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By Michelle Hall
Closing deals is the lifeblood of any sales team, but just knowing your quota isn't nearly enough to hit it. There are a handful of other KPIs that are relatively simple to track and will make you far more likely to forecast accurately and hit your revenue goals.
In this post, we'll share the most important sales metrics you need to know, explain how to calculate and interpret them, and discuss how tracking these KPIs can help you (and your team!) spend your time wisely and close more deals.
While there are dozens of sales metrics you could be tracking, these are the ones that best predict how much business you'll eventually close.
Conversion rate is the percentage of leads that turn into paying customers. It's a crucial metric for understanding the effectiveness of your sales process and identifying areas for improvement.
To calculate conversion rate, simply divide the number of closed deals by the total number of leads, and multiply by 100.
For example, if you had 100 leads and closed 10 deals, your conversion rate would be 10%.
A low conversion rate could indicate issues with lead quality, sales messaging, or the sales process itself. On the flip side, a high conversion rate means your process is dialed in and you're doing a great job of moving leads through the funnel.
It's smart to break down the conversion rates at each stage in your funnel (ex. from demos booked to closed-won) so you can identify which part of your process might be broken.
Average deal size refers to the average value of each closed deal. It's an important metric for forecasting revenue and setting realistic sales targets.
To calculate average deal size, just divide your total revenue by the number of deals closed.
For instance, if you closed 50 deals worth a total of $500,000, your average deal size would be $10,000.
Tracking average deal size over time can help you identify trends and opportunities. If deal size is increasing, it could mean you're getting better at selling to high-value accounts. If it's decreasing, you may need to reevaluate your pricing or targeting.
If you have some large outlier deals in a given period, you might want to look at your median deal size instead.
Sales cycle length is the average time it takes to close a deal, from the initial contact to the signed contract.
To calculate your sales cycle length, add up the total number of days from initial contact to close for all your deals, then divide by the number of deals.
For example, if you closed 20 deals and the total number of days from initial contact to close for all those deals was 600, your average sales cycle length would be 30 days (600 / 20 = 30).
This is a crucial metric for forecasting since it helps you predict when deals are likely to close and how many you can realistically close in a given period.
To get a bit more sophisticated, you can segment your sales cycle length by customer type to better understand how different segments move through your sales process.
Sales velocity measures how quickly deals move through your pipeline. It takes into account four key factors: number of opportunities, average deal value, win rate, and sales cycle length.
The formula for sales velocity is:
Let's break that down. Say you have 100 opportunities in your pipeline, with an average deal value of $10,000 and a win rate of 20%. Your average sales cycle is 60 days.
This means that, on average, you're generating $3,333 in new business each day.
Improving any of the four factors (increasing opportunities, deal value, or win rate, or decreasing sales cycle length) will increase your overall sales velocity.
Once you have a better understanding of how your overall process is performing, it's smart to measure your "inputs" – i.e. how many actions you're taking each day to move people into and through your funnel.
Daily sales activities encompass any number of sales-related tasks a rep might perform in a day, including calls made, emails sent, meetings scheduled, and proposals sent.
Consider tracking any of the following:
Your overall funnel might be very effective, but it won't matter much if you're not taking these daily steps to get more prospects moving through it.
Tracking these sales KPIs isn't about reporting for its own sake – it's about using data to make better decisions, change your behavior, and improve your performance over time.
Here are some of the tangible improvements you'll notice as you monitor your KPIs more closely.
Tracking key metrics like conversion rate, average deal size, and sales velocity can help you pinpoint the strengths and weaknesses in your sales process.
You won't be stumbling in the dark. If the conversion rate at a certain step in your funnel is low, you know you need to work on improving lead quality or sales messaging. If your average deal size is declining, it might be time to reevaluate your pricing or targeting strategy.
Having a handle on metrics like average deal size, win rate, and sales velocity makes it much easier to forecast how much business you'll be able to close in a given period.
Rather than just picking a number out of thin air, you can use historical data to set achievable targets based on past performance.
When you want to set more ambitious goals, you'll also have a much clearer sense of how to actually hit them. For example, if your average sales velocity is $3,000 per day and you want to increase revenue by 20% next quarter, you know you need to get that number up to $3,600 per day.
One of the lasting benefits of tracking key sales KPIs is that you'll be able to continuously optimize and improve your sales process.
As things change, you'll have a system for identifying bottlenecks or areas of friction – and a much clearer sense of how to improve them. Maybe you notice that deals have started to stall out at a certain stage of the pipeline. Knowing this, you can work to create better sales enablement content.
The ultimate goal, of course, is to close more business.
When you track the KPIs that actually matter, you'll be doing a lot less guessing and hoping for a miracle each quarter. Instead, you'll have a sales engine that you can tune over time.
You'll be able to diagnose and get ahead of problems faster and more accurately, which means more of your time will go towards the actions that actually end up closing more business.
Sales metrics might not be the most exciting part of the job, but they're essential for hitting your numbers.
By tracking key KPIs like conversion rate, average deal size, sales cycle length, sales velocity, and your daily activities, you'll gain valuable insights into the health of your sales process and identify opportunities for improvement.
The point isn't to become a human calculator – it's to focus your passion and enthusiasm wisely.
With the right metrics in place, you'll be well on your way to selling more and crushing your targets.
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