5 key sales KPIs (metrics) in your sales management

We are in the era of data and analysis; where the growth of a company or the level of investment to be received will depend on how affordable, clear and realistic it has the numbers of its operation and here the KPIs take an important role.

It is essential to measure and it has been proven that companies that measure face 2 situations:

• The possibility of evidencing what needs to be improved;
• The possibility of growing based on real data on the management of their operation.

Today we can measure almost everything, it is enough to make the decision to collect information, standardize and hopefully automate processes, to measure and analyze.

What is a KPI?

Now the possible question is, but what do we measure? The important thing is not to fall into the error of measuring at a minute level because it can be counterproductive. What we really need to determine is what to measure that will allow us to demonstrate the results of our efforts.

The KPIs, which stands for key performance indicator, are the ones that will allow you to see the results of the performance of your strategy in a very concise, objective and measurable way.

These can be in number or percentage, for example:

KPI 1: “Close sales with an average ticket above USD 100.”
KPI 2: “Decrease CAC by 15%.”

How to define your sales KPIs?

The sales area is a crucial department in any company, in fact almost everything is based on seeing the sales results and many of the other areas depend or must cooperate in function of this area.

Companies in Latin America tend to have more staff in sales than in other areas, such as marketing. And also in the conversation tables, the infallible questions are: how are we doing in sales, how can we sell more, or the usual demand: we need sales!

It really is an area and a function to admire. Some areas measure and have optimized sales processes with the help of CRMs and others are still a bit traditional and the sales report is based solely on revenue. The latter are really lagging when it comes to measurement and do not have KPIs.

In particular, we consider that the definition of KPIs in a sales department will be given according to the objectives of the brand, the team and the type of business model. Some kpis related to sales are:

of sales or customers;

Total revenue;
ROI (Return on Investment);
And % of conversions, among others.

What are the most important Sales KPI’s to keep in mind?

1. It is important not to have too many.
2. Make an evaluation of what are usually the KPIs of your sector or industry.
3. Be very clear about the main objective of your company and know well how you can contribute from sales to that objective.
4. You must have tools that allow you to measure and obtain data in real time.
5. Associate KPIs to the stages of your sales process.
6. And finally, they must be easy enough to understand.

For example, if your company’s main objective is: To be the #1 CRM for sales teams in Latam, then your sales actions should be focused on that objective, to sell the CRM to sales teams in Latam and, in addition, determine the strategy that will allow you to contribute. This way you will choose the KPIs of the sales area that will show the contribution you are making to achieve this great objective.

So, when you want to measure everything, it is time to give you a guide so that you can know the most important KPIs and it will definitely be easier for you to choose yours and organize the information in a report.

Remember that KPIs are indicators that without much explanation should be understood by themselves, that is, they must be clear and measurable enough so that you can present them in a presentation, in a one-page report or literally in a one-minute speech.

Let’s start with these two main concepts or groups to be always attentive in the sales process:

Lagging Indicators

The first thing to understand is that these are under our control and you can only use them based on past data or past actions, i.e. analyze and measure what has already been done.

Examples: # of calls, # of diagnostic meetings, # of proposal submissions, # of negotiation meetings, etc…

Leading Indicators

On the other hand, these are not so much under our control and are those that we project into the future. Actually the result will depend on what has been achieved in the lagging indicators.

Examples: # of sales, # of opportunities generated, # of qualified leads generated, # of lost customers, etc…

Now, after understanding these two general groups, let’s get closer to being more specific and list the indicators and how to calculate them.

We have 3 categories of KPIs for the sales area:

Revenue (and results) indicators.

They will be based mainly on the revenue generated from the sales operation that will allow you to later create budgets; within these we have:

• Sales revenue: shows the sales result in a total or specific period (quarter, for example) in monetary terms. This can be broken down by category or product type.
• MRR (Monthly Recurring Revenue): here its acronym in English, monthly recurring revenue, is the fixed revenue that occurs on a recurring basis each month.
• MRR: Average revenue per customer X Total number of customers.
• Average ticket: indicates the average revenue per customer of the total sales revenue.
• Average Ticket = Total sales in $ / Number of customers.
• CAC (Customer Acquisition Cost): is the economic sum of all efforts (including marketing) up to the moment of closing the purchase.
• CAC = Marketing Investments + Sales Investments / Customers won.
• LTV (customer lifetime value): this is an estimate of the total time that a customer has been buying and is shown in the net value that a customer has left us over time.
• LTV= Average Spending x Recurrence of Acquisition x Customer Lifetime

Performance Indicators

The final sales result will depend on the performance of each of your salespeople. Their actions will be a consequence of the achievement of the objective and they also have to be measured and have their KPIs.

• Number of leads: number of leads that enter the sales process.
• Lead response time: measuring time is an important factor, this is basically to indicate from the moment a lead is assigned to a sales agent, how long it takes to generate a first contact from sales.
• Conversion funnel by stage: % of conversion between each stage of the sales cycle. For example: lead to opportunity=20%, opportunity to scheduled demo=32%, or scheduled demo to customer= 10%.
• Number of deals closed: finally, sales! but not in monetary terms.

Activity indicators

These are the ones we named above within the lagging indicators, they are really useful to have a guide of what the salespeople are doing and how we can improve or implement new actions.

Sales KPI dashboards: what are they and how to create them?

Any number or metric is more understandable if we see it in a graphical way or at least with an easy readability or visibility of the information. For this, having KPI dashboards, tools that as a sales manager will make your life much easier.

We know that in sales time is money, and automation is a great ally here.

The dashboards will have tables or graphs that contain the information we want to analyze and that will allow us to see in real time what is happening and thus make decisions on the fly.

As in everything else, there are several ways to make these dashboards:

1. Manual: with tools such as spreadsheets or slides, you can structure a template to go manually putting the information and at the end semi-automate the graphs.
2. Automatic: the best ally of the best sales teams without a doubt, the CRM, is the tool that optimizes and also allows you to see everything in real time with automated reports.

Whichever one you choose is fine to start, the important thing is that to have a dashboard you must be uploading information or recording information in real time and of course already have determined the KPIs you want to track.

How to improve your sales KPIs and use them to generate more revenue

At this point, if we already have everything measured and constantly monitored, knowing if we are doing well or not will be much more immediate. However, knowing how to read the results is also important and should not be taken lightly.

Once we have the KPI reports, what follows is pure monitoring and taking actions along the way to achieve the objective and meet the KPI. So what we suggest is to have the following routine:

1. Have the KPIs for the year.
2. Once we have these and the agreed sales goals, then it is good to put in place a monthly or quarterly work plan to reach that goal with small milestones.
3. List what actions or efforts will be necessary to achieve the monthly or quarterly goal.
4. Form your sales team and share with them the goals, the KPIs and the actions they should execute.

Depending on the type of business, you should be monitoring the KPIs on a daily basis, but it is not an obsession, it should be clear which KPIs require daily monitoring and which ones require weekly monitoring.

When we have this in place, then we will know if we are hitting the numbers. It is important to listen to your sales team, they are a very important source of information and will help you determine how a process could be done better.

Differences and relationship between reporting, forecasting, targets and sales KPIs

This confusion of terms often arises and it is good to close this article, helping you to clarify this.

• Report: is a report that you deliver in one type of format.
• Forecast: is a possible result or a prediction of something that we can anticipate based on data, for example a sales forecast.
• Objectives: is the final result that you manage to achieve, for example: “Achieve a 20% increase in sales vs. the previous year”.
• Sales KPIs: these are the indicators that will allow you to measure your actions to achieve the final objective.

And they all relate to the final one as Sales Manager. You are going to make a forecast of your sales based on historical data and with that data you will determine how much you can grow in the following year and you will set the area’s objective.

To achieve this you will choose the KPIS of the area to finally show them in a report.

Conclusions

The KPIs are fundamental to evaluate the achievement of the objectives and are determinant for the control and performance of any sales team. All teams that are evaluated under KPIs demonstrate better capabilities to make decisions and implement improvements in advance.

It is not about being obsessed with data and wanting to measure everything, it is about having clear indicators that will allow you to focus on what really matters to meet your sales quota.

It can be concluded that the 5 key sales KPIs (metrics) in your sales will depend on your business model, objectives and sales force, however you can include as a base:

1. Objectives
2. Number of leads.
3. Lead response time.
4. Total sales revenue.
5. CAC (Customer Acquisition Cost).