8 Key Sales Metrics: A Guide to Tracking Sales Performance
Tracking the performance of your sales team and individual salespeople tells you how effective your team is and helps identify your best performers. Without the right metrics, you won’t know which sales reps are meeting quota, pursuing high-quality leads, and closing enough deals. You won’t also know those who do the opposite and therefore cost you money.
You need to track key sales metrics to run your business effectively and intelligently. Read on to discover which metrics you should track and what they tell you about your sales performance.
What Are Sales Metrics and Why Are They Important?
Sales metrics are key points of data that help track the performance of your company’s sales team and individual salespeople. Knowing how well your sales department and individual sales reps are performing helps you to:
- Identify your best performers
- Track performance to targets
- Set new targets for upcoming periods
- Set sales compensation and other incentives
You can also use sales metrics to track how well your business is performing vis a vis the competition and to identify strategic issues. It’s impossible to run your business intelligently without these key sales metrics.
8 Key Metrics for Tracking Sales Performance
What are the most important metrics you should use to track sales performance? Here are the top eight.
1. Revenue and Profit
The first and easiest metrics to track are your top and bottom-line numbers. Track total revenue to see the value of all sales brought in by your sales team for a given time period – weekly, monthly, or yearly.
Track profit margin to see how profitable those sales are, using the following formula:
(Revenue – expenses) / Revenue = Profit margin
You can track both revenue and profit margin on total sales, sales by territory or category, or sales by individual or team.
2. Average Revenue Per Customer or Account
When evaluating your sales, it’s important to track not just total revenue but also the average revenue per customer (ARPC) or average revenue per account (ARPA), depending on how your business is organized. The formula is as follows:
Total revenue / Total number of users or accounts = ARPC or ARPA
ARPC and ARPA tell you whether your business is evenly spread over a large number of accounts (lower ARPC/ARPA) or dependent on a few big accounts (higher ARPC/ARPA). Evaluating this metric over multiple time periods also tells you whether accounts are spending more or less money over time.
3. Average Deal Size
It’s also important to track the average deal size or average order value. Use this formula:
Total revenue / Total number of individual sales = Average deal size
The average deal size tells you if you’re depending on a few big sales (larger average deal size) or a large number of smaller deals. Tracking the average deal size by salesperson helps to single out your higher-performing team members (high average deal size). It can also identify salespeople who are going after low-hanging fruit (low average deal size).
4. Conversion Rate
The conversion rate measures the percentage of qualified leads that become paying customers. Here’s the formula:
Number of new customers / Number of qualified leads = Conversion rate
The conversion rate is important for evaluating the performance of individual salespeople and teams. It can also be useful for measuring the quality of your leads and the effectiveness of the marketing activities that generate those leads.
5. Win Rate
The win rate, sometimes called the opportunity win rate, is similar to the conversion rate but instead tracks the number of deals closed versus the number of viable opportunities presented. Here is the formula:
Number of closed deals / Number of opportunities = Win rate
The RAIN Group Center for Sales Research found that, across a number of industries, the average win rate is 47%. Tracking win rate by salesperson can tell you which reps are more effective (higher than average). It can also tell you if your reps are chasing less-viable opportunities (lower than average).
6. Quota Attainment
How effective are your salespeople at meeting their quotas? You can determine that by measuring their collective and individual quota attainment. Use this formula:
Revenue from actual bookings / Sales quota = Quota attainment
This metric can tell you a number of things. The primary revelation is which of your salespeople are the best performers according to the goals you set. The second thing you can learn is how attainable your quotas are – having too many low performers says your goals are unrealistic, while having too many high performers says your goals are too easy.
7. Year-Over-Year Growth
Is your sales team effectively growing your business? You measure this by tracking year-over-year growth, with the following formula:
(Current year revenue – Prior year revenue) / Prior year revenue = Year-over-year growth
You can measure revenue growth over any time frame, including year-over-year, quarter-over-quarter, or month-over-month. Low or non-existent growth indicates some sort of trouble – poor sales execution, poor product performance, adverse market conditions, or new or improved competition. Companies with high year-over-year growth typically have a more experimentation-oriented mindset.
8. Market Share
Your business can be on a roll yet still moving backward. That happens when your revenues increase in growing marketing but not as much as the market is growing. You rack up more sales but actually lose market share.
To measure market share, use this formula:
Your company’s revenues / Total industry revenues = Market share
A thriving business realizes a steady or increasing market share. A business with decreasing market share – even if revenues are increasing – is losing business to the competition. (See the following video for some tips on how to increase your market share.)
Let Rainmaker Help You Track Your Company’s Sales Performance
When you want to gain more insight into your sales team and individual salespeople, turn to the Salesforce experts at Rainmaker. We can help you identify and track the key sales metrics necessary to improve the effectiveness and efficiency of your sales team. We offer a wide variety of Salesforce Managed Services to help your company generate better leads, turn more opportunities into deals, and increase your revenues and profits.
Contact Rainmaker today to learn more about tracking sales performance with Salesforce!