Published by : Frederic Lucas
Businesses must use reliable and predictive sales KPIs to make informed decisions about their sales strategy.
These indicators should make it possible to evaluate the performance of the sales teams, diagnose potential sales problems and promote continuous progress towards achieving growth objectives.
Here are the 7 key sales performance indicators that every company must track to be effective. Note that this list is not exhaustive: other KPIs may be added, depending on the specific needs and objectives of a particular company.
Gross profit is the best indicator to evaluate the sales team’s performance.
In addition to measuring what the latter generates as profit, it demonstrates the real value of sales. It’s the value of a deal, and not the price, which impacts the company’s profitability.
There are several ways to increase revenue without increasing profitability. By granting significant discounts, for example. Gross profit is therefore much more revealing than gross income.
Sales Force Efficiency Ratio (Sales Labor Efficiency)
Often unknown or underestimated by business leaders, the effectiveness of the sales force is an essential financial indicator. It calculates the ratio of dollars invested in the sales force to dollars earned, regardless of the revenue growth generated by sales.
Therefore, the effectiveness of the sales force in generating cash can be reliably measured.
Gross profit alone is not enough as it doesn’t take into account the cost invested to yield a dollar of profit.
Conversion ratios must be measured at every step of the sales process. Companies often only examine the closing ratio, but by focusing on just this last stage, they are ignoring relevant data seen in the more difficult steps of the sales process.
The closing ratio is often calculated based on parameters that differ from one company to another. Some companies obtain it by dividing the number of meetings by the number of sales, while others divide the number of proposals by the number of sales.
The Value of the Average Sale
It’s necessary to know the value of an average sale or the average value generated by an account. Even if the gap between sales varies enormously, the average value to target must be identified.
It’s necessary for setting objectives.
Attrition Rate and Churn
The attrition rate measures the ratio of lost sales to total sales, while the churn portion indicates the percentage of sales that are not renewed.
These two indicators show the revenue needed to offset losses that are caused by customer attrition and non-recurring sales.
The Quantity and Value of Opportunities in the Pipeline
The number of opportunities in the sales pipeline and the cash value are two separate indicators that must be measured independently.
The total value of the pipeline is predictive of the company’s future revenues. It’s critical in determining whether or not the sales team is on track to meet its sales objectives.
Also, the total value of the pipeline, divided by the number of opportunities, provides the average value of an opportunity within the pipeline.
This new indicator provides insight into the quality of the sales pipeline.
Number of Meetings per Week
For many companies, the logistics required to record the number of calls and the duration of conversations between representatives and prospects makes little sense.
However, compiling the number of weekly meetings that sales representatives have with potential customers provides a good indication of the sales team’s activities.
Tools to Monitor Performance Indicators
No single tool can monitor all these indicators.
Gross profit, sales force efficiency ratio and average sales value are generally available in the company’s accounting system.
As for the number of weekly meetings for each sales representative; these will be listed directly in their respective calendars and CRM.
Monitoring other indicators, such as conversion rates, requires the implementation of an appropriate sales process and CRM.