Sales professionals in the business-to-business (B2B) world, especially those of you who are new to the space, may feel overwhelmed by the activity level needed to maintain sales momentum and fill your pipeline every month.
Your sales manager probably asks you to report on deals projected to close this month, and that’s important, but if that’s all you’re tracking, you won’t be able to truly analyze your performance and understand how to improve.
Because only looking at deals projected to close is a very narrow focus that doesn’t tell the whole story about your sales performance and activity.
While it’s obviously important to your sales manager who needs to deliver an accurate forecast, it’s not what you should look at if you want to be your own sales coach.
Before we outline which sales KPIs you should be tracking, let’s define what a KPI is and why it’s important for the development and growth of your sales career.
What Are Sales KPIs?
KPI stands for Key Performance Indicator and generally speaking, organizations use them to measure how they are performing numerically.
They are critical metrics that measure actual performance against predefined goals and objectives, providing an objective form of measurement that allows you a glimpse into your future – before it’s too late to change the direction or solve any issues with your team.
When we talk about KPIs, it’s important to note that there are lagging indicators and leading indicators.
Lagging Indicators Vs. Leading Indicators
Lagging indicators look at output and results after the fact.
In other words, they focus on historical performance, can show you the final results, and are easy to measure, but hard to directly improve.
Lagging metrics include:
Number of Customers
Leading indicators, on the other hand, focus on the likelihood of achieving goals.
They are the activities and actions that can be tracked or measured during the sales process as opportunities are developing and the pipeline is being built. They are metrics that you have some power to change.
Leading indicators include answers to questions like:
How many calls should you make every day or week?
How many prospects do you visit per week or month?
What types of prospects are you calling? Where are these prospects coming from?
How many of these calls turn into opportunities?
How many of those opportunities turn into wins?
Most companies will focus on both types of indicators in one form or another, but, if you really want to make a change in your sales performance and behavior, leading indicators are best to focus on.
Use them to guide your daily activities and keep you on track to reach your goals.
Now that we are clear on the definition of a KPI and the differences between lagging and leading indicators, let’s take a look at what you should be tracking and how to analyze each metric to help you coach yourself.
#1. Activity Ratios
Activity ratios are leading indicators that measure the activities and actions necessary to hitting your sales goals.
When you understand the relationship between your level of activity and getting a first appointment, demo, or closing the deal – it’s easier to manage your opportunities and prioritize your time.
That’s why you should track these ratios to determine what you need to do on a daily and weekly basis:
Lead Source: First Appointment
Taking note of where the lead was generated, whether that’s through marketing, referrals, or a recent networking event, will help you identify the lead sources that produce qualified first appointments.
Outreach: First Appointment
Whether you’re sending emails, making phone calls, networking at events or via social media, you need to analyze your outreach efforts.
Looking at this ratio provides insight into the communication templates and formats that perform best and with who.
First Appointment: Next Step
Now you’ve got to ask yourself, how many of my first appointments end with a scheduled next step?
Whether that’s sending a proposal, getting another meeting set, or providing a demo, getting the first appointment is critical for qualifying the opportunity, but if there’s no agreement on a scheduled next step, then you shouldn’t count on that prospect.
Knowing your activity ratios will allow you to set weekly, monthly, and quarterly goals for yourself.
When you have a clear picture of what lead sources to focus on, how to effectively reach those leads, and what you need to do to get a next step, you’ll maintain momentum and avoid the ups and downs of selling.
#2. Stage-to-Stage Conversion Ratios
Assessing your sales pipeline based on the flow of opportunities from stage to stage will help you determine how many opportunities reach that stage and then either move forward or backward.
This leading indicator will also help you identify the right number of prospects to have in each stage given how many will likely progress.
Another way to think about this is in terms of understanding where your pipeline might be “leaking” aka where prospects are dropping off the pipeline.
For instance, say 40% of new prospects agree to a first appointment, half of those make it to the next step stage, but just 5% end up buying.
That drop off indicates you may not be qualifying enough, not suggesting the right next step, not getting to the decision maker, and/or negotiating poorly.
If a prospect doesn’t match the definition or you can’t answer one of the inspection questions associated with that stage, then your prospect doesn’t belong there.
At this point, you either need to move the opportunity backward or determine what you need to do to get a scheduled next step on the books in order to collect the information you don’t have.
Pay close attention to how your prospects are converting from stage to stage and try to spot patterns, both positive and negative, so that you can figure out where your sales process might be breaking down and why.
#3. Overall Conversion Rate or Win Rate
Your conversion rate or win rate measures the percentage of leads that ultimately become customers and is a lagging metric.
If you get approximately 100 leads per month, and on average 10 buy your product or solution, your conversion rate is 10%.
This metric can help you calculate how many leads you need to make your revenue targets. For example, if your monthly quota is $100,000, and your average deal size is $5,000, you need to close 20 deals. And if 10% of your leads become customers, you need 200 leads per month.
If you’re unsure or don’t have these numbers, you can also determine your conversion rate, or win rate, by using this formula:
(Closed-Won Opportunities) / (Total Opportunities that were both Closed-Won + Closed-Lost)
For example, let’s say you had 5 closed-won opportunities last month and you opened a total of 30 opportunities. Using the formula above, your win rate would be about 17%.
Knowing the number of opportunities you need to work on in any given month in order to produce the right number of closed-won opportunities will help create your ideal pipeline picture.
When you have that picture in your mind, you’re more likely to hit your sales target every month, quarter, and year.
Use this lagging metric to work in tandem with other leading indicators to help you track progress through to the final results.
#4. Pipeline Today vs. Closed-Won vs. Quota Gap
This leading metric looks at the current state of your pipeline by close date and identifies the number of opportunities you have in your pipeline and what stages these opportunities are in.
It also informs you about what the quota gap is given what you’ve already closed-won for the month.
You can use this information to prioritize your efforts. With it, you’ll know whether you need to focus on generating more opportunities in your pipeline or if you should focus on closing your current pipeline.
Bottom Line: You Track Sales KPIs to Drive Action.
Be your own sales coach by keeping score!
While the KPIs we’ve suggested here are by no means a full list, they should get you thinking about how your pipeline, process, and performance are directly connected.
Defining your sales KPIs is an important start, but KPIs alone can’t take your sales career to the next level.
It’s how you apply them and the actions they inspire that make KPIs so valuable.
KPIs on their own are just numbers on a dashboard. They only become meaningful when you dig deeper, start looking for underlying trends and themes, and use those insights to take the next step toward more powerful growth.
When you measure and keep score, you promote the performance you need, to get the results you want.