Sales Metrics 101: How Numbers Affect Your Sales

By May 5, 2016Sales
sales-metrics-twt

Numbers are everything. And in the statistically-driven industry of sales, they speak volumes. Whether it is an inspiring tale of success or the imminent doom of a company, one can find that out by simply studying the financial figures in any form.

Since the sales business thrives on targets, sales reps, at any given time in their careers, do report the following to their respective managers:

  • Number of calls made in a day
  • Number of emails sent in an hour
  • Number of product demonstrations booked for one month

In this industry, these “numbers” are called “sales metrics” that assist sales managers in determining whether the reps are doing their job well or falling short of targets.

Did you know that about 88% of sales managers believe it is important that they are provided with timely and accurate sales performance metrics? The numbers help them in making better decisions and formulating effective strategies in the future.

Defining sales metrics

A set of measurable indicators that tell how each aspect of the sales operations is performing is called sale metrics. In other words, it:

  • Evaluates the performance of sales teams
  • Clarifies the focus on appropriate sales opportunities
  • Ensures changes in customer engagement strategies
  • Drives competitive advantage

imp-sales-metrics

What are the most common sales metrics?

1. Sales Growth: This shows whether revenues generated by the sales team have increased or decreased over a certain period – monthly, quarterly or annually and by how much percentage.

2. Profit Margin: The difference between total sales and total cost of doing sales (salaries, commissions, licenses, administrative and production expenses, etc.) is net profit. When the latter is divided by total sales, the outcome is called profit margin.

3. Pipeline value: This is the approximate financial worth of all the deals in the pipeline. However, the number varies as per different stages of the sales process.

value

4. Conversion rate: This metric determines the average number of open deals a sales rep needs to close one.

In simple words,

Conversion Rate = (Total Number of Closed Deals  ÷  Total Number of Leads) ×100%

5. Sales funnel leakage: This indicates the number of prospects out of the total leads that leave a sales pipeline at a given point. Using this data, a sales rep can strengthen those stages in the sale cycle where most opt-outs occur.

6. Sales cycle time: This is the average time that a lead takes to enter the pipeline, complete the sales process and get converted into a buyer. Smaller the cycle, the better it is!

Too many metrics to use

According to a 2014 study by Vantage Point Performance and the Sales Education Foundation, 306 sales metrics have been discovered till now, yet only 17% of them are found to be directly manageable. In a manner of speaking, the bigger is the number of indicators, the trickier it is to monitor them.

Since it is quite frustrating to gather, analyze and transform large data sets into something more meaningful and actionable, it is advised to build a data-driven pipeline with the help of 4 solid key metrics:

1. A number of deals in the pipeline: Sales reps should never allow their pipeline to run dry. In an ideal scenario, the more leads they have, the better it is. Therefore, they should consistently prospect and ensure they have qualified proposals submitted and scheduled enough product demos for the month.

2. Average deal size: It is assumed that larger deals move rather slowly through the pipelines, whereas the smaller ones are faster. The average deal size can be determined by looking at the past deals closed by the sales team. This will help the sales reps understand which opportunities are bound to convert and at what pace.

3. Conversion rate: It refers to that percentage of customers who take a specific action instigated by the sales rep such as buying the product. Monitoring this metric allows the sales reps to identify and rectify problems that occur in the funnel.

Lose-win

4. Sales cycle length: If a sales rep takes a lot of time to move from one stage of the cycle to another, then the metric will get adversely affected. Hence, this will help the sales reps decide where they have to get pro-active to shorten the sales cycle and where they need to get trained to avoid lengthening the process.

Sales-Cycle

Managing sales activities

There are categories of sales metrics and different levels of manageability. While business results represent the overall outcome of the company’s operations and are influenced by external factors such as market competition and in-house campaigns, sales objectives can be met to a large extent – provided the plans to achieve them are executed properly.

manageable

However, on the other hand, sales activities are entirely in the hands of the sales department. Metrics under this category such as calls to be made per day or client meetings scheduled per week.

Sales metrics are like GPS

They help the sales team steer their efforts and strategies in the right direction. From accelerating the stage-to-stage transitions or raising average deal values to improve top-line sales by onboarding more prospects in the pipeline, these metrics can lay down the entire roadmap for a company. Either way, sales metrics is one way to measure success and it can be easily done with an effective CRM application. In any company. But how do you measure your sales success? Drop a line in the comments or on Twitter.

crm-sw-cta

Asavari_Sh_author

by Asavari Sharma

Asavari is a content specialist at SalesChakra. She comes with a background in marketing communications and social media.