In the words of famed management consultant Peter Drucker, “what gets measured gets managed.” That holds true for sales results and the people responsible for driving them — whose efforts go a long way in determining whether a business is profitable. Fortunately, most businesses already have plenty of sales data at their disposal. The key is to identify which metrics are most useful to the business and how to interpret them to assess and forecast performance. Top-performing sales teams use their data to remain laser-focused on achieving or exceeding their sales goals.
What Are Sales Metrics?
Sales metrics are data points that measure and evaluate an individual, team or company’s sales performance over a period of time. In the big picture, sales metrics help an organization analyze the success of its sales initiatives, as well as identify areas that might need improvement. They also inform sales strategies, monitor goals and objectives and track progress, while providing other critical business insights.
Sales Metrics vs. Sales KPIs
While closely related, sales metrics and sales key performance indicators (KPIs) are not synonymous. Sales metrics measure the sales-related performance and activities of an individual, team or company over a period of time.
A sales KPI is type of sales metric used to measure performance against strategic goals. For example, if a business seeks to boost sales by 15%, then sales growth is the KPI and sales revenue is the metric.
Why Is Tracking Sales Metrics Important?
By analyzing sales metrics, sales leaders can evaluate what is and isn’t working in the sales process. Armed with this information, sales leaders can optimize their teams’ activities to improve overall sales performance. For example, if a metric shows the sales cycle is taking longer than average, a sales leader could investigate, identify and potentially eliminate any bottlenecks causing the slowdown.
In addition, sales metrics can inform how decisions are made with sales reps, sales activities, product/service and within departments. For example, sales leaders can use these metrics to evaluate each team member’s strengths and weaknesses, or their activities to better manage processes, adjust tactics and strategies, and improve accountability for sales outcomes. Data-driven conversations with sales teams are typically more effective, and have fewer disputes, than those without the metrics to back them.
What Are the Most Important Sales Metrics?
There is not a single sales metric critical for all companies, even within the same industry. Rather, the sales metrics a business chooses depends on its goals. For example, if a business’s goal is to have every sales rep meet their quotas, then metrics that track the percentage of deals each person closes would be useful. If the organization wants to land larger deals, it might track average deal size to see whether its approach is working with larger customers. As businesses grow or branch into new markets, metrics can be added or eliminated.
While companies and sales teams will want to choose the metrics that best match their sales goals, some sales metrics are useful to most organizations. They include:
- Annual Recurring Revenue
- Average Revenue Per User
- Quota Attainment
- Win Rate
- Conversion Rate
- Sales Cycle Length
- Average Deal Size
- Average Profit Margin
- Deal Slippage
- Churn Rate
- Net Revenue Retention Percentage
- Pipeline Coverage
- Sales Productivity Metrics
- Lead Scoring
- Sales Linearity
Annual recurring revenue (ARR) — often used by subscription-based businesses or software-as-a-service (SaaS) models — reflects the revenue per customer for each year of a multiyear contract. Sales and finance leaders can track ARR year over year to forecast revenue and evaluate growth prospects. Companies can also analyze ARR for specific segments, such as product line, region or type of customer (new, current, etc.), to gauge specific performance.
ARR accounts for the overall contract cost, plus upgrades, minus losses from downgrades and cancellations. It excludes one-time fees, variable fees and subscription consumption fees.
Here is the formula to calculate ARR:
Annual recurring revenue (ARR) = Total value of contract / Number of contract years
For example, the ARR for a five-year, $25,000 contract would be $5,000.
Average revenue per user (ARPU), or average revenue per account (ARPA), is the amount of revenue a company generates per user or account in a given period. Like ARR, ARPU can be segmented for insights into which customer groups or regions, for example, generate more revenue and which ones need improvement.
ARPU growth over time often indicates that customers are willing to pay more for a company’s services or products. If ARPU decreases, a sales team might consider offering a higher-priced premium service or add-on that complements the existing service.
Here is the formula to calculate ARPU/ARPA:
ARPU/ARPA = Total revenue / Average number of users or accounts
For instance, if a company has $500,000 in total Q2 revenue and an average of 5,000 customers, its ARPU for the quarter is $100.
Quota attainment is the percentage of sales that reps close in a given period compared to their set goals, or quotas, for that time. In other words, it measures how close sales reps were to meeting their goal. Sales leaders and reps can use this metric to adjust their sales forecasts, evaluate top performers or underperformers and modify sales approaches in order to reach targets. Quota attainment can also be used to indicate how well specific groups, or the sales organization as a whole, performed.
Here is the formula to calculate quota attainment:
Quota attainment = (Sales from actual bookings / Sales quota) x 100
For example, if a salesperson closes $35,000 in deals for a month in which $50,000 is the goal, their quota attainment is 70%.
Win rate is the percentage of the total number of quoted deals that turn into sales. It measures a sales team’s effectiveness in converting proposals into actual sales. Sales managers also can track win rates by sales rep to measure individual performance and to calculate the number of future sales opportunities required to meet targets.
Here is the formula to calculate win rate:
Win rate =
(Number of wins / Number of quoted opportunities, lost and won) x 100
If a salesperson closes 10 deals out of 40 that were quoted, that means their win rate is 25%.
In sales, the conversion rate is the percentage of qualified leads, or potential customers, that become new, paying customers. This metric demonstrates the quality of leads and helps measure the performances of individual salespeople, sales teams and marketing. Tracking conversion rates can help sales teams assess the effectiveness of lead-generation activities and lower customer-acquisition costs.
Here is the formula to find conversion rate:
Conversion rate = (Number of new customers / Number of qualified leads) x 100
For example, if a salesperson converts 10 out of 50 qualified leads into new customers, the conversion rate is 20%.
Sales cycle length is the amount of time, on average, it takes to complete a sale, starting from a rep’s first interaction with a potential customer to a closed sale. Sales leaders and teams can use this metric, for example, to spot possible delays in the sales cycle — which could put sales at risk — and then adjust their processes. Sales cycle length data can also help improve sales forecasting.
Here is the formula to calculate the sales cycle length:
Average sales cycle length =
Total number of days to close all deals / Total number of deals
In practice, let’s say four deals close in one month. Deal A closes in 10 days, Deal B closes in 15 days, Deal C closes in 20 days and Deal D closes in 25. The total number of days to close these deals is 70. Divide 70 by the total number of deals – four – and the average sales cycle length is 17.5 days.
Average deal size is the average dollar amount generated per closed deal. This metric is useful for projecting sales revenue. Teams can estimate how many deals they must close to reach their monthly quota.
Average deal size also is useful for developing a sales growth plan. Sales managers can review average deal size by individual rep to identify larger deals that might require close monitoring and additional resources or to spot which sales reps would benefit from upselling guidance.
Here is the formula to calculate average deal size:
Average deal size = Total sales revenue / Total number of sales
For example, if a salesperson closes 10 sales deals for a total of $100,000, then the average deal size is $10,000.
Average profit margin represents how much of overall sales revenue is converted into profit. As with other metrics, a business can measure its average profit margin by products, services and categories sold, sales territory and salesperson.
Here is the formula to determine average profit margin:
Average profit margin =
Net income (overall or for specific areas) / Net sales (overall or for specific areas) x 100
Net income is derived by subtracting a particular segment’s total expenses from its total revenue. Net sales is calculated by subtracting the segment’s total returns or refunds from total sales. If a specific sales territory generates $150,000 in net income on net sales of $500,000, then its profit margin is 30%.
Deal slippage refers to the percentage of commitment-stage deals or orders that don’t close within the forecasted range — for example, a client commits to a deal in Q3 but then defers the deal to Q4. Sales teams consider deal slippage when preparing sales forecasts.
Here is the formula to find deal slippage:
Deal slip rate =
Number of deals that didn’t close / Number of deals expected to close x 100
For example, if 100 deals were in the commitment stage but 20 did not close as expected, the deal slip rate is 20%
Churn rate is the percentage of customers who cancel or don’t renew their contracts or subscriptions for a company’s services or products. This critical sales metric reflects a company’s ability to retain customers. Finance leaders also watch churn rates due to the potential impact on a company’s sales and profits. Rising churn rates could indicate a problem with a company’s offerings or sales approach, or it could mean the company is losing business to competitors.
Here is the formula to calculate churn rate:
Churn rate = Number of customers lost / Starting number of customers x 100
For example, if a company begins Q3 with 5,000 customers and ends Q3 with 4,000 customers, then the difference in the number of customers (1,000) indicates a 20% churn rate.
Net revenue retention represents the percentage of a company’s recurring revenue derived from its existing customer base over a given period. Typically measured by subscription-based businesses, net revenue retention factors in changes in revenue due to upgrades, downgrades and cancellations. Sales and finance leaders use this metric to assess how well teams renew and expand revenue from their customer bases.
Here is the formula to calculate net revenue retention percentage:
Net revenue retention percentage = Renewal revenue at beginning of period + upsell revenue – churn / Renewal revenue at beginning of period x 100
For example, if a company has 300 customers that each pay $2,500 per month, its net revenue for the month is $750,000. During March, 10 customers add a $2,000 monthly upgrade (+$20,000; renewal revenue total = $770,000), 10 downgrade by $500 each ($770,00 – $5,000; renewal revenue total = $765,000), and 10 customers cancel ($765,000 – $25,000; renewal revenue total = $740,000). The net revenue retention percentage is 96.1% ($740,000/$770,000).
Pipeline coverage refers to the value of a sales rep’s potential sales opportunities relative to their quota for a given period. It is expressed as a multiple of the salesperson’s quota. If a salesperson has $300,000 of pipeline with a quota of $100,000, then they have 3X pipeline coverage. This information can help sales managers adjust tactics and strategies to meet quotas.
Here is the formula to calculate pipeline coverage:
Pipeline coverage = Potential sales in pipeline, in dollars / Sales quota, in dollars
Sales productivity metrics track sales team activities. Examples include the percentage of time spent on selling versus non-selling activities, daily average number of sales tools used and percentage of hot-lead follow-ups. Sales leaders use these metrics to assess team and individual sales performance and prospect engagement.
Lead scoring is the process of evaluating and ranking a lead based on how likely it is to turn into a sale. Lead-scoring systems assign point values to leads based on a variety of factors, such as buyer behavior, frequency of interactions, demographics and company information. The higher the points, the better the lead. Lead qualification helps sales and marketing teams focus their efforts on promising prospects rather than those with little chance of converting.
Software and specifically CRM systems that automate lead scoring using predictive analysis remove the complexity, time commitment and chances for errors common with manual lead scoring. In addition, scoring “gets smarter” as more data becomes available.
Sales linearity refers to nurturing and closing deals in a predictable, steady flow rather than in a rush of sales, typically near the end of a given period. When most deals are crammed into the last few days of a period, it can negatively impact a business’s sales forecasting, resource planning, cash flow and profit margins.
By increasing sales linearity, sales leaders can more accurately forecast sales and sales reps can better manage their pipelines to keep leads moving through the sales cycle. Greater sales linearity also helps increase cash flow and profit margins because there’s less need for last-minute discounts as a period end nears. Some sales leaders offer incentives, such as extra commission for reps or premium packages for customers, for those who close early in the quarter.
Choosing the Right Sales Metrics to Track for Different Roles
The “right” sales metrics vary by role or function. The key is to choose a few of the most meaningful metrics that will help move a business forward. Sales and marketing leaders who plan long-term sales strategy and hone tactical sales approaches can benefit from monitoring both leading and lagging indicators for a full picture of historical results and future sales outlook. Sales metrics such as sales growth, ARR, churn rate, net revenue retention rate and average profit margin are particularly important to them.
Sales metrics such as pipeline coverage, win rates, average deal size, calls per rep and quota attainment can help sales team managers optimize day-to-day activities to reach sales goals. At the salesperson level, metrics such as pipeline coverage, win rate, conversion rate and sales targets can help reps manage their own sales activities, as well as help managers evaluate individual and team performance.
How to Track Sales Metrics
Sales metrics change quickly and require regular monitoring for the most up-to-date analysis. Here are a half-dozen steps for tracking sales metrics:
- Select a few key sales metrics that are the most important sales drivers for the organization.
- Decide how frequently to measure these sales metrics. For example, pipeline coverage may be reviewed weekly or monthly while the number of sales calls is reviewed daily.
- Aggregate sales data. The most effective method is to rely on real-time reporting with CRM or sales analytics software. The key is for calculations to be consistent so comparisons are meaningful.
- Use data visualization tools. When presented in visual format, data is processed quickly and more efficiently, creating more of an impact on sales teams. Certain powerful CRM software provides customizable, role-based, real-time dashboards that track metrics from opportunity stage to closed sale and customer service.
- Analyze the data and look for trends. For example, is the average revenue per account increasing or decreasing month over month?
- Apply results to improve sales results. Look for areas that require improvements. If average revenue per account is decreasing, what action can the business take to stop this trend and increase revenue?
Tracking Sales Metrics With Software
A powerful solution like NetSuite CRM automates the entire lead-to-cash cycle, capturing data along the way. It tracks sales metrics meaningful to your business in real time and displays them via customizable dashboards that are easy to understand. With the right software, sales teams can continuously monitor performance, improve sales forecasting and adjust their approach to achieve or even exceed their sales goals.
Sales metrics are especially critical in business since sales are the primary source of the company’s revenue and profit. They can be used to measure the performance and effectiveness of an entire sales organization, individual teams and reps, and specific products. The right mix of metrics provides a solid understanding of revenue drivers, which levers to pull to achieve sales goals, and areas that need improvement.
Sales Metrics FAQs
What are sales metrics?
Sales metrics measure the sales-related performance and activities of an individual, team or company over a period of time. They can measure a number of things related to revenue, quotas and customer retention.
What are KPIs for sales?
Sales KPIs are specific sales metrics with a targeted goal. They are strategic and intended to drive action toward a predetermined goal.
How do you track sales metrics?
Sales metrics can be tracked manually, but the most accurate, efficient and real-time method is with software such as CRM.
What are the five most important metrics for performance of the product?
The five most important metrics for performance of a product vary by company, product and industry. The key is to identify the biggest drivers of business, product and service success and monitor those metrics on a regular basis. Examples include revenue, profit margin and conversion rate.