How to Create a Customizable Sales Metrics Strategy in Just 6 Steps

In order to compete in the modern sales world, you need a team that is aligned with your company’s best sales metrics. This means data driven strategies and performance reviews for each individual on your team.

Setting goals, holding people accountable to those numbers and knowing when course-correcting is needed will be a lot easier if you have that knowledge beforehand.

Our data shows that transparency into sales numbers is a very effective motivator. In fact, 32% of reps said it was more motivating than any other thing including awards programs.

The survey showed that there are a lot of people who don’t know their daily performance because they lack visibility. This is worrying.

Need Help Automating Your Sales Prospecting Process?

LeadFuze gives you all the data you need to find ideal leads, including full contact information.

Go through a variety of filters to zero in on the leads you want to reach. This is crazy specific, but you could find all the people that match the following: 

  • A company in the Financial Services or Banking industry
  • Who have more than 10 employees
  • That spend money on Adwords
  • Who use Hubspot
  • Who currently have job openings for marketing help
  • With the role of HR Manager
  • That has only been in this role for less than 1 year
Just to give you an idea. 😀

Sales Metrics and Sales KPIs Definition

Sales metrics can be used to measure a companys sales performance. They track the activity of your reps, number and quality of deals generated or revenue generated. Sales data metrics are most often used for setting strategy but they also provide insight into current performance.

A KPI is often mistaken for a metric, but they are not the same. A key performance indicator (KPI) is an important measurement that can be used to track business success and therefore it has been identified as one of the most important metrics.

Sales metrics are important, but the only way to tell which ones matter is if they show a connection between numbers and deals closed.

Your KPI targets sales are the numbers that matter for your business. They need to be what you base all of your strategies around.

You need to define your own sales metrics KPIs. You can’t rely on us or anyone else for what sales data metrics you should be tracking and analyzing because every business is unique in its needs. Only you know which numbers will tell the story of whether things are going well.

A good sales team KPI dashboard will show both lead and lag indicators. Lead indicates whether you are on track to hit your targets, while lag tells if that goal was achieved.

How Are Sales Performance Metrics Measured?

The first thing you need to do is decide what your KPI for sales is. Some of the most important sales metrics for business success include revenue and profit, while others can be used as measurements for sales performance by reps.

We will then look at the different sales metrics that matter and are important to measure, and how you can use them for your company. What are the most important sales metrics?

Let’s get to know how to use metrics and the sales metrics examples.

1. Annual Recurring Revenue (ARR)

The Average Contract Value is a key metric for software-as-a service businesses. It’s the total value of contracted revenue that your company brings in each year, calculated by taking the total contract price and dividing it by how many years are left on said contracts.

Annual recurring revenue (ARR) = (total value of a contract) / (number of contract years)

2. Average Revenue Per Account

One of the asctivity metrics examples is the ARPA. It is the amount of revenue that each account has historically produced. Calculating this will give you a sense for how much money an account is worth, and if it changes significantly over time then there may be something wrong with your deal.

APRA = (total revenue over time) / (number of accounts with deals in that time period)

3. Average Deal Size

Average deal size is the amount of revenue youve closed in a given period. If your team closes six deals, take an average of how much they were worth and that will give you your ADS.

If your Ad Spend is increasing faster than the economy, it means you are landing larger deals with more important clients. However, this can also mean that while some months will be great for ad spend and other times not so much. You need to account for these changes by smoothing out your data over a long period of time.

Average deal size = (total value of all deals in X time) / (total number of all deals in X time)

4. Average Profit Margin

It is easy to judge the success of a sales team based on revenue. However, its important not just look at this number but also examine margin because what you are really looking for is profit after all costs have been accounted for.

Average profit margin = (total revenue from all deals total cost of fulfillment) / number of deals

5. Churn Rate

The churn rate is the number of customers who leave a company before their contract expires.

A company’s churn rate is technically the percentage of customers who don’t renew their service. But it often goes deeper than that because there are different types of customer turnover, including negative net churn where lost revenue exceeds new sales.

Retaining customers is crucial because it can save your company a lot of money. Retention rates are so much cheaper than acquiring new ones, and churn indicates how youre doing in that area.

Churn rate = (number of customers who didnt renew) / (total number of customers)

6. Quota Attainment

This sales performance metric is one of many measurements for how well your reps are performing. It simply looks at whether they’re meeting the number of deals that have been set for them, and if any rep has a significant trend towards underperforming their quota over time, it’s important to review why.

Quota attainment = (number of deals closed in a period) / (number of deals in quota for that period)

7. Win Rate

The Sales Achievement Ratio tracks the number of deals that your reps closed, against the total amount of successful or lost deals. It is a figure which helps you to measure how well they are doing.

If you know your win rate, then it is easy to calculate how many deals are needed in the pipeline. If there is a change over time, this tells us whether we’re doing well or not.

Win rate = (number of deals closed successfully) / (total number of deals closed both won + lost)

8. Sales Cycle Length

This refers to the time it takes for a customer to move from qualified opportunity, which can be anything such as an appointment or call back. If this changes, then there is some element of risk in the sales process and you may need further analysis on what’s going wrong with your deal. This also lets you spot deals that have gone much longer than normal without being closed because they are more likely to fall through.

Sales cycle length = (number of days taken for all closed deals) / t(otal number of closed deals)

6 Steps to Creating Your Own Sales Performance Metrics and KPIs

It is important to have a strategy for your sales metrics. Here are six steps that will help you build the right metric definition and measurement program so everyone on your team can hit their targets.

  • Sales metrics are essential to track in order to measure your success.
  • Identify your sales metrics KPIs
  • Set the right goals
  • Build your scorecard
  • Stay accountable
  • Coach your team to success

1. Understand What Types of Sales Metrics You Should Be Monitored

There are three types of performance metrics you should be working toward: Activity, Objective and Moneyball. Now lets take a look at each.

The daily grind for a salesperson is not just meeting with clients or picking up the phone. It’s also messaging prospects on LinkedIn and following up with contacts in order to get that sale.

  • What is the average number of calls they make in a week?
  • How many calls does the average salesperson make per month?

When I realized that my sales team was not meeting their goals, it became clear to me that the metrics were there. They are longer-term outcomes like

  • Revenue
  • Profit
  • Leads converted
  • Closed/won deals

These metrics all contribute to your North Star metric (more on that in a bit).

Moneyball software sales metrics provide an objective way to measure how your reps are performing and make decisions about the future of your team. It is a point system that calculates what percentage of deals each rep can close.

  • Did I get any callbacks?
  • The number of scheduled meetings that came out of those conversations?
  • When you focus on conversion rates, your sales reps will be able to see the effect of their strategy and skill sets. This can help them understand how they make money.

Examples of Key Sales Metrics to Track

For many sales teams, the only metric that is tracked are scheduled meetings or calls. However, you need to know if these meetings resulted in a sale because what really matters is closing deals.

Here are four metrics that I learned to track in order to ensure my sales team was performing well.

The dial is one of the most important parts to a phone. Without it, there would be no way for someone on the other end to answer your call. The dial allows you and others on the line to chat with each other in real time or wait until they are free.

The length of each conversation can tell you a lot about the success and skill level of your sales reps. It’s important to know what constitutes an average duration for any given type of conversation in order to make more informed decisions.

Positive Disposition Calls What percentage of conversations were positive? Did the prospect schedule a next step?

If your salesperson is getting a lot of prospects that say, Im not the one to make this decision, or I am just not interested in what you are selling. I don’t think it’s for me,” then there might be something wrong with how they qualify their leads.

The speed of a salesperson’s progress can be limited by the number of meetings they have scheduled in any given week. They need to make sure that for every ten prospects, at least one is turned into an opportunity.

Once you see how a group of 4, 8, or 50 salespeople move leads through the sales process and what they are struggling with along the way, it becomes much easier to identify where your coaching is needed.

In a recent study, it was found that there are many factors beyond the base pay and commission structure of an employee which influences motivation.

2. Determine Your Team KPIs

The majority of reps and sales leaders agree that the top three performance metrics are Revenue Generated, Pipeline Created, and Opportunities Created.

If you only focus on the end goal, then it is easy to lose sight of what needs to be done in order for that final objective. If you want a successful sales team, they need good training and enough motivation which can come from both pay as well as non-monetary rewards.

To identify your team sales training KPIs:

The first step is to set a goal that you want your employees to work towards. This can be in the form of an individual or team metric.

To measure the success of your sales team, you need to have an understanding of what is expected. For most companies this means determining how much revenue they are trying to generate in a year or quarter.

If your company is looking to make $20 million in sales, and it’s all coming from the sales department, then that number should be your North Star. Achieve this goal or you’ve failed; if not, you are on track.

In order to set up a plan that will motivate your salespeople, you need to understand the different stages of an opportunity. This is done by going backwards from closing

Figure out your North Star Number by working backwards from the dollar amount that you want to make. You can then find what actions will get you there, which is the only way to figure out how much money it takes.

One of the most important numbers for any salesperson is their North Star Number. If you know your average deal value, then you can calculate how many deals it will take to hit that number.

If you know how many deals are needed to close, and the number of prospects that need to be identified in order for your pipeline to reach a certain level, then it is possible for each part of the business process (such as marketing or operations) determine their individual activity levels.

Identifying lagging indicators will help you identify which aspects of your sales process need improvement. This is because the problem area may be directly or indirectly tied to getting closedwon deals.

Next, you need to calculate the conversion rates between each stage of your funnel. This will tell you how many leads are needed in order for a certain number of conversions.

The next step is to define what you want your team members to be doing. This can help with understanding the numbers and will also allow for better conversion between stages.

Use historical data to get a sense of the conversion rates between each stage in your pipeline. Dont let them limit you, because it is worth testing new ideas and adjusting accordingly.

The next step is to identify the activities that will increase conversions and then determine how much time should be allocated for each activity.

What is the best way to motivate your salespeople? You should measure and reinforce activities that help deals progress through each stage of their process. These are the things you want them working on at all times.

Tracking dials is important, but it might not be the most effective activity in some markets.

So do some light math:

  • What percentage of calls end up in a sale?
  • What percentage of emails result in a response?

Instead of wasting time on guessing what will work, there is a better way to help your team get the most out of their day. Use science-backed methods and spend less time trying different tactics that might not be as effective.

There are many facets of sales to remember, but the most important is that you can only manage what you have control over. For example, your activity and effort will be dictated by how much time or energy they put in.

3. Make the Right Goals

Set achievable goals based on the tasks youve already identified as relevant for achieving your sales performance metrics and KPIs. You want to create a system of consistency that will keep your reps accountable.

A goal is always easier said than done, but a good one should require some effort. No matter how hard sales may be, there’s no way it will ever get easy.

One of the most important things when setting sales goals is to make sure they are Specific, Measurable, AttainableAchievable, Relevant and Time-bound.

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Time-Bound

The S.M.A.R.T framework is a helpful tool that will help you take your metrics from step two and convert them into KPIs for each goal in order to measure success.

This is how to set your goals:

Start by calculating the number for this quarter or year. If you want to make $5 million in new sales, break that into smaller chunks with shorter timelines. Say your average sale is worth $100,000 – then 50 sales would be needed each year (or 2 per month). And if 25% of those are won (a 14 chance), 200 opportunities need to exist at any given time.

From there, you should try to figure out what activities are required for your pipeline. How many conversations does it take before someone is interested in buying?

Once you have an understanding of what needs to be done and the steps involved, it becomes easier.

Have a goal for each rep that is both specific and distinct. For example, 50 outbound dials per day might be the target number to set if your reps are new on the job.

  • Specific (50 outbound dials)
  • In order to measure the effectiveness of a salesperson, it is important that they are tracked through customer relationship management software.
  • Achievable by only calling one person every 10 minutes over the course of an 8-hour workday.
  • A few months ago, I started a new campaign where we set up an activity called “relevant” for our prospects. The idea was to make sure that the first interaction with each prospect would be relevant and not pushy.
  • Time-bound (per day)

If you choose goals that are challenging but achievable, and most importantly keep the team accountable to your company’s sales strategy, then they’re S.M.A.R.T.

Related: The Scientific Approach to Setting Sales Goals for Your SDR Team [Template Included]

4. Build Your Scorecard

Once you have a good grasp on which metrics are most important and what goals your reps should be focusing on, it is imperative that these things all show up in the individual sales scorecard for every rep. A clear structured card will always provide information about where they stand, how well theyre doing compared to their peers, and areas of improvement.

A good sales scorecard should have two sections:

  • One of the most important parts of closing a deal is activities. These are all those little things that happen on a day-to-day basis, like emails or phone calls.
  • Objectives are measurable goals that can be measured over a set period of time (monthquarter). These objectives usually include the number of opportunities won or revenue generated.

There are two areas that need to be addressed in the employee handbook:

  • Metrics are the individual actions that managers monitor in order to assess performance.
  • Benchmarks are the goals set for each type of metric.
  • In order to find the weights for each of my benchmarks, I had to determine how important they were.

In this example, the importance of a metric is weighed based on its value to your company. For instance, new opportunities are weighted heaviest at 15 points per unit because they carry the most weight towards revenue.

sales metrics

There are many different metrics that need to be monitored, but they all have an importance level. One metric is new opportunities which will show up in the Activity Score section of the dashboard more than it does here.

The problem is that new opportunities don’t always mean the lead will stay in your funnel for a long time. A better way to judge whether or not someone is interested in buying from you over the next month, quarter, etc., would be by looking at won deals and revenue.

sales metrics

5. Stay Accountable with Visibility and Excitement

In order to reach your goals, you need a clear understanding of how what you do every day and the KPIs that are set align with organizational priorities.

When I had my first salespeople, the most important thing that I learned was to let them know how they are being compensated.

When I first began hiring salespeople, I just assumed pay along with commissions and bonuses would be enough. However, people are not motivated by the paycheck alone; they want to feel like their work has meaning. Knowing what your team members contribute on a daily basis is important for achieving goals as a whole.

The key?

In order to keep your sales team motivated, you need a clear picture of what they are accomplishing. The more the metrics on their performance is visible and accessible, the easier it will be for them to understand how well theyre doing in relation with everyone else.

It’s as simple as making sure that everyone has access to the same dashboard. Tracking and publicizing progress creates both positive reinforcement for your team members, but also feedback loops.

The real time is key here. When we know with a few weeks left in the quarter that we are not going to hit our numbers, there is no point trying and everything becomes ineffective.

Salespeople are all working towards the same goal, but in order to really be productive each individual needs to understand how theyre progressing and what value they’re bringing.

6. Coach Your Team to Success

It is important to know how each individual member of the team operates. The most effective way for a manager to get feedback from their staff is through coaching.

A leader is a coach, but not just because it’s what the company needs. They’re motivated by things like monetary goals and promotions so you need to know what they want in order to be able to guide them.

When I first began hiring salespeople, my goal was to find metrics and KPIs that would be useful in measuring their success.

When you identify the right metrics and KPIs, your team will be focused on what matters most to them. It also levels the playing field so that everyone has a fair chance of succeeding.

When gaps in performance arise, it is the leaders responsibility to say How can I help?

You may need to pair your more experienced salesperson with another, who is new and struggling. This way they can be mentored or work on skills together one-on-one.

I made the mistake of not looking at other potential motivators for my sales team. I was so focused on what they were getting in pay and commission that I forgot to look elsewhere, which could have been an issue.

Get your team on board with the right sales strategy by setting goals and keeping them accountable.

With KPIs, you can see the story of what is going on and what has happened. When it comes to your 1:1s with salespeople, they should never be surprised by their performance. And a KPI should not just be a random number that does not have any context.

When hiring a salesperson, it is important to know what kind of metrics you want them to focus on. This includes the KPIs and activities that will make those numbers go up.

A perfect example of this is a salesperson who does well on the number and quality of their phone calls, but doesnt have many meetings after those conversations.

As we learned in step one, it is important to pay attention and listen for signs of employee engagement. This will help you determine if the conversation with your employees was successful or not.

Test and experiment

Experiment with different sales pitches and slides for the next week or so to see if that changes things. If not, try something else.

The key to a successful sales strategy is being able to figure out where you need to improve and then tweaking your approach so that the goal stays achievable.

Bottom Line

Ultimately, by setting up a transparent sales metrics strategy that everyone understands can help your whole team work better together.

With the 6-step process, you can find which sales metrics and KPIs are best for your sales team. 

Need Help Automating Your Sales Prospecting Process?

LeadFuze gives you all the data you need to find ideal leads, including full contact information.

Go through a variety of filters to zero in on the leads you want to reach. This is crazy specific, but you could find all the people that match the following: 

  • A company in the Financial Services or Banking industry
  • Who have more than 10 employees
  • That spend money on Adwords
  • Who use Hubspot
  • Who currently have job openings for marketing help
  • With the role of HR Manager
  • That has only been in this role for less than 1 year
Just to give you an idea. 😀
Editors Note:

Want to help contribute to future articles? Have data-backed and tactical advice to share? I’d love to hear from you!

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Justin McGill
About Author: Justin McGill
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