Sales metrics need to be measured in more ways than one. Simply tracking the dollar value of sales each month is not enough.
We have 2 main sales indicators:
Leading indicators: These give us advance information of potential sales and are an alarm to change action if potential sales are weak.
Lagging indicators: This is the actual sales information that tells us if our sales activities are successful.
We look at 4 types of sales metrics in this article.
In order to find potential customers and convert potential customers to actual sales, the sales team need to be active.
Measure the sales activities that are most likely to result in potential new clients or renewals of existing clients.
To ensure we achieve sales targets, the potential sales pipeline needs to be big enough. We need to have a view of potential sales in the next 3 - 6 months.
Example:
Our budget is $1m sales per month.
Conversion is 50% - we typically convert 50% of potential sales into invoiced sales.
We need $1m / 50% = $2m in potential sales per month for the next 3 months to be healthy. Our pipeline target (active leads) is $2m sales per month.
If we increase our conversion rate, sales will improve.
Improving conversion includes:
- Accurate and up to date data. This could be maintained in a CRM or similar system
- Understanding which sales activities are most effective
- Segmenting customers to understand why customers don't convert
- Reviewing the performance of sales team members.
A business won't grow if it loses customers.
Conversely, a business will grow by keeping customers. The easiest and cheaper sales are to existing customers.
Retention can be calculated in various ways:
- Sales invoiced / sales quotes for the last 60 / 90 /120 days
- Number of active customers today vs 12 months ago
- Number of customers renewing / total customers
The important thing is to identify why customers are being lost and to take actions:
- Regular sales meetings to identify customer dissatisfaction early on
- Pricing - segmented pricing per customer segment
- Sales promotions
- Adapt the product or service where possible
