Review popular sales metrics and our recommendations for a few more that will tie your sales team to the overall performance of the business (including customer success).
December 7, 2021
How does your business measure big-picture success?
If you’re like most, you start with some standard top-line measurements: When revenue and profits are up, you’re succeeding. When they’re down, you’re not.
These top-line metrics may be enough to tell you that your business is succeeding as a whole. But they don’t paint much of a picture about why your business is succeeding, or in what ways you could target greater improvements.
As a result, most businesses go deeper, measuring a variety of sales metrics and key performance indicators (KPIs) to determine success on a more granular level, commonly including average deal size and conversion rate.
The problem with this approach is that historically, traditional business metrics and KPIs have focused heavily on sales. They’ve been established with significant input from sales and revenue leaders, and tend to focus on the act of the sale itself: number of employees in seats, dollar value of contracts, number of items sold, and so on.
These are still helpful metrics, of course. But for most businesses, they’re no longer enough. They don’t tell the full story of business success because they don’t measure what happens to those customers after the sale or sign-up.
For truly meaningful results, SaaS businesses and others that rely on repeat or recurring revenue must make sure they’re measuring the right metrics — considering both sales and customer success.
Sales metrics show businesses how they’re performing over time, typically measured with quantitative data like numbers and dollar amounts. Metrics can cover any aspect of a business and can be framed at any level, from the individual or department to the company as a whole.
Sales metrics specifically target elements of the sales process, measuring how successfully the sales team is performing in a range of areas. While these aren’t (or shouldn’t be) the only metrics a business measures, they often hold a prominent place in overall strategy development. Tracking these metrics helps with sales forecasting, analyzing sales productivity, and increasing sales growth.
Sales team metrics can be as varied as the businesses doing the measuring. Most businesses will use several, if not all, of the most popular KPIs along with any others that make sense for their particular industry or clientele.
First, let’s look at seven of the most popular traditional sales metrics.
If your sales process has a degree of complexity, you likely already have an idea how long the sales cycle should usually take. Sales cycle length is how long it takes, on average, to move a customer from “opportunity” to “signed contract.”
For high-end, high-touch SaaS businesses with larger contract values, the sales cycle length tends to be fairly long. For more transactional, low-touch SaaS businesses, it tends to be shorter.
But the value of this metric isn’t necessarily the length. What matters is how long your sales cycle takes compared to how long you expect it to take.
Average deal size measures the monetary (dollar value) or numeric (how many widgets sold) value of the typical sale, deal, or transaction. It’s calculated using the following formula:
Average deal size = Total number of deals or transactions / Total amount sold (in dollars or items)
Businesses typically measure average deal size over months or quarters to reduce spikiness and evaluate what the metric says about contract size.
For many businesses, the size of the contracts is just as important as the quantity of contracts, making average deal size a powerful metric to measure increases in per-customer growth.
At the individual level, average deal size can reveal valuable information about sales team members. You can identify high performers and those potentially in need of coaching by looking at which sales agents are consistently above or below the team average for this metric.
If you’re looking at stats in real time or near real time, this metric can also alert you to unusually large contracts that may include higher levels of risk.
In any sales process, not every lead becomes a customer, but those that do are called conversions. So, your conversion rate is the percentage of leads that convert into customers. If one out of every 100 leads converts into a customer, you’re looking at a 1% conversion rate. If 10 leads out of every 100 convert, then that’s a 10% conversion rate.
What a good conversion rate or close rate looks like will vary widely from industry to industry, and from how you’re qualifying leads (such as those from social advertising, cold calls, trade show contacts, etc). Your best bet is likely to measure against past performance, which means that if you aren’t tracking conversion rate yet, now is the time to start.
Conversion rate is another metric that gets graphed over time. If your conversion rate dropped significantly since last quarter, it’s time to investigate why. Similarly, if it spiked, finding the reasons why can help you continue the growth.
Combined with other metrics, conversion rate can help you calculate sales goals or quotas. If you have enough data to show that your typical agent will convert 5% of sales and you know the average deal size, you have enough data to project roughly how many leads your sales team needs to reach to meet a certain revenue goal.
This is a very high-level metric that looks at how much net income the average sale generates. This is easiest to calculate at a business-wide level, where net income is clearer to measure (total revenue minus total expenses).
At this level, average profit margin tells you essentially how profitable your business is on a per-sale basis, showing you how much or little room there is in the average sale.
Calculating average profit margin with this level of detail can be complex, but it is possible. You must first determine how to calculate net income in terms of a department, product, or sales team member. Taking this approach can reveal insights into the profitability of specific business units or segments.
Quota attainment measures whether a business unit or individual team member has achieved a predetermined quantity of sales, conversions, revenue, closes, or any other similar goal.
This important sales analytic tool can be expressed in decimals, with 1.0 meaning that the measured entity has met the quota exactly. Any values over 1.0 show achievements that exceed the quota, while values below 1.0 reveal that the quota has not been met.
If your entire team is consistently below 1.0, then it’s time to re-evaluate quota levels or sales processes. Likewise, if almost everyone consistently hits or exceeds your quota attainment KPIs, you might consider setting them higher and pushing the team a bit.
On the individual and aggregate level, you can use this metric to evaluate higher- and lower-performing sales agents.
Last, what we call the “E for effort” metrics, sales activity data metrics can be useful as well. These KPIs don’t directly target sales or dollar-value results, but instead target the activity points that eventually lead to those sales or dollar-value results.
Sales activity data includes how many emails a team or team member sends to prospects, how many calls they make, and other similar outreach efforts. Most elements of the sales funnel can be turned into activity-data-style sales performance metrics.
These metrics can be valuable in tracking the productivity of newer salespeople. Another option as a sales manager is using them to help determine what’s causing issues for your low performers. By combining sales activity data with quota attainment, average deal size, and win rate, you’ll have concrete information to understand whether the problem is one of motivation, execution, or other factors. As we mentioned earlier, this is quantitative data and it has its limits. Talking with your team members is another key piece of the puzzle.
Considered together, all of these sales-forward metrics have great value within a sales unit. But they don’t tell the whole story of business success for many modern service-oriented and SaaS businesses. For example, they don’t evaluate customer churn or satisfaction, both of which have long-term consequences to top-level revenue goals.
A sales team may be primarily focused on the sale itself, but leaning too heavily on short-term revenue goals alone is a short-sighted approach to business. A truly holistic approach to sales metrics will include additional KPIs that lean into the world of customer success.
It makes sense that sales teams focus on sales-focused metrics and KPIs. But it’s possible, and even common, for sales teams to get too internally focused on these metrics.
A sales team that operates in a silo, detached from customer success goals, can often fail to work in harmony with other business units. The sales to customer success handoff is one place where this improper focus can show up and damage the process.
Consider these further important sales metrics to track, which will help make your sales teams more accountable to high-priority customer success goals.
Sales linearity measures how consistently deals close throughout a sales period or season (such as a quarter). For a whole host of reasons, executing sales at a reasonably predictable pace is beneficial to the business as a whole. By tracking sales linearity, you’ll see which sales agents or groups are steadily executing and which ones tend to cram their sales into narrower windows of time.
Why does this matter? Focusing on quotas alone can lead to a yo-yo effect, where the majority of sales end up concentrated near quarterly deadlines. Sales agents rush to meet minimums and keep their commissions or bonuses.
When in this mode, sales agents tend to offer more aggressive discounts, negatively affecting revenue. Revenue choke points can also negatively affect cash flow.
Even worse, the new customer funnels get filled to overflowing, creating chokepoints for customer onboarding and customer success down the road.
While your sales agents might not directly feel the impact of neglecting sales linearity, customer success teams certainly will.
From the perspective of your sales reps, new customers are shiny objects worth chasing. Closed deals often lead to advancement or higher commissions. It’s all about the sales pipeline, not the customer journey.
But long-term growth requires more than closing deals. It requires nurturing those qualified leads into satisfied, long-term customers.
Customer satisfaction as a sales metric measures the customer’s satisfaction level during the buying process, giving the customer success team a better sense of where the customer is prior to the onboarding process.
For example, knowing that a customer is already highly satisfied may give customer success more freedom for upselling that customer, while knowing that a new customer remains skeptical or frustrated gives CS teams the ability to adjust messaging (or even lead response time) to match.
This information is often qualitative more than quantitative. Entering observations into a CRM is a good way to handle the transfer of information from one team to the next.
As more businesses chase subscription-based revenue, the more valuable it is to measure annual recurring revenue (ARR). Instead of focusing solely on profits or sales, this metric focuses on repeat revenue from existing customers. This is revenue that keeps rolling in regardless of number of sales or ongoing sales team performance.
ARR is sometimes further broken down to monthly recurring revenue, or MRR.
Churn rate measures how many customers leave over a given period. It’s often measured monthly or annually and can be defined in terms of revenue (dollars lost) or customers (head/license count).
No business reaches a 0% churn rate, and what’s considered normal can vary widely depending on your industry, the cost of your product, and the complexity of your offering (how easy it is to switch).
There are all sorts of reasons that customers can churn. Some of these, like customer satisfaction, your sales and customer success teams have direct influence over. Others, like a new competitor or a missing feature or integration, are harder or even impossible to control.
If you have access to churn rate data from competitors, you can use that as a benchmark. Otherwise, set your own internal benchmarks, run a churn analysis, and then look for significant or sudden changes over time.
Related to churn rate, net retention rate looks at customer retention from a positive angle. To calculate your net retention rate (or net revenue retention), take your ARR (be sure to include both standard renewals and upsells) and then subtract churn.
If you’ve set a target for ARR, you can divide your total NRR by your target ARR to get a percentage figure showing how close you are to that target, or how far you’ve exceeded it.
The value of net retention rate is in showing true business growth in a way that conversions alone can’t. It doesn’t matter how many closed deals the sales team executes if you’re losing customers faster than you’re gaining them. NRR encompasses both ends of the bathtub — the drain (churn) and the spigot (acquisition) — distilling down your total customer or revenue retention into an easy-to-use KPI.
That said, just like most other sales KPIs, NRR is not the single standard by which you should judge business success. If your net retention rate is too low, this metric alone doesn’t tell you whether your problem is primarily with lead generation or customer retention. Even if your NRR meets your targets, it doesn’t reveal the specific inefficiencies keeping you from surpassing those targets.
Sales activity data for customer success looks a little different than for sales, and it can play a much larger role. Because the role of customer success is to increase customer satisfaction and customer lifetime value, activity that doesn’t generate new sales can still be said to have income-generating value. It’s just a little harder to measure exactly how much dollar value these activities contribute.
In the customer success world, numerous nurture-style activities can qualify as sales activity data that’s worth tracking. Your sales team can benefit in significant ways by participating in some of these activities that wouldn’t traditionally be considered sales-oriented.
Here are a few examples of activities that are primarily associated with customer success, but that you might want your sales reps participating in:
By engaging in these sorts of activities, sales teams can gain a better understanding of the product they’re selling and how the customers they sell it to will interact with the product.
Managing the onboarding process effectively is one persistent problem for many organizations that offer high-touch SaaS products. Sales and success teams both manage steps in the process, which can be multifaceted and complex. It’s easy to miss handoffs and drop balls, and your customer satisfaction pays the price.
Arrows is the secure, scalable, and highly engaging onboarding platform you need to keep your various teams and customers onboarding the right way, with fewer gaps and better engagement.
Ready to do more, stay better organized, and keep your customers even happier? See what Arrows can do for your sales and success teams.
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