Sales performance measurements are part of everyday life for everyone in sales. Either you are collecting and analyzing performance measurements, or the quality of your work is judged by them. There are dozens of different ways to look at performance, and understanding what’s behind all those figures will clarify the “big picture” for sales professionals.
The basics of sales metrics
Sales metrics are measurements that show how well a sales team is doing its job. Managers can analyze important sales metrics to figure out if and how the team needs to improve. If figures seem to be suffering, then the boss might want to add a new SDR tool to the stack or even start interviewing staff to find out if they have their pitches down pat. Measuring sales performance is also useful when it comes to planning, hiring, commissions, and feedback.
But looking at a single figure is never enough, and it takes a number of sales metrics to really capture what’s going on. Let’s take two examples of sales metrics: closing rate and number of sales calls. If a closing rate goes down, and the number of sales calls also declines, then there’s a good chance that the team just needs to get back to the standard number of calls. But if the closing rate dips while the number of calls remains the same, then you need to look at other factors, like issues with the sales enablement program.
What are sales performance metrics?
From the above example, you can identify two types of metrics:
Activity: The number of sales calls is an example of things that the team is doing to increase purchase intent. Other instances of sales activity metrics are the number of completed demos, sent emails, and in-person meetings. Some managers keep a close eye on these figures since they show how much time the staff is putting into their work. But other managers just want to see results and only look at activities when the results aren’t as they should be and they need to get to the heart of the problem.
Performance: “Results” are measured through metrics for sales performance. These are the figures that, simply put, connect directly to income. They also need to account for the expense of sales.
All sales performance measurements are relative. For example, if you work for a startup, you’re probably concentrating on how to scale sales. Your goal is to meet a target that’s set according to milestones. On the other hand, maybe you are a new sales manager who wants to show rapid growth. In this case, beating last month’s revenue figures is what counts. In short, there is no particular set of numbers that are a good measure of sales performance. It’s all about what’s expected in your particular department.
Not to be confused with marketing metrics
Some companies include figures like click-through rates (CTR) and email responses in sales performance measures. But, strictly speaking, these are more relevant to marketing productivity. For example, CTR reflects how well the marketing funnel of the website is doing. A sales performance measure is what’s generated when a staff member makes a sale to the person who clicked through.
How to measure sales performance
The most important thing about sales productivity metrics is making sure you choose the right ones. Interestingly, some industries even have their own measurement systems. For instance, a healthy level of B2B SaaS sales depends on recurring subscription revenue and after-sales service. The metrics for B2B sales departments are specialized because of this distinct situation.
Still, certain numbers tend to be common to any sales operation. They are essential because they address the three facts that every business needs to consider:
- How much money did we bring in?
- How much did it cost to earn that money?
- How are we doing compared to last period?
These are vital considerations. Let’s not forget that productivity is about how much you produce compared to the amount of resources you put in. Productivity in sales means producing revenue.
Secondly, expenses need to be under a certain level; otherwise, they cancel out the revenue.
And lastly, a sales department must maintain a certain income level over time (income = revenue – expenses) to pay for other costs like R&D, administration, and marketing. Having a great quarter won’t help much if the next quarter doesn’t provide enough sales income to stay above water.
In sum, crucial sales productivity metrics need to cover revenue and expenses over time.
4 sales productivity metrics that everyone must know
There are countless metrics out there to consider, but the ones highlighted below are entry-level basics for every sales department.
1. Revenue
This is all of the money brought in by sales over a certain time period, usually monthly or quarterly. Keep in mind that revenue recognition policies will affect this figure. You might close a deal today, but if the customer only pays 90 days later, your company might recognize the revenue only when it’s in the bank.
Total revenue = number of products sold x price per product
2. Conversion Rate
Conversion rates examine how many leads came in compared to how many resulted in a sale. In a sense, leads are like the raw material used to produce revenue. If your team is productive, then it has a relatively high conversion rate.
Conversion rate = (number of leads converted into sales / total number of leads) x 100
3. Sales-Expense Ratio
Remember the definition of productivity? A sales team is only performing if the expenses of running the team are below a certain level. Again, everything is relative, and some industries have very high sales-expense ratios. Finding a good ratio is a matter of experience and business goals.
Sales expense ratio = net sales* / sales department expenses
*Net sales = revenue – cost of goods sold
4. Sales Cycle Length
Sales cycle length is a way of understanding performance over time. The less time it takes to convert a prospect to a customer, the better, because this means that the company receives revenue more rapidly. As the sales staff gets more experienced, this number should drop.
Sales cycle length = number of days for a deal to close / total number of deals
Key Takeaways
- Sales productivity metrics are the measurements directly connected to the sales department making income.
- The three essential considerations of sales performance metrics are how much money was earned, how long it took, and how much that effort cost.
- Four of the most important metrics are revenue, conversion rate, sales-expense ratio, and sales cycle length.
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