To be successful as a sales team, you need well-defined goals that you know will impact your company’s overall objectives—and a way to measure your progress toward those goals.
That’s exactly what key performance indicators for sales, or KPIs, provide.
Keep reading to learn what KPIs for sales are, why they’re helpful, how to choose the right ones, and how to track them.
Key performance indicators for sales, or sales KPIs, are metrics used to track the progress of sales teams toward their goals and measure their performance’s impact on overall business objectives. Sales KPI examples include customer lifetime value, conversion rate, and number of new leads.
The difference between KPIs and sales metrics
KPIs and sales metrics are similar, but they’re not exactly the same thing. Essentially, KPIs can be metrics, but not all metrics are KPIs.
Like KPIs, metrics are quantifiable measures of business functions. What sets KPIs apart from other metrics is the fact that a KPI for sales is designated as the most important measure of progress toward the most significant goals.
Why should sales managers track KPIs?
Tracking KPIs gives sales managers and their teams a clearer view into how the sales department is performing and how that performance impacts the company. Here are some of the key benefits.
KPIs keep you focused on your most important objectives
Since KPIs make progress toward your most important goals measurable and easily visible, they make it much easier to ensure you’re on track toward meeting them. KPIs ensure you’re using meaningful sales metrics to track your success.
KPIs prevent information overload
With so much data now available to businesses, it’s easy to get overwhelmed. KPIs help your team focus on the metrics that truly matter and avoid information overload so you can actually make use of your data.
KPIs turn abstract goals into measurable targets
Even if your team knows its goals, unless you break them down into measurable targets, it’s hard to know whether you’re on the right track. KPIs for sales team members enable you to turn abstract goals into something you can measure.
KPIs help you achieve results faster
Since KPIs help improve focus, they often enable you to get quicker results. With well-defined KPIs in place, you’ll spend less time on tasks that don’t make as much meaningful impact and stay better focused on the most critical tasks.
KPIs provide insight into business performance
Keeping an eye on KPIs for sales can also reveal trends and shine a light on what’s working well and what needs improvement. Sales managers can use this information to improve sales performance by shifting focus, offering guidance to their team, and adjusting strategies.
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To track KPIs that will benefit your business, you need to make sure you choose the right ones. These tips will help you pick the sales KPIs that matter most for your team.
Start with your goals
Before you can choose KPIs, you need to understand what your most important objectives are. Work with company leadership and others in your organization to determine the most meaningful goals and top priorities for your company and choose KPIs that will make the most impact on achieving those goals.
Determine how to make those goals measurable
When it comes time to define your KPIs in more detail, use the SMART framework to make your goals as useful as possible for your team. The SMART framework advises you to create goals that are:
Specific: More detailed goals are easier to track and provide a more focused target to aim for. Your KPIs should lay out specific numbers your team will aim for, such as a specific revenue number to hit or a percentage increase in new sales or leads.
Measurable: Have a plan in place for how you’ll measure progress toward your goals. A CRM and other software tools can help you with this.
Achievable: Your targets should be realistic while still providing meaningful growth when you hit them.
Relevant: Ensure the targets you set align closely with your company’s most important objectives. This helps you avoid vanity metrics.
Time-bound: Set a time frame for your goals to help keep your team on track. For example, you could set a goal to increase sales by a certain percentage each quarter.
Narrow it down to just a few key metrics
You probably have a long list of sales metrics you’d like to track, but for KPIs, it’s better to focus on just a few key ones that will have the most impact on your top-priority objectives. This will help keep your team focused and help you get the most meaningful results.
Tying your sales metrics to your overall business goals prevents you from wasting resources on activities that don’t contribute to these goals. It also ensures that your sales team contributes to your organization’s success in a meaningful way.
Proper sales and company goal alignment improves your team members’ understanding of the business’s priorities. This encourages a more cohesive sales approach and makes it easier for the business to achieve its goals.
How to track and report on sales KPIs
Once you’ve chosen your KPIs, you’ll need to create a solid tracking and reporting system. These tips will help you keep track of your KPIs.
Identify who will track each KPI
To make sure your team tracks all the necessary sales KPIs, you’ll need to determine who is responsible for each one. This person will manage tracking, report on progress, and help identify any issues or roadblocks related to the KPI.
Create a reporting plan
For each KPI, decide which reports you’ll use to track it, how often you’ll create them, and who you’ll share them with. Creating this plan will help keep you on track and ensure you don’t lose sight of your progress.
Choose the right tools
Another key to success when it comes to sales KPIs is ensuring you have the right tools for tracking and reporting.
A customer relationship management (CRM) system is essential for tracking sales data. With Nutshell, for instance, you can:
Automatically track sales performance
Monitor leads
Analyze how customers move through your sales funnel
Download presentation-ready charts
And much more
Reporting & analytics in Nutshell
Learn more about Nutshell’s reporting and analytics features
So, which KPIs should you measure as a sales manager? You’ll want to choose ones tied to your unique objectives, but here are some of the common and essential sales KPIs.
Customer lifetime value (CLV) is the total income a company brings in from a typical customer over the entirety of their time as a customer. It includes the value of initial purchases, renewals, upsells, cross-sells, and any other income.
CLV is crucial because it shows how much revenue a company can expect to earn over the long term and how much each customer is worth to the business. It can also shine a light on customer fit, customer retention efforts, and more.
CLV formula: CLV = (average transaction size) x (average number of transactions) x (retention period)
2. Retention rate
Customer retention rate measures the likelihood your business will keep customers over a given period.
A low retention rate might indicate poor customer fit or dissatisfaction with your product or customer support. Tracking the retention rate can help you catch these issues and make changes to retain more customers.
Customer retention rate formula:
Customer retention rate = (Customers at the end of a period) – (new customers gained) / customers at the beginning of a period
3. Churn rate
The churn rate is essentially the flip side of the retention rate and measures the rate at which a business loses customers.
Most of your revenue likely comes from existing customers, and it’s much more cost-effective to keep a current customer than gain a new one. So, while every business has some churn, tracking your retention or churn rate is essential.
Customer churn rate formula:
Customer churn rate = (customers at beginning of period – customers at end of period) / customers at beginning of period
4. Revenue
Tracking revenue as a KPI may seem obvious, but it’s an extremely useful and flexible metric.
If your business is subscription-based, you may want to measure monthly recurring revenue (MRR) and annual recurring revenue (ARR). These sales metrics include income from subscriptions, upsells, and cross-sells and consider discounts and cancellations. They provide a measure of the revenue that a business can reliably expect to generate each month or year.
5. Total sales and sales per rep
Tracking total sales over time provides insight into sales growth and trends and enables you to keep your team on track toward hitting sales targets.
Tracking sales per rep can help managers to improve individual sales performance, and sharing these sales statistics can help motivate team members to hit their goals.
6. Customer acquisition cost
Customer acquisition cost (CAC) is the total cost of gaining one new customer. These costs typically include costs for sales, marketing, and overhead and can be looked at on an overall or campaign basis.
Sales teams can have an even more significant impact on a company’s profitability by working to reduce CAC in addition to increasing revenue.
Customer acquisition cost formula:
CAC = Total sales and marketing costs / number of new customers
7. Conversion rate
Conversion rate, also called customer acquisition rate or win rate, is a measure of how many leads become customers.
Looking at this metric for your sales team as a whole gives you insight into the effectiveness of your sales strategies and tactics.
For example, you could look at the win rate for customers who participated in a demo compared to those who just had a sales call. If demos led to higher conversion rates, you could then focus more on getting demo signups.
You can also look at conversion rates on an individual basis. If you notice some sales reps have higher win rates, you can look into the tactics they use and then encourage the rest of the team to use those techniques as well.
8. New leads
Another relatively simple but important KPI for sales managers is the number of new leads gained during a given period.
You can calculate how many new leads you’ll need to reach your sales goals based on your typical conversion rates. If the number of newer leads is lower than expected, you can shift focus to spend more time on prospecting.
9. Average purchase value
Average purchase value is the average amount that customers spend on a transaction with your business. This metric is closely tied to revenue and CLV.
Increasing average purchase value enables you to earn more revenue from your existing leads and customers. When sales managers track average purchase value, they can use the data they collect to develop strategies that encourage customers to spend more.
10. Number of sales activities
Tracking the number of sales activities each rep completes in a given period can help sales managers understand their team’s productivity. These activities can include calls, emails, meetings, demos, and other tasks that may contribute to winning a sale.
To really understand sales performance, you’ll need to consider win rate, sales cycle length, and other metrics, but sales activities are a valuable part of the whole picture.
11. Upsell and cross-sell rates
If you want to increase revenue from your existing customers, it’s a good idea to track upsell and cross-sell rates.
Putting more focus on upselling and cross-selling is an excellent way to give your revenue a boost. Tracking these metrics helps you determine what techniques are working for winning upsells and cross-sells.
12. Sales cycle length
Another useful KPI for sales managers is sales cycle length.
By looking at which cycle lengths resulted in the most wins, highest values, and best customer retention rates, you can determine the ideal sales cycle length.
If certain sales reps are closing quality deals faster than others, other reps may be able to adopt their tactics to shorten their sales cycles.
13. Lead response time
Quickly responding to leads can have a significant impact on whether they’ll convert.
Tracking lead response time enables you to set response time goals and speed up your processes, which can help improve your win rate.
14. Employee satisfaction
Another key KPI for sales managers is employee satisfaction. When your team is happy and motivated, they’ll perform better and enjoy being part of the team.
Sales managers can use surveys, meetings, and other feedback opportunities to gauge employee satisfaction and gather ideas for improving team culture and work environment.
Common sales KPI tracking challenges
Tracking your sales KPIs effectively doesn’t have to be complicated. However, sales managers often face KPI tracking obstacles when teams don’t follow the best practices we’ve detailed above.
Here are a few of the most common sales KPI tracking challenges your team might come across and how you can overcome them.
Poor data quality
Without accurate data, your sales metrics are doomed from the start. Low-quality data leads to inaccurate reporting and forecasting, which could spell severe financial problems for any business.
Inaccurate, inconsistent, or incomplete data capturing is typically at the heart of a data accuracy issue. These can lead to duplicated, incorrect, and outdated information, making KPI tracking an uphill battle.
Establishing a structured data-capturing process and assigning specific individuals to data quality control is a good idea. A regular data cleaning routine will also help ensure your KPIs and metrics remain accurate and relevant.
Lofty KPI targets
If you set unreasonable KPI targets, your team will have a tough time achieving their goals, which could threaten your business. When sales teams continually fail to meet their objectives, demotivation sets in, which could lead to your sales reps looking for work elsewhere.
Setting SMART goals is one of the cornerstones of keeping your sales team motivated and on track. While we’d all like to double our profits in the shortest possible time, setting KPI targets based on what your team can actually achieve will get you there faster.
Lack of management
The importance of proper data management cannot be overstated. You need someone to oversee your data management processes, such as your data capturing and cleaning procedures. But data quality isn’t the only thing your data manager will be responsible for.
These managers are also tasked with monitoring data accessibility and sharing to ensure seamless collaboration among team members and across departments.
With the right data manager, sales managers should have access to the sales metrics they need to track KPIs effectively. This will help them identify trends, measure progress against sales and company goals, make decisions, and optimize sales strategies more effectively.
Sales KPI FAQs
What’s the difference between KPI and KRA in sales?
Sales-related key performance indicators (KPIs) describe particular sales metrics used to evaluate performance against set targets and goals. However, key responsibility areas (KRAs) in sales are the core functions and responsibilities of your sales representatives.
Is a sales target the same as a sales KPI?
Not exactly. Sales managers will set specific targets for sales teams to track goals and encourage a higher level of performance. While KPIs are used to gauge performance and its impact on the business.
What are qualitative KPIs?
A qualitative KPI is non-numerical data used as a value of measurement but based on information that is more subjective or related to an opinion. For example, your business’s overall customer satisfaction level is not represented by a numerical value and would be considered a qualitative KPI.
Ready to make tracking KPIs for sales easier?
Once you’ve selected the right sales KPIs and set up a system to track them, you’re on your way to helping your team achieve its sales goals and making a significant impact on your organization.
Having the right tools is essential for tracking and reporting on KPIs, and Nutshell is here to help. When you choose Nutshell as your CRM, you’ll get automatic sales data tracking, customizable dashboards, and flexible, easy-to-use reports. Give it a try today with a free 14-day trial.
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