Sales KPIs 101: Your Roadmap to Success
Sales Key Performance Indicators or sales KPIs are vital to the sales process. Sales KPIs are measurements that you can use to determine if your company is meeting expectations. If you’re missing your sales KPIs repeatedly, it indicates that you have a major issue with your pipeline that needs to be addressed. On the other hand, if you’re constantly crushing your KPIs regularly, you may be able to accelerate some of your growth plans and other initiatives.
Sales KPIs drive your sales by giving you data. The more data and information you have, the better decisions you can make. Your KPIs tell you if you’re succeeding or failing. Some companies may rely on a handful of KPIs to drive their sales pipeline, while others may have multiple categories with smaller KPIs for each. Scaling Sales can help you determine what KPIs you need to use for your sales pipeline and how to interpret what they’re telling you. To help you get started, let’s take a deeper look at what KPIs are and how you can use them.
Understanding Key Sales KPIs
To understand KPIs, you first have to understand your sales goals. What are you trying to accomplish, and what time frame are you trying to accomplish those goals in? While you can get some ideas of these goals and timeframes from other businesses, you typically can’t simply copy and paste them. Your business is unique, and you’re going to have your own unique goals.
These goals can include financial goals (making X percent profit, growing your gross income), customer goals (bringing X number of new customers, growing your customer base in specific areas), operational (boosting productivity, reducing wasteful purchases), or in other categories as needed. You may want to look at the size of the deals you’re making rather than how many deals you’ve made, or you may want to compare sales growth over the years. You may want to track and use both—there’s no real limit to the number of KPIs you have, though you do want to make certain there’s a reason for tracking each. There’s no need to track KPIs simply for the sake of tracking them.
Once you’ve set your goals, it will be fairly natural to see what performance indicators you need to track. For example, if your goal is to grow your average deal size, one of your KPIs will be the average amount of each sale and the number of sales you make within the specified period. With those two pieces of data, you can calculate the average amount of each deal, which is your KPI.
Examples of some metrics you may want to track:
· Monthly Revenue Growth Rate
· Average Deal Size
· Sales Growth Year over Year
Lead and Conversion Metrics
· Sales Cycle Length
· Opportunity Win Rate
Customer Retention Metrics
· Customer Churn Rate
· Customer Lifetime Value (CLTV)
· Net Promoter Score (NPS)
Setting SMART Sales KPIs
While you can make just about anything you can collect data on into a KPI, tracking some of these things is going to be worthless to your overall decision-making process and even to your sales team. It can also take a lot of time to track and analyze all of this data. Again, you don’t need to make everything into a KPI.
So how do you know which KPIs are right for you? You want to put them through the SMART test. KPIs that are SMART are going to be relevant to your business and provide you with information you can truly use.
S – Specific
The KPIs you focus on need to be specific to your company and your needs. Moreover, they need to be specific to your current needs. Using old KPIs can actually hurt you if you’re measuring where your company is now compared to where you were five years ago. Those KPIs may no longer be relevant. Likewise, using KPIs based on what you want to achieve in the far future is also not helpful. Make sure each KPI is specific in language, too. “Boosting revenue” is fairly vague and isn’t necessarily helpful to refining your sales process. “Increasing our customer base by X percentage within one year” is more specific.
A specific KPI typically includes what you want to accomplish, when you want to accomplish it, and how you’ll accomplish it.
M - Measurable and Meaningful
This leads into M – KPIs need to be measurable. Saying you want to improve customer satisfaction isn’t a measurable KPI. Saying you want to have an average of 4.5 stars on reviews in the next year is more measurable because you can clearly see if you have accomplished that goal or not. Again, make certain the KPIs you’re using have meaning to you. Maybe online reviews aren’t something you focus on. While you may still want to keep an eye on them just in case you get flooded with negative reviews, it may not be something meaningful enough to be a KPI.
A - Achievable
Are your KPIs achievable? You don’t want to set yourself up for failure. Doing so can cause morale to drop and frustrate your sales team. A KPI with the goal of boosting sales by 50 percent within three months is likely not achievable for most businesses. Your KPIs need to be reasonable based off of your current personnel and past achievements. If you quickly surpassed your previous KPI of growing your customer base by 5% within a year, you may determine that setting a KPI to grow your customer base by 15% within six months is reasonable. It all depends on what the numbers suggest.
R – Relevant
Are your KPIs relevant to your current business plans? For example, if you’re currently looking to expand your online sales, relevant KPIs would include website traffic, churn rate, cart abandonment rate, conversions, and other related data. That’s not to say you may not have a set of KPIs for any brick-and-mortar store you may have, just that those KPIs may not be the most important at this time. You might only track a few of them to make certain that your in-store sales aren’t dropping. Similarly, if you’re trying to move into a new market, KPIs for that market may be your top priority. KPIs related to older markets that you’re well-established in may not be as relevant right now.
T – Time-Bound
Finally, a SMART KPI has a time frame attached to it. Each KPI should have a specific date by which you want to achieve it. You may have some monthly KPIs, some quarterly, and some yearly. Some of these monthly KPIs may feed into a quarterly one, allowing you to track your progress on that larger KPI every month.
Measuring and Tracking Sales KPIs
How do you measure and track your sales KPIs? The first thing you need to do is determine what data you need to collect for each KPI. Again, this is typically pretty obvious if you have created a SMART KPI. Once you know the data, you can set up methods to track it. There are a number of tools out there that were designed specifically to track data for KPIs. These tools often provide you with real-time updates, so you can see at any given moment how close you are to meeting a KPI. With this information, you can then review the KPI and decide if you want to modify it. If you’re overperforming, you may want to go for a bigger goal. If it looks like you won’t meet your goal, you might want to scale back your expectations while you review the relevant processes.
Interpreting and Leveraging Sales KPIs for Success
KPI data will help you spot trends and patterns in your sales. You may be able to see what time of the year you have large sales, where your customer base is located, how they prefer to shop, and more. This will help you identify what your strengths and weaknesses are so you can form a plan that plays to the strengths while shoring up the weaknesses. Like many things in sales, KPIs work best on a cycle. Set KPIs, gather data, review your KPIs, adjust your sales pipeline, and then set new KPIs and start over again.
The data from KPIs is best leveraged when making decisions. You can see how your overall process is performing and determine what you need to do to improve that performance. If your sales and marketing efforts are not in alignment, your KPIs are going to show it. If your goals are unrealistic, you’ll see it in missed KPIs. If customers have changing needs, KPIs related to customer satisfaction and new customer interaction will reflect this.
All in all, KPIs can transform your business when used correctly. If you’re not certain where to start with KPIs, Scaling Sales can help. We bring years of experience and insight to the table, and we can work with you to craft KPIs that meet the SMART test and will help you grow your business.