Sales is one of the most important functions of any business. Whether you do one-on-one selling, sell in print, or allow your product to do the selling, it must happen. For the organizations that take a more active role in the selling process, there are many questions that you may not be able to answer without the right metrics.
Do you know what your reps do on a daily basis? Do you know your close rate? Do you have a clear picture of the opportunities in the pipeline? What are the major areas that you need improvement and what growth levers can you pull?
Those are just a few of the questions that you’ll be able to answer if you track the right metrics in your sales organization. In this guide, you’ll learn 8 important metrics to track so you can build out useful sales analytics and improve your topline revenue.
What is sales analytics?
Sales analytics are all the technologies and processes you use to measure, analyze, and manage your sales data. With sales analytics, you have a clearer picture of your sales performance over time and can optimize specific areas to get better outcomes. It has multiple benefits such as:
- Improving efficiency and productivity by revealing where there’s waste and allowing you to take corrective measures
- Reveal growth areas whether through identifying your highest performing products, customer segments, or sales techniques
- Optimize your sales funnel over time by helping you understand where bottlenecks are in your processes and working to remove them.
Key sales metrics to track
Even though you’re about to get a good list of sales metrics to consider tracking, it doesn’t cover everything. Your business will have a few peculiarities and it’s important to take that into consideration when trying to decide what metrics to track. That’s why a good strategy always starts with an audit of what you have now and ensures you have solid CRM software to help you track these metrics.
1. Overall sales growth
Once you have a bit of historical data under your belt, you’ll see how important it is to track sales growth over time. For example, what were sales this time last year? Are you contracting, remaining steady, or growing. You can also choose to track sales for shorter periods but keep in mind that seasonality and short-term external environmental factors may skew your data.
Track both the percentage growth and the absolute growth in sales. Depending on the size of your sales revenue, one or the other may be misleading. For example, if you jump from $5,000 in sales for January 2019 to $20,000 in sales for January 2020, the percentage increase is massive. The absolute growth is respectable but much more modest.
2. Average deal size
Average deal size is important for two reasons. It lets you know where you are so you can set reasonable targets for improving that number. It also makes it possible to set clear goals related to the number of deals you have to close in a certain period to meet your quotas.
You want to track this metric on a monthly basis and a yearly basis. The monthly tracking helps you maintain an up-to-date view of the kind of leads you’re attracting. For example, if your deal size is increasing every month, your marketing team may be getting more effective dialing in their messaging to get the attention of the right leads. The yearly tracking gives you insights into your overall performance over an extended period.
3. Total opportunities
This metric, combined with the following one, gives you an idea of your ability to hit your quota for a specified time period. If at any time, the numbers don’t work out then the easiest thing to do is to add more opportunities to your pipeline. You can track this with a visual dashboard using tools like Pipedrive.
For example, if you have a quota of $10,000/m and an average deal size of $500 then you need to close 20 deals in a month. If you have 50 total opportunities in your pipeline and your opportunity win rate is 25% then you’ll need to increase the number of opportunities to hit your $10,000 quota.
4. Opportunity to win rate
The opportunity win rate is a measure of your sales team’s efficiency over time. It’s the percentage of total opportunities they’ve been able to turn into closed deals over a given period. This can be measured monthly, quarterly, or yearly. This number should also be broken out based on individual sales reps to get an idea of the strengths and weaknesses of people on your team. From there, you can take steps to correct issues before they become irreparable. The right small business CRM will give you this information at a glance so you can move faster and more effectively.
5. Quote to close rate
The quote to close rate is the percentage of formal quotes that turn into closed deals. You’ll always have more leads in your pipeline than signed agreements. The metric helps you identify the number of qualified leads that entered your pipeline because unqualified leads wouldn’t get to the quote stage. It also gives you insights into the ability of your team to close deals. In other words, it determines how well you are at finishing the sales process with a win.
If you see that the total number of quotes you send out is high then you may have good leads. If the quote to close rate is poor then either something is wrong with the offeror your sales reps are unable to get the deal done. Track this metric on a monthly and yearly basis using a CRM like Freshsales. Monthly tracking gives you quick feedback on how effective changes you’ve implemented are. Yearly tracking will highlight the impact of organizational strategy over time.
6. Customer Retention
This doesn’t seem like a sales metric at first glance but it’s vital. Sales cost money and you may not make your investment back until the customer has been with you for a certain amount of time.
Unqualified leads may be convinced to purchase your products and services but won’t stick around for long. That means the investment that went into acquiring them will be lost and, in the end, you’ll increase topline revenue but be unprofitable.
Determine how long customers need to stay with you for you to recoup the investment in marketing and sales. This is also known as the payback period. After you have this figured out, identify your most profitable customer segments in terms of deal value and retention. Optimize your processes to push more of those kinds of leads into your sales pipeline.
7. Lead response time
The faster you reply to a lead that has shown interest, the more likely you are to successfully close the deal. This particular piece of information has been confirmed time and again by independent studies. The ideal lead response time is five minutes or less. When organizations start to track this metric, they’re often well above the recommended time but for every minute they reduce the response time, they have a correlated increase in win rate.
Track lead response time on a monthly basis. Even if you get it below five minutes, continue to implement processes that will help you improve Complacency is the enemy of a great lead response time.
8. Average deal time (days)
At any given time, you should have multiple prospects in the pipeline but they’ll all turn into customers at different moments. The average deal time in days will let you know how quickly sales reps are able to move prospects through the pipeline. This metric helps you with proper forecasting and planning based on the opportunities in the pipeline right now. If you’ve selected the right CRM for your business then this information will be easy to gather.
It also lets you know if you have room for improvement and by how much. For example, if the average deal time is 45 days, can you get it down to 40 days or even 30 days? If you’re tracking the metrics and actively working towards lowering them then anything is possible.
Sales metrics are an essential aspect of ensuring your team is working in the most efficient manner possible. This guide has walked through eight key metrics that you should be tracking and trying to improve over time. The best small business CRM will make this process much simpler for you and your team. If you’re in the process of choosing the right one or switching from an older provider, be sure to check our helpful reviews here.