Sales Metrics: What, When, and How to Track

To be a successful business, you have to ensure the most efficient resource utilization. From sales to inventory, you must have insights into all your business operations. You cannot manage what you don’t have data on, so sales metrics are essential in all aspects of a business.

You see, intuitions can only drive companies to a certain level, beyond which only data can be used to make informed decisions. With access to accurate data, the sales team, sales leaders, sales manager, and business owner can mitigate risks and increase sales and profitability. 

With the inception of AI-based algorithms, you can easily access data related to sales metrics. However, just storage of this data is not functional. You have to decipher this data with the right sales metrics.

Knowing what to measure and how to measure it is the key to boosting sales, ensuring a frictionless sales process,  and driving businesses’ growth.

Through this article, we will go through specific sales metrics that help to make sense of sales analytics and can be used to grow your business further.


What are Sales Metrics?

Sales metrics are nothing but sales analytics representing data obtained from either an individual’s, team’s, or a company’s performance. These sales analytics help monitor the business’s progress, prepare strategies for future expansion, maximize sales and reduce operational costs, and so forth. 

Therefore, these can be understood as vital components of a business that need to function effectively to keep the company afloat. 

These sales metrics allow sales managers to tweak processes to boost sales by revealing the strengths and weaknesses of the sales process and business operations. This sales analytics is beneficial for the smooth functioning of the business both at a macro and a micro-level. 

At the micro-level- Sales analytics associated with direct sales hold the sales team and sales reps accountable for their performance. This makes managing the sales team a lot easier as data rather than prejudices and opinions now back the solutions. 

At the macro level- These sales analytics offer insights into the sales cycle as a whole. 

Questions like – 

  • Lead response time, 
  • Lead conversion rate,
  • Sales rep productivity,
  • Win rate,
  • Sales performance,
  • Why are deals taking longer to close,
  • Are average contract values sinking,
  • Overall performance metrics,

 and so forth can be dwelled upon based on current trends and numbers. 

What are Sales Key Performance Indicators (KPIs)

key performance indicators

Sales KPI’s are sales metrics that are important for measuring company-wide operations and performances. Some of these KPI’s include: 

  • Total revenue
  • Product or product line revenue
  • Market penetration
  • Percentage of revenue from new customers
  • Percentage of revenue from existing customers
  • Year-over-year growth
  • Customer Lifetime Value (LTV) 
  • Net promoter score (NPS)
  • Percentage of sales reps reaching 100 percent of the sales target
  • Revenue by territory
  • Revenue by market
  • Sales costs vs. percentage of revenue

By understanding these metrics and sales analytics, sales teams, sales managers, and the sales leader can chalk out strategies for your business based on the insights obtained.

For example, if moving forward, you want to make sure that all your sales reps meet their sales quota, it would be wise to look into activity metrics such as emails sent, phone calls made, and meetings booked.

This will help you as a business to monitor processes at a micro-level and address faults at their very roots thereby boosting sales performance and sales growth.

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The Key Sales Metrics to Track

Through this section, we will go over some of the most commonly used sales metrics. Further, we will also understand how these metrics are important, how to measure the respective sales metrics, and where these sales metrics can be used.

  1. Average Revenue Per User

    Average Revenue Per User

    The average revenue per user (ARPU) refers to the amount of money that a business receives in revenue per customer in a particular time period. 

    When To Use

    This KPI can be used when your average revenues seem to be increasing. A high value of this metric indicates that your company is holding weight, and providing discounts to attract customers may not be necessary. 

    Additionally, this sales metric can be used to identify your target audience and its market niche. 

    For example, if the sales and marketing team notices that telecommunications firms are your highest revenue-generating clients/ reason for your revenue growth, it may be wise to double down in this segment. It shows that customers are willing to pay for your product and that your product is sought after. 

    How To Track 

    The average revenue per user (ARPU) is calculated by dividing the total amount of income for that period by the number of customers or during that period:

    ARPU = (total amount of revenue in the given time period) / (average number of customers during that time period)

  2. Annual Recurring Revenue 

    Annual Recurring Revenue

    Annual recurring revenue, or ARR, is the total amount of contracted revenue that your company brings each year. It is particularly critical for businesses that provide a subscription-based contract of their product. 

    Existing and new customers (read: sales opportunities) will return only if they are convinced of the product. The Cloud Tutorial provides your business with a platform to build the foundation blocks for unparalleled customer service and support.

    A fully customizable platform allows businesses to create help desk, FAQ pages, and standard operating procedures to enable solution sharing. 

    When To Use

    ARR can be used to forecast a company’s growth in the long-term. Therefore, it is a great metric to consider during times of mergers and takeovers. 

    How To Track

    It is calculated using the following formula:

    Annual recurring revenue (ARR) = (total value of a contract) / (number of contract years)

    For example, a 3-year subscription of your product that amounts to $30,000 can be calculated as $30,000/3 = $10,000. This metric also helps to understand the number of customers who are currently subscribed to your product. 

  3. Quota Attainment

    Quota attainment

    It can be defined as the ratio of the deals or revenues converted by an employee to their total targets. This sales metric can be calculated over a month, quarter, or year depending on the degree of insights required. 

    Employees can better attain their goals if they do not have to engage in customer support. With the help of The Cloud Tutorial, you can do just that. It allows you to customize your website while enabling you to create easy-to-locate virtual helpdesks, FAQ pages, and other tools that allow for efficient information sharing between you and your customer.

    When To Use

    In case your business is not able to meet the required sales year on year, it is a good idea to look into this metric. You can identify whether or not employees can meet their goals and if not, you can intervene.

    For example, this sales metric may highlight the need to implement structural changes in your field team if, time upon time, they cannot meet the required goals.  

    How To Track 

    This metric can be calculated as follows: 

    Quota attainment = (number of closed deals or revenue in given time period) / (quota for that time period)

  4. Win Rate

    win rate

    Everybody likes to win in the business, right? This sales metric refers to the percentage of deals that are made within a specific time period.

    When To Use

    By understanding this metric, you can gain further insights into which sales team struggles to meet their goals. By segregating win rates by product, group, marketing campaigns, or any other external factor that the business had introduced, you can pin-point out exactly where your sales reps lack the finishing touch. 

    Once identified, you can even coach your sales rep and sales team and help your sales bounce back. 

    How To Track 

    This sales metric can be calculated as the following:

    Win rate = total no. of converted opportunities/total no. of opportunities (both won and lost)

  5. Conversion Rate

    Conversion Rate Percentage

    Another sales metric is the conversion rate which allows you to gauge how effectively you act on qualified leads. This sales metric is vital for your business because it serves as the bridge between the marketing and the sales teams.

    Potential customers are brought in by the marketing team, whereas the conversion of these leads is the sales team’s responsibility.  

    Monitoring conversion rates over time, and the characteristics of those leads, ensures that your company focuses on selling to relevant buyers. This translates into 

    • refined sales opportunities (read: packed sales pipeline),
    • improved performance metrics, 
    • efficient sales processes and sales productivity metrics,
    • and boosted sales growth.

    When To Use

    If your business comprises long sales cycles, then this sales metric should be looked into. By monitoring this sales metric during each sale funnel stage, you can tighten your revenue machinery. 

    If the metric indicates a low percentage of conversion of qualified leads, you may need to consider restructuring your top sales funnel and focusing on transforming these leads. 

    How To Track 

    The conversion rate sales metric can be calculated as follows: 

    Conversion rate percentage = (No. of qualified leads converted into sales/total qualified leads generated)

  6. Customer Acquisition Cost (CAC)

    Customer Cost Acquisition

    This sales metric is beneficial for growing businesses as it allows you to understand the costs associated with trying to establish or expand your customer base. 

    When To Use

    When you are a growing business, it is so critical to be cost-effective to maximize profitability. This sales metric allows you to create a budget and allocate funds to establish your customer base. 

    As a rule of thumb, try to minimize this sales metric to increase profit margins. TCT-The Cloud Tutorial enables businesses to do just that. Team members can be added to the platform to manage faqs and other customer-related queries and update them on time.

    It further allows assigning members with specific responsibilities so that you can efficiently manage customer inquisitions. 

    How To Track 

    The following formula can calculate this sales metric:

    Customer Cost Acquisition (CAC)= (Money + Additional Resources Spent) / Number of Customers Acquired

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  7. Sales Cycle Length

    Sales Cycle Length

    This sales metric indicates the amount of time it takes your business to act on a lead and see its completion. 

    When To Use

    This sales metric helps to identify any possible sources of bottlenecks in the sales process. These delays need to address as they may potentially cause your business to lose potential customers, thereby decreasing profitability. Additionally, by effectively streamlining your sales funnel, you establish higher conversion rates and generate more revenues.  

    How To Track 

    This sales metric can be tracked simply by using this simple formula:

    Sales Cycle Length= Amount Of Time Taken (No recurring orders) / Total No. Of Individual Customers Catered 

  8. Average Deal Size

    Average Selling Price

    As the name suggests, average deal size refers to the average selling price of orders with the total number of orders. Sometimes, small orders may not be profitable for businesses in the long run as higher cost prices reduce the profitability margins. 

    When To Use

    Average deal size helps you understand two things. Firstly, does your product have the ability to land large deals? Is your product a sticky product that requires the customer to indulge in additional sales? Are your marketing efforts resonating with the customers that have hefty budgets? 

    Additionally, the sales metric helps to identify whether or not small sales are profitable. If not, the focus can be shifted entirely towards trying to land larger orders that are profitable to execute.

    How To Track 

    The following formula can calculate this sales metric:

    Average selling price = (Total amount of deals over a specific time period) / (Total no. of sales)

  9. Average Profit Margin

    Average profit margin

    Perhaps the most critical aspect for your business, the average profit margin, will help you predict whether or not your business will remain afloat. The average profit margin is calculated by dividing your company’s net income by the total number of sales made.

    When To Use

    This sales metric can be segregated based on product and region to gain further insight into how profitable each segment of your business is. If you identify a segment that does not yield profitable margins, you have to decide whether you want to dissolve the segment or allocate additional resources to strengthen it. 

    How To Track 

    The following formula can calculate this sales metric:

    Average profit margin = Net income / Net sales made

  10. Deal Slippage

    Deal Slippage

    Businesses often tend to take more orders than they can handle. Deal slippage is a sales metric that monitors this insight/sales data – businesses’ inability to execute orders timely, leading to a delay. 

    When To Use

    Contrary to misconceptions, slippages aren’t necessarily bad. A high value of this sales metric indicates that your product is in high demand. Another interpretation of the same sales data/sales analytics can be that you need to increase your production capacity to meet the increased market demand.

    Thus, knowing what your average deal slippage is and trying to address the same will lead to sales productivity and profitability. 

    Efficient customer support is a way by which you can reduce your deal slippage as more resources can be allocated to the order’s execution. The Cloud Tutorial provides you with just that.

    It allows you to customize your website while enabling you to create easy-to-locate virtual helpdesks, FAQ pages, and other tools that allow for efficient information sharing between you and your (new) customer.

    How To Track 

    Essentially, this sales metric can be monitored by the following formula: 

    Deal Slippage= No. of deals that are delayed 

  11. Churn Rate

    Churn rate

    This sales metric helps to identify those customers that either drop out as your customer. If you provide a SaaS, the number of customers who don’t renew their subscriptions is also considered dropouts.

    When To Use

    This is a critical metric if you are a SaaS business that provides a subscription model. It helps you understand your customer base and whether they react positively to a new feature you launch.  

    Efficient customer service is a great way to reduce this metric. The Cloud Tutorial allows you to customize your website while enabling you to create easy-to-locate virtual helpdesks, FAQ pages, and other tools that allow for efficient information sharing between you and your customer.

    How To Track 

    This sales metric can be calculated by: 

    Churn rate = Number of churned customers / Total number of customers

  12. Net Retention Percentage

    Net Retention Percentage

    Loyal customers are hard to come by, and when they do, businesses must make sure that they stick around. Net retention is a metric expressed in terms of a percentage that indicates how many customers contribute to recurring sales. 

    When To Use

    Since this metric is dynamic, you will have to ensure that you collect data for this metric in real-time. This should be used by businesses that are trying to establish a customer base. 

    How To Track 

    A simple way to measure this metric is: 

    Net retention percentage = No. of customers involved in recurring sales/ Total customer base

  13. Sales Linearity

    Sales Linearity

    Consistent sales lead to steady cash flows and profit margins for businesses. This sales metric helps to monitor the constant nature with which sales are distributed through a period. 

    When To Use

    This metric can be used to monitor the whole business by segregating it into segments. This allows you to gain insights into why specific segments are outperforming others, and there is a need for restructuring to boost the sales in segments that have a low value of this metric. 

    How To Track 

    Sales linearity can be measured as the number of recurring sales (subscriptions) made during a specific time period. 

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Final Verdict

Regardless of how well your business is doing, sales performance metrics should be monitored regularly. They provide valuable insights into business performances, productivity, and operations that are otherwise intuitive in nature. Sales metrics help narrow down inefficiencies in the entire sales funnel and address them at their source. 

Sales analytics also helps you monitor and understand monthly recurring revenue (mrr), lead conversion rate, sales pipeline coverage, activity sales metrics, number of deals, and accurate sales numbers.

The Cloud Tutorial provides you with an efficient way to boost your sales performance metrics. It allows you to customize your website while enabling you to create easy-to-locate virtual helpdesks, FAQ pages, and other tools that allow for efficient information sharing between you and your customer.

Unparalleled customer support is something that customers appreciate, thus helping to build long-term relationships.


FAQs

Some good sales metrics that provide insights into business performances are:
  • Average Revenue Per User
  • Average Profit Margin
  • Customer Acquisition Cost (CAC)
  • Conversion Rate
  • Recurring Revenues (Monthly/Annually)
  • Total revenue
  • Product or product line revenue
  • Market penetration
  • Percentage of revenue from new customers
  • Percentage of revenue from existing customers
  • Year-over-year growth
  • Lifetime value (LTV) of a customer
  • Net promoter score (NPS)
  • Percentage of sales representatives reaching 100 percent of the sales target
  • Revenue by territory
  • Revenue by market
  • Sales costs vs. percentage of revenue
  • li>
Create a plan and closely monitor your sales metrics. The sales plan acts as a roadmap for your business while. If you can address the inefficiencies in your sales funnel, you can create better sales strategies to improve profitability.
  • Sales Productivity- How much time do your employees spend selling?
  • Lead Response Time- Time is taken up to follow up on potential leads.
  • Opportunity Win Rate- Number of orders converted from total orders
  • Average Deal Size- Values of orders that customers are placing

  • Conclusion

    By tracking the sales metrics mentioned above, you can identify the Achilles’ heel of your sales funnel and fix problems hindering your success. Further, you can allocate more resources towards segments whose metrics are declining, increasing sales.

    To know more about how our software The Cloud Tutorial (TCT) helps you in your business, you can visit our website. You can also explore TCT features to know the main benefits.

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