Businesses

7 Sales KPIs (Key Performance Indicators) You Should Measure in 2018

As a business manager/entrepreneur, you understand the value of sales KPIs (Key Performance Indicators). In this article, I’ll highlight seven KPIs for managing your sales team.

sales key performance indicators

By paying attention to key business metrics across all areas of your operations, you can quickly understand what’s going on – without digging through endless spreadsheet pages.

The next time you work with a management consultant, you can use fewer of their expensive billable hours gathering and analyzing data.

Provide KPI sales metrics for the most important aspects of your campaigns before they walk in the door. With these sales KPIs, you can save time, money, and effort.

The Basics of Sales KPIs

If you manage a startup, run a sole proprietorship, or own a new small business, you may not know much about Sales KPIs.

  • So, what are KPIs for sales?
  • How can you use them to stay abreast of your sales team’s productivity?
  • What can you do to streamline this process?

In short, you can only look at so many stats, figures, and spreadsheets.

By choosing a small set of KPIs to review on a regular basis, you prioritize only the most relevant data – and avoid information overload.

You’re probably wondering how to set KPIs for sales and stay abreast of these vital figures without wasting time. You could keep an eye on dozens (if not hundreds) of metrics across endless spreadsheet pages.

Luckily, not every sales KPI carries the same weight.

Scan this list, determine the most-relevant metrics in your niche, and check them daily.

Ask your accounting team to send you just these few numbers – and link you to the supporting information. (Email management techniques like this can save you both time and stressful information overload.)

Have your people send you a larger list with most or all of the metrics in this article on a less-frequent basis, such as once every one or two weeks.

Seven Examples of Sales KPIs

With these key performance indicator examples, sales numbers don’t have to be a mystery – or a slog. Track only the most important figures in your niche and avoid time-wasters.

Have your accounting team present these vital sales KPIs on a daily/weekly basis – and save the details for less-frequent meetings.

After reading these key performance indicators sales examples, you’ll find a quick template for requesting this information from your accounting team and sales managers.

1) Gross/Net Profit Margins

This sales KPI tops the list because your entire business growth depends on the money you keep after covering your expenses.

Your target profit margin depends greatly on the type of business you run – and your niche.

For example, you could run a low-volume, high margin business that provides boutique services to high-end clients. Alternatively, you could operate a high-volume, low-margin retailer.

Gross Profit = Net Sales – Cost of Goods and Services (COGS)

However, gross profit margins aren’t quite as simple as this formula would make it seem. Not all debits count as expenses; not all credits count as income.

Make this crucial distinction by disqualifying certain items (from both your credits AND debits) and excluding them from your calculations.

Next, use your Gross Profit figure to determine your Net Profit, the amount you make after paying certain “costs of doing business”:

Net Profit = Gross Profit – (Total Operating Expenses + Taxes + Interest + Depreciation + Amortization)

Remember, your company could look profitable before you consider factors like loan payments/interest. Likewise, remembering to account for depreciation tax deductions could reframe a losing quarter as a winner.

For a more comprehensive discussion of these Essential sales KPIs, read on about the net income formula. Also, take Days Sales Outstanding into account when checking up on your key sales KPIs. The time it takes your customers to pay directly affects your profitability.

2) Sales Revenue

No, revenues don’t tell you as much about your company’s overall health as profit figures.

However, the total amount of money you bring in can help you complete certain crucial analyses.

When managing your sales team, you need to know the effects your various marketing efforts have on your revenues.

  • What would it take to increase your revenues by 5%?
  • How much would you have to spend on sales and marketing?
  • Where is the sweet spot between over- and under-advertising?

The basic sales revenue formula (like most on this list) looks deceptively simple:

Price Per Unit Sold x Number of Units Sold = Revenue

The trick is to string together dozens of these formulas without missing one. You need a separate sales revenue calculation for each price point.

Surely, you get different returns from different sales platforms and retail outlets.

Include bulk pricing rates, discounts, and refunds. Remember, you need to separate calculate sales revenue for all of these factors for each product/service you offer.

Once you add it all up, you’ll have a clear idea of your sales revenue.

By regularly calculating these figures, you can determine the effects of your various marketing/sales/ad campaigns.

3) Prospecting Activity

Have your sales teams measure the amount of time, effort, and resources they put into seeking out new leads. Keep track of client calls/emails, meetings with prospects, product/service demos, and any other applicable activities.

Prospecting activity is more a cloud of sales KPIs than a single metric.

Have your sales managers compile and track the many elements of prospecting activity. They should report this information to you on a regular basis.

Have them highlight outliers – sudden or substantial changes in these statistics that can signal growth and decline.

With this information, you can ensure your manufacturing, customer support, IT, etc. efforts match your current (and projected) sales volume.

4) Funnel Flow

Your sales funnel must move people smoothly from one step to the next. As users experience your brand, they take a journey of increasing trust and commitment. Track the four

Leads

  • How many people enter your sales funnel over a given period?
  • How does this compare to industry averages and your company’s past performance?

Response Time

  • How quickly does your sales team respond to new leads?
  • How long does a potential customer have to wait to get an answer from a support/salesperson?

Content Use

Check your tracking analytics to see how often the leads you contact stay in touch with your brand on social media, via ongoing email campaigns, and by consuming lead magnets.

Qualified Leads

  • How many qualified leads does your sales funnel generate?

The definition of “qualified leads” depends on your industry. In general, these people must have traveled most of the way down your sales funnel.

For example, they could be regular readers of your free content or consumers of your sample products. They may show interest in discounts, coupons, and special deals – without actually having made that first purchase.

Closing Rates

Quite simply, what percentage of leads make it to the end of your sales funnel – and actually buy something.

If these rates compare unfavorably to your competitors’ numbers (if known) and previous in-house campaigns, consider how you can better understand and empathize with typical customer personas.

Targets

Are your salespeople meeting their targets? Do they convert the right percentage of leads? Have they brought in enough new revenue to cover expenses, offset customer churn, and make a substantial profit for investors?

5) Customer Retention

You can easily measure your change in customer volume for a certain period. Simply subtract your “customers lost” figure (CL) from the number of customers you’ve gained (CG).

            CG – CL = ∆C

Note that this formula may well return a negative value.

For example, if you lost 20 people and gained 10, you would have a -10 change in customer volume (∆C):

CG [10] – CL [20] = ∆C [-10]

When you combine this data with your leads figures from the preceding section to calculate customer churn, one of the most important sales KPIs.

Remember to maintain the positive/negative quality of this number as you progress to the next step.

By the way, business accountants do calculate customer retention with other methods (for other purposes).

6) Churn Rate

Use this vital KPI for sales staff management, especially if you run a subscription business.

With churn rate figures, you can answer one simple question: “Do we attract more customers than we lose?”

As you know, it’s easier to keep customers than attract new ones. Use this KPI to determine if your customer service and sales teams prioritize customer retention – or simply that first sale.

Remember, when competitors succeed in luring away your customers, your churn rate increases – which can alarm investors.

To calculate customer churn, use the numbers from the previous step. When working with the figures, in steps 5 and 6, make absolutely certain all of them represent the exact same time period.

For example, a change in time zone or a difference in month length from one figure to the next could dramatically change your results. (Also, remember these variables when comparing one period with another.)

Divide the number of customers you’ve lost/gained (∆C) during a period (∆T) by the total number of customers you served (C) in that time:

Customer Churn = ∆C / ∆T x C

Click the following link for a more detailed explanation of customer churn (and a sample calculation). Remember, you can also measure customer loyalty by calculating Net Promoter Score.

7) Year-to-Date Sales Growth

You can calculate year-to-date (YTD) sales growth (and many other YTD comparisons) with this standard formula:

(VC – VS) / VS x 100 = ∆V%

Don’t feel daunted – most of this formula simply converts a decimal into a percentage. You only need two data points to figure out your company’s YTD Sales Growth.

In this case, let’s say you have a current sales volume (VC) of 25,000 customers. At the beginning of the year, you had 20,000 customers (VS). With these two figures, you can calculate your YTD Sales Growth, which equals 25%:

(VC [25,000] – VS [20,000]) / VS [20,000] x 100 = ∆V [25%]

Remember, you can use this formula to determine percentage change over any time period – and for all kinds of volumes. For example, you can use it to calculate month-to-date sales volume (and a host of other possibilities).

Sales Team KPI Template

Use this KPI template for sales teams to create a simple tracking system. In addition to time-sheets, you can manage mileage logs and create productivity reports on Toggl’s fast and powerful platform.

Refer to the quick tips in this section when talking with analysts and making sense of your sales KPIs.

1) Gross/Net Profit Margins

  • Gross Profit = Net Sales – Cost of Goods and Services (COGS)
  • Net Profit = Gross Profit – (Total Operating Expenses + Taxes + Interest + Depreciation + Amortization)

2) Sales Revenue

  • Price Per Unit Sold x Number of Units Sold = Revenue

3) Prospecting Activity

  • Client Calls/Emails, Meetings with Prospects, Product/Service Demos, and Any Other Applicable Activities

4) Funnel Flow

  • Leads, Response Time, Content Use, Qualified Leads, Closing Rates, Targets

5) Customer Retention

  • CG – CL = ∆C

6) Churn Rate

  • Customer Churn = ∆C / ∆T x C

7) Year-to-Date Sales Growth

  • (VC – VS) / VS x 100 = ∆V%

Other Free Business Templates

Toggl offers a variety of templates to support the burgeoning online business community.

You don’t need to reinvent the wheel – just learn the fundamentals that have worked for countless business owners.  For example, you can design motivational and achievable task targets with this free Smart Goals Template. (No, you don’t have to sign up for anything or share your email address.)

You can keep projects focused and on-time with our free Work Breakdown Structure template.

In today’s digital marketplace, technology has dramatically increased the speed of business. At Toggl, we use that same technology to help you work smarter, identify your most profitable systems, and easily identify efficiencies. Try Toggl for free.

As the corporate world continues to change, we’ll help you find the simple and stress-free solutions you need to succeed!

By On January 22, 2018