific time frame. This has a close relationship with win rate - it’s in fact a function of it.
Pipeline coverage should be in accordance with win rate. If win rate is 25%, pipeline coverage should be at least 4.
Wrapping Up
There are a variety of ways to track these metrics, including spreadsheets, CRM, and specialized stack.
ElevateHQ can help with visualizing all these metrics. Check it out here!
