Essential Sales Growth Metrics Explained
When it comes to making decisions about your sales, marketing plans, and even product/service offerings, you need data. While you can make decisions without data, these decisions are made on guesses or on how you’re feeling that day. They’re about the same as making decisions based on rolling dice.
This is why data-driven decision-making is vital to your business’s success. You can’t confidently grow your sales without knowing what works and what doesn’t. By analyzing sales growth metrics, you’ll be able to chart trends and learn what customers want and what products or services aren’t in demand. Let’s take a look at the essential sales growth metrics you should be tracking and why they’re necessary to boost your customer base and profits.
The first set of metrics you want to look at when evaluating your sales growth is based on revenue. For many business owners, looking to see what your profits are and how much they’ve grown by is the most important metric. While this may not always be true, revenue is an important benchmark. There are four revenue metrics:
Gross revenue – This is the total amount of money you bring in during a set timeframe (month, quarter, year, etc.). Bringing in more money can be a good sign that your company is moving in the right direction, but gross revenue does not include any expenses or other money spent.
Net revenue – Your net revenue indicates your actual profit. It’s calculated by subtracting all of your expenses from your gross revenue. It’s possible to have a positive gross revenue but a negative net revenue. If that’s the case, this metric indicates you’re spending too much or that your products/services aren’t priced correctly.
Average transaction value (ATV) – How much money do you make on average on each sale? That’s your average transaction value, and it can tell you a lot about your customers and products. If your ATV is very low, it could indicate that your services are overpriced or that your higher-priced options aren’t attractive to customers.
Customer lifetime value (CLTV) – What can you expect a customer to spend with you during their entire time working with you? That’s your customer lifetime value, and it estimates everything from a customer’s first purchase to repeat purchases and future contracts. This metric gauges customer loyalty and long-term value. If your CLTV is low, it could indicate you need to put more focus on customer retention.
Sales Volume Metrics
The second set of metrics covers sales volume or how much of a product or service you’re actually selling and to whom you’re selling it:
Total sales – This metric can outline how many products total you sold, how many units of a specific product were sold, or how many contracts or service calls you made. For services, it represents the total amount of work you did for customers during a period. Low total sales may indicate that you need better marketing or that your services need to be revamped.
New customers acquired – How many of your total sales were made to new customers? Growing businesses always need to be acquiring new customers, so if this number is low, your sales growth is likely to be stunted unless your returning customers are spending more money. That’s why it’s vital to track multiple sales growth metrics—you need several different views of your business to compare to each other to determine where issues may be.
Repeat customer rate – This metric measures how many customers renew their contracts or return at a later date to make purchases. You want a high repeat customer rate because it indicates you don’t need to spend as much on acquiring new customers unless you’re prepared to grow. Low rates, however, show that you need to boost your retention.
Churn rate – The churn rate is how many of your customers leave over a period of time. If you have customers who don’t renew, they contribute to your churn rate. If it’s a high amount, it may indicate customers aren’t happy with the services they’re receiving or the price they’re paying.
Many businesses that sell online are highly invested in having a great conversion rate. While most people know this rate as the indicator of how many potential customers convert into paying customers, there are actually four types of conversion metrics you will want to track.
Leads-to-Customer conversion rate – This is what most people think about when they hear the term “conversion rate.” How many of your leads become customers? If your conversion rate is over 10%, you’re doing very well. If it’s fairly low, you may need to reconsider your approach.
Conversion rate by channel – This percentage indicates how many customers a specific channel, such as paid search marketing, social media marketing, or outbound sales, is generating. You calculate it the same way you do leads-to-customer conversion, but you only look at the customers gained and leads generated from a particular channel. You can even break it down further in some cases. For example, your social media conversion rate could further break down into Facebook, Instagram Twitter/X, etc.
Sales funnel drop-off points – Where are you losing customers? Looking at your sales funnel drop-off points will highlight where people are abandoning your company. It can show you if your lead-nurturing plans are working or if you need to focus on something different.
Cart abandonment rate – Are people leaving things in their shopping carts? For companies that only offer services, this metric may not be one they need to track. However, if you have products you sell online and people are not completing their purchases, you want to track that metric and address it in some way.
How profitable is your overall business? Tracking profitability metrics is one way of getting an answer. While these metrics won’t tell you everything, many business owners do look to them to show overall success. They are similar to revenue metrics, but they bore down deeper into customer behavior and provide more information.
Gross profit margin – Your gross profit margin is how much profit you’ve made after you subtract the cost of your products or services. Note that this margin typically does not subtract out your overhead or other costs. It indicates how much money you’re keeping for every dollar spent. If your gross profit margin is only 5%, you’re retraining a nickel off of every dollar you bring in, which is fairly low.
Net profit margin – Similar to your gross profit margin, your net profit margin indicates how much money you’re keeping out of every dollar you bring in. However, unlike gross profit margin, your net margin does account for overhead costs such as your office’s electricity costs.
Return on investment – How much money are you getting back on every investment you make? It’s an important metric. While some metrics are applied to your business as a whole, your ROI can be applied to marketing campaigns, products, services, partnerships, and more.
Customer acquisition cost vs. CLTV ratio – How much money does it take to convert a customer? It’s not always easy to calculate, but once you have it, you can compare it to your customer lifetime value.
Customer Engagement Metrics
In addition to retention and the cost to acquire a customer, there are several other metrics you will want to track:
Customer satisfaction or CSAT – How satisfied are customers with your service? Higher customer satisfaction typically translates into higher retention rates, while lower customer satisfaction can indicate that you need to address issues with your products, services, customer service, or other areas.
Net promoter score – Your NPS is a metric attached to customer loyalty. Unless customer satisfaction, your net promoter score isn’t directly tied to how happy your customers are. Instead, it looks at how likely those customers are to provide you with word-of-mouth marketing. Is someone going to recommend you to a friend? If so, you have a high NPS. This is important for two reasons: first, word-of-mouth is still one of the best marketing methods out there, but second, it’s very difficult to buy word-of-mouth recommendations.
Need Help Tracking These and Other Sales Growth Metrics?
Tracking revenue, sales volume, conversion, profitability, and customer engagement methods is a start to making data-driven decisions, but you also need to know how to properly analyze that data and understand it. You also need to make certain the data you’re gathering has value. It’s easy to find a list of metrics online, but because every business is a little different, some of those metrics may be less important to you. You may even have some metrics you need to track that most other businesses don’t.
This is where Scaling Sales comes in. We will work with you to design metric-tracking processes that will allow you to gather the data you need, put it into a form that you can analyze, and then use that information in the best way possible. Reach out today to start a discussion about sales metrics and what we can do for you.