If you want to be successful in any walk of life, it’s a good idea to set yourself some goals. In the business world, the most important targets are key performance indicators, or KPIs.
A KPI is any measurable value that indicates how well your business is functioning. Consistently missing your KPIs is like seeing warning lights on the dash, while hitting them or surpassing them repeatedly shows that the engine is running smoothly.
Most businesses also use KPIs to track progress within departments. So, what are key performance indicators in sales?
We have answers — along with a shortlist of the top sales KPIs you should be using.
What Are KPIs (Key Performance Indicators) in Sales?
Key performance indicators in sales are designed to measure the performance of your sales tactics and strategy. They can also be applied to individual teams or even reps, if you want to get that granular.
Usually, KPIs within a business follow some kind of hierarchy. You start by setting your overall business goals, and use them to guide your goal-setting within various departments — including sales.
The best key performance indicators are generally custom-made to fit a particular business and industry. They can contain several conditions, and it’s a good idea to create a clear definition for measurement and responsibility. For example:
Why Do We Need Sales KPIs?
To understand the value of setting up sales KPIs, let’s look at the example above in closer detail.
The benefits of increased revenue across the year are fairly obvious, and setting a growth target gives everyone in sales something to strive for. Just as importantly, it sets the bar for success.
In the example above, the KPI is measured across a whole financial year. But take note of that last bullet point. By reviewing progress on a monthly basis, the person who is responsible for this KPI (in this case, the CEO) is able to assess whether the current strategy is working.
If the numbers look good, the sales department can continue following the same path or even invest further in the current strategy. If the figures are not keeping up with expectations, a change can be made.
Of course, revenue is not the only sales KPI available. Depending on what you want to achieve, you can set goals for sign-ups, return on investment, gross profit margin, leads, conversions, and more.
You can even add secondary objectives to your primary key performance indicators.
These could be more specific, team-level metrics such as the sales cycle length or the number of closed deals. Alternatively, you could choose secondary KPIs that provide stepping stones towards your primary KPI — such as the number of outreach emails sent, or follow-up time with leads.
How to Pick the Right Sales KPIs for Your Business
As you can see, there are many different KPIs to choose from in sales. While some are universal, not all will fit well with your business.
To find the right match, you need to start with your ideal end result. What is an achievable aim for your business? From there, you need to break down the steps required to reach that organization-level target.
These individual parts will vary hugely depending on your industry, your product or service, your audience, your price point, the size of your operation, and other factors.
Whichever KPIs you choose, make sure they follow the SMART framework. That is:
- Attainable – There is no point in aiming for dreamland!
- Relevant – Consider whether each KPI will help your business
- Timely – Set a clear end date, or you will drift forever
5 Top Key Performance Indicators in Sales
With these key principles in mind, let’s take a look at five sales key performance indicators that work for almost any sales operation.
1) Sales Revenue
Let’s start with the basics. Sales revenue is quite simply all the cash you generate through making sales.
This metric is a very blunt instrument for measuring your work in sales. But at the same time, it is actually the most important KPI. After all, the whole point of sales is to generate revenue.
To calculate your sales revenue, run the following math:
price of units sold × number of products sold
Alternatively, you can just add up all the closed deals within a specific time period — but remember to account for payments not yet made.
2) Average Purchase Value
Another high-level sales KPI you should use is average purchase value. This metric shows you how much revenue is coming from each closed deal. You can work it out like this:
total revenue ÷ number of deals won
This key performance indicator is particularly useful if your business uses flexible pricing, or regularly sells multiple products in the same transaction.
With either model, you may close fewer deals in one month and still post higher revenue. Likewise, more deals do not always produce greater revenue.
Of course, the ideal situation is to make more sales at a higher value. Setting the average purchase price as a sales KPI can help you work towards this aim.
3) MQL-to-SQL Ratio
Okay, time to get a little bit technical.
If your marketing strategy is working well, you should see a consistent stream of leads flowing into your sales inbox. Ideally, the people who feed through should be marketing-qualified leads, or MQLs.
This term describes anyone who knows of your company, and fits the description of a likely buyer. However, they might not have shown clear intent to make a purchase.
When your sales reps make contact with MQLs, you may discover that some of these leads are looking for a specific product or solution. In other words, they are showing clear intent to make a purchase. These people are known as sales-qualified leads, or SQLs.
The difference between an MQL and an SQL might seem small, but it is actually very significant. Let’s take a simple example:
- MQL – Someone walks into a store to browse
- SQL – They tell the sales assistant that they are looking for Nike shoes
SQLs are very valuable, because they are only one step away from making a purchase with you. It’s the job of your salespeople to get them over the line.
Setting the conversion rate of MQLs to SQLs as a key performance indicator is a smart move, because it shows how well your sales process is working. The calculation is simply:
number of MQLs ÷ number of SQLs
4) Sales Cycle Length
After a prospect first comes into contact with your business, it can be anything from minutes to months before they make a purchase. The sales cycle length KPI helps you track this period of time as an average across all your customers.
To calculate your sales cycle length, record the amount of time it takes to close every sale. Then take all your data for a month, and add the time together. Finally, run the data through this formula:
total closing time ÷ number of deals in month = sales cycle length
By setting a low target with this KPI, you can turn long-term prospects into imminent sales. In turn, this will put more revenue on your balance sheet.
By comparing your sales cycle length with the number of leads you are generating, you can also forecast future revenue. If you don’t like what you see, it’s time to try something new!
5) Customer NPS
Although the primary objective of sales is to close deals, you also want your customers to actually feel positive about making a purchase.
Why? Because they are more likely to make another purchase — and remember that repeat customers are much easier to find than fresh leads. As a secondary benefit, customers who had a good experience may recommend your company to other potential leads.
The best way to test your customer experience is through the customer NPS (net promoter score) metric.
To use this KPI, you will first need to ask some customers to fill out a satisfaction survey, with questions on a scale of 1 (unhappy) to 10 (very happy).
From the responses you collect, sort people into three groups:
- 0–6: Detractors
- 7–8: Passives
- 9–10: Promoters
Calculate the percentage share of respondents in each category, and then make the following calculation:
% of promoters − % of detractors
If you’re left with a positive number, you’re doing well! If you make customer NPS one of your KPIs, you should be trying to improve your score over time.
How to Improve Any Key Performance Indicator
If you set achievable goals, there is every chance you will hit all your targets in the KPIs mentioned above.
But let’s just imagine for a second that things don’t go to plan. What then?
While there may be many possible causes and methods to rectify the situation, you can always turn to one catch-all solution.
The Secret Is Better Prospecting Data
Most sales KPIs relate to revenue, and your ability to convert opportunities into closed deals. In both cases, gaining access to better prospecting data can significantly improve your numbers.
Why? Well, prospecting is a key part of the sales funnel, but it takes time. By sourcing accurate contact information, you can reduce the amount of time you waste on calls and follow-up emails.
In addition, the better you know your prospects, the more likely you are to build a working relationship via email or over the phone. Data can also help you create a personalized offer, which will make it easier to turn your SQLs into wins.
Even when it comes to customer experience, accurate prospecting data makes it easier to hit your KPI targets. Every customer wants to feel special; with good data at your fingertips, it becomes far easier to provide that kind of human connection.
How Datanyze Helps You Collect Accurate Prospect Data
If you want to get better prospecting data, and in turn improve your KPIs, you essentially have two options: spend time gathering intelligence manually, or use a specialized tool.
While gathering data by hand might seem like the cheaper option, you pay with time. As a result, your sales staff are likely to have less time for actually selling products.
In contrast, a specialized tool like Datanyze lets you grab accurate information about contacts with a click. Our Chrome extension can reveal the email address, direct dial, and company information for any LinkedIn or online profile. Just as importantly, it’s super affordable and easy to use.
Want to give it a try? Sign up today to get a 90-day free trial!