Tracking sales performance metrics can offer significant strategic value to companies looking to optimize sales efforts.
By analyzing performance across various metrics, companies identify strengths and weaknesses in their current sales strategies and methodologies. Sales performance metrics are also helpful when making compensation adjustments, awarding bonuses, and creating incentive programs.
This insight opens opportunities for companies to make agile and data-driven adjustments to recreate sales successes and minimize or eliminate unprofitable efforts. Perhaps even more importantly, tracking and analyzing sales metrics and KPIs allows companies to distinguish high-performing sales reps from their average counterparts quickly.
What are Sales Performance Metrics?
Sales performance metrics are another word for key performance indicators or KPIs. Sales performance metrics and KPIs are data companies gather to measure the performance, productivity, and goal attainment of individual reps, sales teams, and even the entire sales department.
“Without a keen understanding of the ‘right’ metrics for your business and a plan to track them, it can be challenging or outright impossible to accurately diagnose performance and productivity bottlenecks that harm sales performance.”
Why are Sales Metrics Important?
Sales metrics are important because they clearly reveal your sales department’s quantitative performance and effectiveness.
Without a keen understanding of the ‘right’ metrics for your business and a plan to track them, it can be challenging or outright impossible to accurately diagnose performance and productivity bottlenecks that harm sales performance.
Similarly, without a data-driven method to identify high-performers, sales organizations will likely struggle to recognize and retain the sales professionals who make an outsized impact on their bottom line.
This also allows poor performers to ‘coast’ on colleagues’ efforts and successes, reducing your sales department’s overall quality and ROI.
If you’re interested in using sales performance metrics to modernize and optimize your sales organization but aren’t sure where to start, there’s good news.
We’ve compiled a list of three top sales performance metrics your company should track heading into 2022.
Three Key Sales Metrics to Measure and Track Success
1. Revenue
We begin our list with the King of KPIs – revenue.
Revenue is a crucial sales performance metric regardless of industry or market. Revenue is the total amount of money earned during a given time window and typically includes adjustments for discounts and returns.
Why You Should Track Revenue
Tracking revenue supports a wide variety of crucial business decisions and responsibilities, including:
- Tracking profitability
- Budgeting for expenses
- Creating performance targets
- Setting compensation rates
- Analyzing sales trends
- Tax preparation
How to Track Revenue
Tracking revenue is a relatively straightforward process. Many companies utilize software programs to track incoming funds and create easily digestible data points.
Sales organizations can track revenue on a variety of timelines. Two popular timelines often used in conjunction for short and long-term perspectives include monthly recurring revenue (MRR) and annual recurring revenue (ARR.)
Analyzing your MRR will allow you to adjust strategies and efforts to align with your targeted ARR. MRR can also be extremely useful for tracking profitability and growth for subscription-based companies.
Companies can track revenue over shorter periods to analyze the effectiveness of recently implemented sales methodologies or incentive programs.
MRR Example: If a subscription-based company has signed up 150 members at $50/month, MRR is $7,500.
(150 members x $50/month each = $7,500 MRR)
ARR Example: Assuming this company does not increase the size of their subscription pool, you would use the data gathered calculating MRR to calculate ARR. Simply multiply MRR (in this case, $7,500) by 12 to determine ARR.
($7,500/m x 12 months = $90,000 ARR)
“Quota attainment is one of the most important key performance indicators for creating sales projections and analyzing the effectiveness of current sales strategies.”
2. Pipeline Conversion Rate
Pipeline conversion rate is the ratio of closed deals at the end of a specified period, versus total opportunities in the sales pipeline over that period. For example, a sales team that had 500 sales opportunities in the pipeline at the beginning of the month and closed 50 of them by the end achieved a pipeline conversion rate of 10%.
Why You Should Track Pipeline Conversion Rate
Pipeline conversion rate is ideal for improving crucial operational activities like sales forecasting, quota creation, and territory designations. In addition, tracking pipeline conversion rates can disclose the best channels for lead generation, the overall health of your sales pipeline, and the effectiveness of your sales efforts at the individual, team, and enterprise levels.
How to Track Pipeline Conversion Rate
Calculating pipeline conversion rate is relatively simple, but tracking it can be a challenge. To calculate your pipeline conversion rate, divide the number of closed pipeline opportunities by the total amount of opportunities available. Then, multiply the answer by 100 to generate a percentage that represents your pipeline conversion rate.
Pipeline Conversion Rate Example:
Step 1: 37 closed opportunities / 250 total pipeline opportunities = 0.148
Step 2: 0.148 x 100 = 14.8%
To track your pipeline conversion rate, review the capabilities of your CRM. Many popular CRMs allow users to track conversions over various lengths of time and at micro and macro levels.
3. Quota Attainment
If revenue is the king of KPIs in sales, quota attainment rules alongside it as queen. Sales quota attainment is a metric that measures the time it takes for a given sales target to be met or exceeded.
Why You Should Track Quota Attainment
Quota attainment is one of the most important key performance indicators for creating sales projections and analyzing the effectiveness of current sales strategies. It’s also a key metric for devising realistic sales quotas moving forward.
If most of your sales team has managed to meet or exceed quotas this year, you can try implementing a 10% increase to drive greater revenue. But if less than 60% of your salesforce is meeting quota, it’s likely a sign that the current sales targets are not realistically attainable, and you may want to reduce your sales target.
How to Track Quota Attainment
Track quota attainment from the beginning of each month or quarter to measure sales linearity and individual sales rep performance. To calculate quota attainment, divide the value of a sales rep or team’s sales by the targeted quota.
Quota Attainment Example: Imagine a sales rep with a quarterly quota of $300,000. At the end of the quarter, this sales rep has managed to sell $287,000 worth of products. To determine their quota attainment rate, you will divide $287,000 / $300,000 to get a QAR of 95.6%.
$287,000 / $300,000 = .956 x 100 = 95.6%
How to Use these Data to Improve Sales Performance?
You can’t get where you want to go if you don’t even know which direction you’re heading. Tracking sales metrics gives sales managers and executives to keep a close and detailed read on how sales activities align with sales targets, providing a roadmap to future strategies that support the organization’s growth.
On a micro-scale, sales organizations can also use the data provided by KPIs and performance metrics to track the success rate of their hiring and training processes.
Companies that use sales performance metrics (or even better, predictive analytics tools) to analyze their sales staff will enjoy lower turnover rates, improved productivity, and performance that regularly exceeds targeted quotas.
Conclusion
Modernize your hiring process with predictive analytics if you’re ready to start looking forward to sales performance metric reviews. At PerceptionPredict, we use predictive analysis to create data-driven sales candidate profiles. As a result, we help companies optimize the hiring process by identifying the hallmark characteristics and traits of excellent salespeople in potential hires.