Sales is a metrics-driven contact sport. Here I’ll talk about 5 sales metrics that you should use to evaluate your sales team’s performance and results. When you track your 5 metrics historically, you’ll be able to analyze trends in your results, categorized by these key areas, with more clarity. Armed with these 5 metrics, you can focus on the best sales opportunities in the pipeline and set your sales team up for success.
(For even more detailed information on key sales metrics, check out our FREE eBook: The Right Metrics for Your Inside Sales Team.)
1. Open Opportunities in Total and per Rep (by # count, not by $ volume)
This means: the number of open opportunities each rep is working at any given time.
Figure out how many opportunities are created and thus are available for your sales reps to work on. This number will tell you: a) the inflow of new opportunities into your sales pipeline, and b) how many opportunities in total your reps have to work on and sell to.
If you check this metric and notice your reps don’t have enough open opportunities in the pipeline, you know you’ll need to grow your pipeline by using the seeds, nets and spears strategy to grow as rapidly and effectively as possible. If your reps are running too few opportunities, they won’t close enough business and you will have less revenue. Additionally, they will have capacity to do more things (but won’t be doing them) so that costs your company money, not to mention the rep’s motivation might suffer.
You can also use this metric to make sure each of your sales reps are not carrying too many opportunities. Reps working too many open opportunities will become ineffective because they only have so many hours in a given selling period to qualify and close these opportunities. They won’t have sufficient time to work them all and prospects will feel neglected and you risk losing them.
How many open opportunities a sales rep should work on at once depends on deal size, experience level, and time needed to service an opportunity. The balance can be difficult to pinpoint, but you can achieve it by building out a simple capacity calculation and figuring out what the breaking point is for your sales reps depending on how much time they usually invest into prospecting, qualifying, presenting the solution, following up, negotiating, closing, and so on. To learn how to teach your reps to calculate their ideal individual pipeline coverage ratios, check out this post.
2. Closed Opportunities in Total and per Rep (by # count, not by $ volume)
This means: the number of opportunities your sales team closed, including both closed-won and closed-lost opportunities.
In Joe Smith’s sales funnel above, he worked a total of 31 closed opportunities in the last 30 days – 5 were closed-won while the other 26 were closed-lost. You should find this number for every one of your sales reps at the end of each selling period.
You’ll benefit from looking at this historically and following it for a sense of whether each rep or your team worked enough pipeline to hit your goals. Is your pipeline steadily growing over time? Are your reps opening and closing enough deals? If you see that opportunity creation is low, for example, then check MQL count, prospecting activities (like dials and emails), channel referrals, trial downloads, and anything else that generates lead flow for your sales team.
Wondering what your company’s sales funnel looks like? Download our Free Sales Funnel App for Salesforce.com today.
3. Deal size
This means: the average sales price of all your closed-won deals.
In the short run, this metric will make it easy for you to spot opportunities that fall outside the normal deal size and flag them as at-risk. Opportunities in your pipeline that are significantly larger (3x or greater) than your average deal size should be flagged because, typically, larger-than-average deals tend have smaller win rates and longer sales cycles.
Do you spot an opportunity worth $100k in your pipeline when your average deal size is $20k? Flag it. Talk to the rep who owns the at-risk opportunity about how likely it is to close-win and whether it belongs in the sales forecast. If the trend shows an increase in smaller won deals, then perhaps some of your reps have learned that small deals are easier to close, so they choose to go after the small fish. Or maybe your reps are giving discounts on a regular basis and that is affecting the pipeline.
In the long run, average deal size over time will help you track when and by what margin you move up-market and begin winning bigger deals. If your average deal size increases significantly from your historical average, your pipeline may be changing. It is time to dig in to your lead generation efforts and figure out why you’re attracting larger deals.
A change in average deal size isn’t good or bad – it just means you need to dig into your historical data and pipeline generation efforts to figure out how (and whether) to react.
4. Win Rate
This means: the number of closed opportunities that you won.
Formula: (Closed-Won Opportunities) / (Total Opportunities that were both Closed-Won + Closed-Lost). For example, Joe Smith’s win rate from his sales funnel is 5 closed-won opps divided by 31 total open opps = 16%.
Win rate tells you the success rate of your sales team. To increase your reps’ win rate, you need to find where they have the most difficulty converting opportunities from stage to stage. Analyze your sales funnel by stage – are your reps losing a lot of opportunities in the early stages or the late stages? If conversion rates are low in the early stages, your team will need help with such skills as rapport building, better qualification, or maybe product knowledge and demo skills. And if conversion rates are low in the later stages of the sales funnel, you may want to start coaching skills such as managing objections, gaining commitment, negotiation skills or perhaps even closing skills.
As a sales leader, you should always be trying to increase your team’s win rate. It’s not as simple but through setting a solid sales process, through consistent training, good sales coaching, and sales and marketing support, this is possible to increase gradually and over time until a point that it is sufficiently good and steady.
Look at win rate in conjunction with other things such as deal size or lead source. Your win rates can be higher when the original source of the opportunity is from referrals or from inbound marketing (i.e. when the prospect was searching for a solution like yours and found you) rather than from outbound sales (i.e. when your sales development reps cold call them). Alternatively, your win rate can decrease when your sales reps work on opportunities that are considerably larger than your average deal size which you win.
Visualize your conversion rates by stage with our Free Sales Funnel App.
5. Sales Cycle
This means: the average duration or time (typically in days) it takes your team to win a deal. Top sales managers will also want to glean how long individual stages of the sales process take (also known as “duration in stage”). Your sales cycle is the sum of all the durations within each opportunity stage in your pipeline.
Keep historical data about your average sales cycle to better identify likely buyers and at-risk opportunities. How do the sales cycles of current opportunities in your pipeline compare to the sales cycles of deals you’ve won in the past? The amount of time an opportunity spends in a stage has a high correlation to its likelihood of becoming a won deal – if your opportunity has been stuck in the pipeline much longer than the typical won cycle then this opportunity is less probably to be won.
Minimize your sales cycle by identifying at which stage in your sales funnel you are seeing bottlenecks and know that for each sales rep. This will inform you which skills you should coach and improve. Each stage is unique and some take longer than others – it is important to identify which stages need improvement when compared to historical benchmarks. Flag opportunities that have lingered in the same stage 3x longer than the average won deal.
3 of the 5 critical sales metrics can be used to predict your sales in the next selling period or to analyze what happened in the last month or quarter or year. You look at your sales number to see why you either didn’t hit your goal or overachieved it.
$ Sales = (Total # Closed Opps) x (% Win Rate) x ($ Average Deal Size)
Once you know the 3 metrics in the formula above, you can then drill into each one individually that did not correspond to your expectations or historical averages to evaluate what really happened under the hood.
Did you have enough open opportunities to close new business and did this number increase in line with your projections that you used to set quota?
Did your win rate stay within the acceptable range that you expected or did it drop dramatically and that’s why your team didn’t hit their number? Why did the % Win Rate drop – was it because the team got a wrong set of leads from a new industry to which you didn’t sell previously or were they all larger opportunities that required a much longer sales cycle which may be different from what your team was typically used to selling to?
Did your average deal size increase or drop? If it dropped and you didn’t hit your number, then you need to drill deeper and evaluate why that happened. Was it because the reps were working leads that were much smaller companies or was it because your team discounted too much or perhaps didn’t upsell or cross-sell?
This is how you would typically go about analyzing each of the 3 key pieces of the puzzle to analyze the past and evaluate the future.
Your goal is to hit your revenue number and manage your team successfully. To do this, you’ll need to focus on a few of the most critical sales metrics. The 5 metrics above are the ones that really matter for your sales pipeline and results. Measure them, build historical datasets for each category, track your progress over time, and set your goals, forecasts, and coaching strategies accordingly.