The DriveSales™ | Here are the Top 7 critical sales KPIs for sales growth and success!
Management guru Peter Drucker has been often credited with one of the most important quotes in modern business management: “If you can’t measure it, you can’t improve it.”
Drucker simply implies that to be successful, organizations need to define and track success. Only with a clearly defined and meticulously tracked metric for success, organizations can quantify progress and adjust the processes to produce the desired outcomes thus, obliterating a state of speculation and guessing.
KPIs connect a sales team directly to a company’s health, performance, and growth potential. They translate a company’s key objectives into measurable metrics.
Managers and sales executives need to track, use, and interpret KPI data continuously throughout the sales cycle.
1) New Revenue Attainment: The revenue generated from acquiring new customers strongly reflects the overall contribution to a business’s revenue growth. Getting new leads and converting them into opportunities is the primary task of every sales team. This KPI for the sales team is most consistently monitored to understand how sales teams and sales processes are performing.
2) Average Lead Response Time: Lead response times make or break sales. Since every minute matters in sales, sales teams need to track the average amount of time taken by the sales reps to respond to leads, to understand how to improve the efficiency of the process. One of the studies conducted by Dave Elkington and James Olroyd which analysed data from six different companies over 3 years strongly suggests that the companies who contacted the leads within an hour were seven times more likely to qualify the lead, than the companies who decided to contact the customers just an hour later and sixty times more than the companies who waited 24 hours or longer.
3) Customer Lifetime Value (CLV): The customer lifetime value or CLV is a critical metric for all aspects of a business and not just sales management. CLV represents the total amount of money a customer is expected to spend on the products and services of a business during their time as a paying customer. This metric considers both the periodic revenue as well as the period for which the customer remains with the business. It is the revenue attributed to the entire future relationship with a customer. For instance, if a customer spends $10 per year on a business for 10 years, his/her CLV would be $100.
4) Marketing Qualified Leads (MQL) to Sales Qualified Leads (SQL) Conversion Rate: Every new lead in the sales funnel is an unqualified lead at the beginning. It has to meet certain qualification requirements to be considered a qualified lead. This KPI is a measure of the number of leads required to stay on track with the revenue goals. It helps in understanding the most optimum channels for lead generation. It is a measure of the percentage of marketing qualified leads that get converted to sales qualified leads. The MQL to SQL conversion rate helps in determining the lead quality and is an excellent indicator of the efficiency of the marketing team in qualifying and screening leads to maintain a high-quality pipeline. It’s calculated as the number of Sales Qualified Leads divided by the number of Marketing Qualified Leads.
5) Average Revenue Per Account (ARPA): ARPA is the average revenue per customer upon closure of a deal. Tracking ARPA based on market segmentation is particularly useful for comparing transaction sizes and traction within respective market averages. This critical KPI can expose trends in account expansion and contraction of existing customers and evaluate the effectiveness of pricing plans within monthly cohorts. ARPA fluctuates based on product and pricing levels, so constant data collection from past quarters and years is necessary for efficient benchmarking and target predictions.
6) Average Sales Cycle Length: Selling a product or a service requires completing a series of steps/phases making up the sales cycle and a well-defined sales process helps in streamlining the process and more accurately forecast closure dates and incoming revenue. This, in turn, impacts the sales pipeline which is simply an organized visual representation of tracking potential customers as they progress through different stages in the sales cycle. Sales Cycle Length is calculated by dividing the total number of days to close individual deals by the total number of deals in a particular period. The Sales Cycle Length depends on many factors such as the industry, product, price point, and customer profile.
7) Sales Pipeline Velocity: A sales pipeline velocity is a measure of the projected revenue per day. It factors in the number of opportunities in the pipeline times the average deal size times the win rate or conversion rate, divided by the sales pipeline length. It’s a crucial metric to maximize revenue and scale a business.
KPIs are the backbone of an increasingly data-driven sales industry. Independently, KPIs are just numbers on a dashboard; they only become meaningful when analysed in the context of the overall organizational goals for underlying trends and themes that can contribute towards making a sales team more efficient by examining drivers for successful goal attainment.
Businesses can use strategic insights from KPIs as a means to align key targets with company objectives. Clearly defining KPIs is imperative, but the true potential only manifest when these indicators are used as strategic levers towards driving sales growth. A business can only make strides towards its overall business goals after establishing KPIs that monitor productivity.
Now, as an effective SALESPERSON! We can do three things from here.
1. Not ignoring the opportunity and blaming the situation for revenue loss.
2. Taking necessary notes and revisiting your sales strategy with a growth mindset.
3. Reach out to The DriveSales™ in case you need any specialized help.
To conclude, what you believe also provides some idea of your development as a consultative salesperson. For more, please be connected to team The DriveSales™ as these are the foundations for our culture and ways of working!
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