What is KPI in Sales?
KPI in sales is a measurable value used by Sales Teams to track and determine their progress on specific sales business objectives. These KPIs help determine how well Sales Teams are performing.
We've been compiling examples of KPIs from all different departments and industries as part of our KPI examples mini-series.
This post is a small supplement to that series, which provides 12 Sales KPIs Examples, we also include a brief description of why you may want to use it. We suggest you pick at least 2 of the Sales Metrics for each of your key business objectives.
If you need a hand creating your own KPIs, we put together an easy 4 step formula to help you create great KPIs.
Sales KPI Examples
In this post, we're looking at examples of Sales KPIs. We're covering lead KPIs (your inputs), lag KPIs (your outputs) and a set of KPIs for understanding how your sales team is performing on a more holistic level.
Understanding your opportunities
These examples of KPIs for sales are for helping you to understand the first part of any sales cycle. This is the number and quality of the opportunities (leads) that are coming through the door. This applies whether you're a retailer selling shoes or a SaaS company selling B2B.
Sales KPIs: Lead Flow
A simple count of the number of leads that your salespeople are working on each month. Start by setting a target for the month (say 100 leads). Then break this down into the areas you want the leads to come from (outbound, inbound, free-trials, etc).
Sales KPIs: Activity Metrics
If you have a problem driving leads, you could wait for your marketing activities to kick-in... or you could take control of the situation in your sales team.
Decide on the 1 key activity that drives the best quality leads (calling, e-mailing, LinkedIn prospecting) and set a target.
Sales KPIs: Qualified Opportunity Rate
So you've got leads coming in, but are they quality leads that can actually result in sales? Measure what percentage of your leads moved through your sales pipeline into a qualified stage.
CRM systems like Pipedrive have this percentage built in to their reporting.
Sales KPIs: Opportunity to Win Ratio
The ultimate test of whether your opportunity pipeline is working - what percentage of all new opportunities ultimately turn into sales.
You should measure this at an overall level for your sales team, but also by an individual salesperson as this is the acid-test of their performance.
Understanding your sales effectiveness
Now that we have a good handle on the opportunities coming through our pipeline, it's time to dive deeper into how effective your sales team is at actually converting opportunities into sales.
These examples of sales KPIs are often classed as 'lagging' indicators as they measure outputs rather than inputs (leading indicators). The key thing about these examples of KPIs for sales is that they must be measured in unison. Succeeding on one KPI might not be a good thing, if it's hurting your ability to meet your other KPIs.
For example you might be succeeding in shortening your sales cycle, but be achieving that by settling for lower margins.
Sales KPIs: Total Sales Volume
We'll keep things super simple to start - you need to be measuring the total volume in $ sold by your sales team on a minimum of a monthly basis.
Ideally you'll set a constantly growing target, but don't forget to factor in seasonal changes such as around Christmas or the holidays.
Sales KPIs: Discounts Applied / Margin Retained
Selling is one thing, but it's easy if all your sales team is doing is applying heavy price discounts to get sales over the line. At the end of each month, take the total sales volume, and calculate it as a percentage of the total sales volume if all sales had been made at full price.
Measure this regularly and ensure you're not on a trend that is driving higher and higher discounts just to hit the volume targets.
Sales KPIs: Average Contract Length
This won't be applicable to all businesses, but for businesses selling subscription services, you need to be measuring the average length of the contracts being signed.
Even if you only offer monthly and annual options rather than multi-year, take a simple average of the lengths of all the contracts signed in a month, and ensure the trend is going up rather than down.
Sales KPIs: Sales Cycle Length
One of the things that hurts sales teams isn't so much the lack of sales, but rather that the sales cycles are simply too long. That makes targets hard to reach quickly, and gives you less room to course-correct if sales start to take a downturn.
Use your CRM system to measure the average time between a lead becoming an opportunity, and when they close to becoming a sale - the shorter the better.
Understanding sales holistically
So far we've looked at examples of KPIs for sales that are both lead and lag KPIs. But truly effective sales teams need to be part of a more broadly effective business ecosystem.
It's therefore critical to implement sales KPIs which look deeper than simple lead and lag indicators of sales success.
Sales KPIs: Average Retention Rate
This might look a little different depending on your business. Essentially we're looking to measure churn / retention after the sales cycle is completed. A low retention rate is often an indicator of problems in the sales process (in the worst case, it could even be due to misselling).
Measure what percentage of your customers cancel each year / month (or whatever is most appropriate for your business).
Sales KPIs: Sales Cost to Sales Volume Ratio
The cost of making a sale is often higher than you think when you factor in lead costs, salaries, commissions, fixed building costs and more. Understanding your sales cost to sales volume ratio helps you make informed decisions about whether (and how) to grow your sales team efficiently.
Measure the total cost of your sales efforts in a month vs the total sales volume generated in that month (or factor your sales cycle time into the formula for a more accurate view). Then convert that to a ratio and express it as a percentage.
Sales KPIs: Collateral Usage Rate
Your marketing team is busy pumping out brochures, videos and website enhancements - but are your sales teams actually using these resources? This is a great way to identify any possible disconnects between your sales and marketing teams.
Measure what percentage of successful sales made use of a piece of marketing collateral and report on this as part of your monthly sales reporting.
Sales KPIs: Team Morale
This may sound strange, but sales teams often rely on morale even more than other teams in the business. That's because sales culture is (rightly or wrongly) a 'thing' that's proven to work to drive sales.
Measure morale in the team with a mixture of surveys and qualitative discussions with team members. You can record the employee happiness in the team in a quantitative manner and see how it correlates to sales performance.
Hopefully you've found our examples of KPIs for sales teams useful! Next up, we'll be taking a look at KPIs for marketing teams.