KPIs (Key Performance Indicators) are a useful way of measuring the success of your team. If you’re a business manager or entrepreneur, you likely already know how valuable sales KPIs can be. In this article, I’ll be highlighting seven sales KPIs in particular that are especially valuable.
Whether you’re a seasoned sales professional or new to sales, this list is a good place to start thinking about the key business metrics you should be paying attention to.
The basics of sales KPIs
If you manage a startup, run a sole proprietorship, or own a new small business, you may not be too familiar with sales KPIs. But they’re important if you want to stay current on your sales team’s performance.
So what are KPIs for sales? How can you use them to stay abreast of your sales team’s productivity? And what can you do to streamline this process?
There’s a lot of good (and more comprehensive) information out there, but in short, sales KPIs are measurements that tell you how well your sales team is performing. Instead of sifting through endless pages of stats, figures and spreadsheets, you can choose a small set of measurements to review on a regular basis.
You can streamline the process even further, because luckily, not every sales KPI carries the same weight.
And while every business is different and requires slightly different sales KPIs, the list of seven core sales KPIs below is a good place to start.
Seven vital sales KPIs
These examples of seven crucial key performance indicators demystify the process of reading sales numbers. They’ll help you prioritize and track only the most important figures for your business.
Have your accounting team present these vital sales KPIs on a daily or weekly basis–and save the details for less-frequent meetings.
These examples of sales KPIs are followed by a template for requesting this information from your accounting team and sales managers.
1) Gross/Net Profit Margins
This sales KPI tops the list because your entire business growth depends on the money you keep after covering your expenses.
What’s the profit margin you should be aiming for? That depends. In general 5% would be considered a low profit margin, 10% healthy, and 20% high, according to financial services company Brex.
But your target profit margin depends greatly on the type of business you run–and your industry.
For example, you might run a low-volume, high margin business that provides boutique services to high-end clients. Alternatively, you might operate a high-volume, low-margin retailer.
Gross profit = Net sales – Cost of goods and services (COGS)
However, gross profit margins aren’t quite as simple as this formula might suggest. Not all debits count as expenses; not all credits count as income.
Make this crucial distinction by disqualifying certain items (from both your credits and debits) and excluding them from your calculations.
Next, use your gross profit figure to determine your net profit, the amount you make after paying certain “costs of doing business”:
Net profit = Gross profit – (Total operating expenses + Taxes + Interest + Depreciation + Amortization)
Remember, your company could look profitable before you consider factors like loan payments and interest. Likewise, remembering to account for depreciation tax deductions could reframe a losing quarter as a winner.
For a more comprehensive discussion of these essential sales KPIs, read up about the net income formula.
Also, remember to take days sales outstanding into account when checking up on your key sales KPIs. The time it takes your customers to pay directly affects your profitability.
2) Sales revenue
No, revenues don’t tell you as much about your company’s overall health as profit figures.
However, the total amount of money you bring in can help you complete certain crucial analyses.
When managing your sales team, you need to know the effects your various marketing efforts have on your revenues.
- What would it take to increase your revenues by 5%?
- How much would you have to spend on sales and marketing?
- Where is the sweet spot between over- and under-advertising?
The basic sales revenue formula (like most on this list) looks deceptively simple:
Price per unit sold x Number of units sold = Revenue
The trick is to string together dozens of these formulas without missing one. You need a separate sales revenue calculation for each price point.
Surely, you get different returns from different sales platforms and retail outlets.
Include bulk pricing rates, discounts, and refunds. Remember, you need to separately calculate sales revenue for all of these factors for each product/service you offer.
Once you add it all up, you’ll have a clear idea of your sales revenue.
By regularly calculating these figures, you can determine the effects of your various marketing, sales and ad campaigns.
3) Prospecting activity
Have your sales teams measure the amount of time, effort, and resources they put into seeking out new leads. Keep track of client calls and emails, meetings with prospects, product and service demos, and any other applicable activities.
Prospecting activity is more a cloud of sales KPIs than a single metric.
Have your sales managers compile and track the many elements of prospecting activity. They should report this information to you on a regular basis.
Have them highlight outliers–sudden or substantial changes in these statistics that can signal growth and decline.
With this information, you can ensure your manufacturing, customer support, IT, etc. efforts match your current (and projected) sales volume.
4) Funnel flow
Your sales funnel must move people smoothly from one step to the next. As users experience your brand, they take a journey of increasing trust and commitment.
- How many people enter your sales funnel over a given period?
- How does this compare to industry averages and your company’s past performance?
- How quickly does your sales team respond to new leads?
- How long does a potential customer have to wait to get an answer from a support/salesperson?
- Are your salespeople connecting leads with marketing collateral?
Check your tracking analytics to see how often the leads you contact stay in touch with your brand on social media, via ongoing email campaigns, and by consuming lead magnets.
- How many qualified leads does your sales funnel generate?
The difference between unqualified and qualified leads can depend on your industry and how your business decides to define these leads. However, in general, these people must have traveled most of the way down your sales funnel.
For example, qualified leads might be regular readers of your free content or consumers of your sample products. They may show interest in discounts, coupons, and special deals–without actually having made that first purchase.
Closing rates refers to the percentage of leads that make it to the end of your sales funnel–and actually buy something.
If these rates compare unfavorably to your competitors’ numbers (if known) and previous in-house campaigns, consider how you can better understand and empathize with typical customer personas.
Are your salespeople meeting their targets? Do they convert the right percentage of leads? Have they brought in enough new revenue to cover expenses, offset customer churn, and make a substantial profit for investors?
5) Customer retention
You can measure your change in customer volume during a certain period. Subtract your “customers lost” figure (CL) from the number of customers you’ve gained (CG).
CG – CL = ∆C
Note that this formula may well return a negative value.
For example, if you lost 20 people and gained 10, you would have a -10 change in customer volume (∆C):
CG  – CL  = ∆C [-10]
Combine this data with your leads figures from the preceding section to calculate customer churn, one of the most important sales KPIs for evaluating sales performance.
6) Churn rate
With churn rate figures, you can answer this crucial question: “Do we attract more customers than we lose?”
Use this vital KPI for sales staff management, especially if you run a subscription-based business.
As you know, it’s easier to keep customers than attract new ones. Use this KPI to determine if your customer service and sales teams prioritize customer retention–or simply that first sale.
Remember, when competitors succeed in luring away your customers, your churn rate increases–which can alarm investors.
To calculate customer churn, use the numbers from the previous step. When working with the figures, in steps 5 and 6, be absolutely certain all of them represent the exact same time period.
For example, a change in time zone or a difference in month length from one figure to the next could dramatically change your results. (Also, remember these variables when comparing one period with another.)
Divide the number of customers you’ve lost/gained (∆C) during a period (∆T) by the total number of customers you served (C) in that time:
Customer churn = ∆C / ∆T x C
7) Year-to-date sales growth
You can calculate year-to-date (YTD) sales growth (and many other YTD comparisons) with this standard formula:
(VC – VS) / VS x 100 = ∆V%
Don’t feel daunted–most of this formula simply converts a decimal into a percentage. You only need two data points to figure out your company’s YTD sales growth.
In this case, let’s say you have a current sales volume (VC) of 25,000 customers. At the beginning of the year, you had 20,000 customers (VS). With these two figures, you can calculate your YTD sales growth, which equals 25%:
(VC [25,000] – VS [20,000]) / VS [20,000] x 100 = ∆V [25%]
Remember, you can use this formula to determine percentage change over any time period–and for all kinds of volumes. For example, you can use it to calculate month-to-date sales volume (and a host of other possibilities).
Sales team KPI template
You can use this KPI template for sales teams to create a simple tracking system. In addition to time sheets, you can manage mileage logs and create productivity reports on Toggl Track’s fast and powerful platform.
Refer to the quick tips in this section when talking to analysts to make sense of your sales KPIs.
1) Gross/Net profit margins
- Gross profit = Net sales – Cost of goods and services (COGS)
- Net profit = Gross profit – (Total operating expenses + Taxes + Interest + Depreciation + Amortization)
2) Sales revenue
- Price per unit sold x Number of units sold = Revenue
3) Prospecting activity
- Client calls/emails, Meetings with prospects, Product/service demos, and any other applicable activities
4) Funnel flow
- Leads, response time, content use, qualified leads, closing rates, targets
5) Customer retention
- CG – CL = ∆C
6) Churn rate
- Customer churn = ∆C / ∆T x C
7) Year-to-date sales growth
- (VC – VS) / VS x 100 = ∆V%
Why sales KPIs?
Staying abreast of your company or your team’s sales KPIs saves time, effort and money. It’s a good way to remain aware of what’s going on without needing to dig through endless spreadsheets.
The next time you work with a management consultant, you can use fewer of their expensive billable hours gathering and analyzing data–just provide them with sales KPI metrics for the most important aspects of your campaigns.
More free business templates
Toggl Track also offers a variety of other templates to support teams and small businesses across a variety of industries.
You don’t need to reinvent the wheel–just learn the fundamentals that have worked for countless business owners. For example, you can design motivational and achievable task targets with this free SMART Goals template. (No, you don’t have to sign up for anything or share your email address–unless you want to).
Keep projects focused and meet deadlines with our free Work Breakdown Structure template.
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