Most businesses rely on sales to make a profit. The advice you’ll always get is to collect relevant data, keep track of everything, and measure your performance in various areas. Why is it important to do so? Because it will provide you with a clear idea of where you stand and other valuable insights. Plus, it allows you to see what works and what needs improvement. That way, you can plan more efficiently and design more effective strategies. Whether you wonder how to increase website sales or streamline your sales cycle, analytics will show you how to get there. Sometimes it may seem you’re doing well, but data will show you how to do even better. This is especially critical when assessing your sales potential to define goals and make plans for the next period of time. So, let’s learn more about key metrics for determining your sales potential.
What are sales metrics?
Sales metrics (or KPIs – key performance indicators) include all the relevant data that you use to measure your sales performance. This relates both to the performance of your sales team on the whole and individual sales reps. Some of these indicators (lagging indicators) refer to what is already accomplished which enables you to see how well you’re doing. And some (leading indicators) refer to what you can expect in the forthcoming period. That enables you to set your goals and adjust your strategies depending on what you want to achieve.
What are the benefits of using metrics for determining your sales potential?
As you’re already guessing, having all this valuable data in front of you can help you guide your business and inform your decisions. Using and understanding your sales metrics will help you:
- set goals for the future
- determine weaknesses and strengths of your past (and present) strategies
- design incentive plans and calculates bonuses
- choose the right tools for boosting your business such as a callback widget for your website or CRM software for your business
- provide the right training for your sales team and individuals
- adjust your strategies.
Different types of sales metrics
So, where should you start with using metrics for determining your sales potential? We’ve already mentioned the so-called lagging and leading metrics. Apart from that, we can divide them using other criteria. For example, based on what they track and determine, we could divide sales metrics into three broad categories:
- sales performance metrics that encompass the whole company
- sales function performance metrics
- metrics that measure your sales teams’ and individual reps’ effectiveness and performance.
Which sales metrics should you track?
There are dozens of different sales metrics. Therefore, choosing the ones you should track can be a bit challenging. In fact, trying to have them all in mind can be pretty overwhelming. Instead, it would be best if you focused on those metrics that are the most relevant for your business. That will depend on many factors – the type and size of your business, your industry, your sales team, performance goals, etc.
For example, maybe you do business exclusively online and you wonder how to lower your website bounce rate. Of course, you’ll have a different set of critical metrics compared to in-store businesses (or the ones that combine both). Similarly, if you rely on subscriptions you’ll have different priorities than companies that focus on manufacturing.
However, regardless of these factors, most businesses have some common core goals and objectives. Here, we’ll suggest some core metrics that are relevant to any type of business. Of course, you can always add extra metrics you want to track with specific goals in mind.
Annual Recurring Revenue -ARR
ARR refers to the total revenue your business generates in a year. This is a vital KPI metric because it shows you how much your customers want to spend on your business in any given year. Of course, if you track ARR over the years, you can reap extra benefits. For example, you can compare different years and gain insight into what factors affected the increase or decrease in your revenue. In addition, based on these insights, you can reliably forecast your expectations for the following year(s).
The average revenue per user – ARPU
The next valuable metric is ARPU. It refers to the average amount of money your subscribers, customers, or accounts spend during a given period of time (a month, a year, etc.). You can calculate ARPU by dividing your total revenue for a time period by the number of customers.
Knowing your average revenue per user can be valuable in several areas. For example, you can choose to offer discounts if you see that reaching your typical revenue doesn’t seem likely. Or you might notice that there’s no need for such measures as your ARR is likely to stay the same. Also, identifying your highest ARPU customers can provide you with valuable guidelines for your marketing and sales strategies.
Quota attainment is the percentage of closed deals that your sales team or rep has achieved relative to their quota for a certain time period. You can measure it by using the number of closed deals or revenue. It’s important because it enables you to estimate the revenue for the next period of time. Plus, it shows which reps should have more training and whether your team structure is sound and effective.
The easiest way to learn your conversion rate is to divide the number of leads converted into sales (won deals) by the number of qualified leads during the period of time. It provides many benefits. You’ll learn how good your team is in qualifying and nurturing the leads, how effective your sales funnel is, and help you align your marketing and sales goals.
This metric shows how well you cover different areas and whether your sales reps are the best choice for the given territory. You can gain many insights that will help you distribute your team’s efforts in the best way possible and show you where you need improvement. If you combine it with market penetration metrics it will ensure you market and sell your products and services to the right people at the right place and time.
Other key performance indicators – KPIs
It’s impossible to cover all important sales metrics in a single article. After you start keeping track of the ones we’ve mentioned, here are some other valuable KPIs you might want to consider:
- length of the sales cycle
- average sales price (or deal size)
- average profit margin
- churn rate
- year-over-year growth
- customer lifetime value
- lead generation metrics, etc.
The more you know about how your company performs in various areas, the more you’ll be able to improve. Determining your sales potential through sales metrics will provide you with important data and a basis for making better strategies and informed decisions. As a result, you’ll be able to boost your sales rates and help your business grow.
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