leadership

June 30, 2023

9 Best KPIs for Sales Managers

Summary

Gain valuable insights into these essential KPIs that sales managers should track for better performance analysis and data-driven decision making. Learn how these metrics can optimize sales strategies and contribute to business growth.

Have you ever spearheaded a professional project from beginning to end? Perhaps you’ve been tasked with leading a team to reach ambitious sales goals? If you’re nodding your head right now, chances are you’ve heard of key performance indicators (KPIs). While they may sound a little technical, KPIs are vital for helping businesses monitor their performance, measure success, and plan for the future.

So, what are KPIs exactly? Put simply, they’re measurable operations and sales metrics designed to evaluate a team or organization’s progress toward achieving defined goals. KPIs keep individuals and teams focused on strategic objectives, ensuring everyone knows the value of their work. Business leaders can also use KPIs to identify areas of improvement or success, concentrating their resources on the most cost-effective strategies. In the long term, organizations can use KPIs to maintain a healthy culture of accountability, set new targets, and strive for that all-important growth.

KPIs are especially helpful to sales managers. By analyzing a range of metrics and sales indicators, sales managers can evaluate the productivity of individual sales representatives, identify bottlenecks in sales funnels, identify sales optimization strategies, makes informed decisions about resource allocation and territory management, set realistic targets, and much more. Explicitly providing salespeople with KPIs is also a great way to ensure the whole team is onboarded with the same goals in mind.

While KPIs are a valuable tool, we know that getting to grips with data analysis can be a little tricky. To tackle this problem, we’ve crafted a need-to-know list of the best KPIs for sales managers. If you’re looking to enhance your organization’s customer relationship management tactics, boost sales revenue, and supercharge lead generation, you’ve come to the right place.

9 Best KPIs to Drive Impact

Before you start measuring the success of your sales efforts, you must decide what metrics you will measure. You must choose KPIs that will deliver the greatest impact for your purposes, as this will save you time, money, and effort in the long term. So, what are the best KPIs in sales contexts? Here are some of our top examples of KPIs used in sales departments:

1. Retention Rate

Your retention rate measures the percentage of customers or subscribers who continue to use your company’s goods or services over a specified period. Taking into account new additions and initial engagement rates, retention rates help businesses identify sales patterns that may impact growth and brand popularity.

Formula: ([C – N] / S) x 100

Wherein:

C = the total number of customers engaged at the end of the specified period.
N = the number of new customers acquired during the specified period.
S = the number of customers engaged at the start of the specified period.

Regardless of the sector in which you operate, retention rate is an important metric that reflects customer satisfaction rates. Sales managers who achieve high retention rates can celebrate the fact their customers are loyal and sufficiently impressed with their organization’s services. Those with low retention rates will need to dig a little deeper into the lack of customer loyalty, especially if they run a subscription-based service.

Retention rates can also be used to measure employee turnover if you replace the number of customers with the number of employees in your team. This metric is handy if you’re in charge of a big team and want to assess employee satisfaction and identify costly retention issues. The higher your turnover rates, the more you’ll need to pay on recruitment processes – something which will impact your profit margin.

2. Churn Rate

Churn rate tracks the rate at which customers stop using a company’s products or services within a specified timeframe. Also known as customer attrition rate, churn rate is especially useful for subscription-based businesses such as streaming services or gyms looking to assess the number of people canceling their memberships.

Formula: (C / S) x 100

Wherein:

C = number of customers or clients lost within a specified time period.
S = number of customers or clients held at the start of the specified time period.

Measuring the churn rate is crucial for catching signs of customer dissatisfaction that could harm your revenue stream. If you have a high churn rate, you’ll need to investigate the potential problems encouraging customers to leave and take proactive steps to turn the tide.

3. New Leads

A sales manager’s new leads are potential customers who have expressed an interest in purchasing the relevant company’s goods or services. Obviously, measuring your number of leads doesn’t require any fancy formulae. However, you’ll need to implement a consistent strategy for capturing and tracking new leads, such as a lead generation form, lead magnet, or customer relationship management (CRM) software. These tools will ensure your data tells a genuinely insightful story.

As well as providing sales managers with evidence of their (at least partial!) success, new lead figures can help companies identify demographic trends and make data-driven decisions about their marketing campaigns and communications strategies. For example, a low new lead rate suggests you may need to optimize your lead magnet or create more targeted communications.

4. Monthly Recurring Revenue

Monthly recurring revenue (MRR) measures how much money a business can expect to generate every month as a result of its subscription-based offerings.

Formula: The calculation for working out MRR will depend on your pricing structure. You’ll need to consider whether to limit your calculations to active subscriptions or other recurring revenue sources. Similarly, you may need to account for promos or discounts commonly applied to subscription plans. A simple formula could be:

Monthly price x Number of active subscriptions = MRR for single-subscription model

If your business offers several subscription plans, you’ll need to work out the MRR for each individual plan and carry out the following calculations:

MRR Plan 1 + MRR Plan 2 + MRR Plan 3 etc.

Tracking MRR helps sales managers ascertain the overall health of their subscription model, work out which plans are most cost-effective, and optimize retention strategies.

5. Upsell and Cross-Sell Rates

Upsell rates measure the percentage of customers who choose to upgrade their subscription plan or purchase higher-priced products than they were initially intending. As every sales manager knows, a talented upseller is excellent at convincing customers to part with more of their money, helping to generate more revenue per transaction. If you identify any sales reps with high upsell rates, it’s worth doing everything in your power to hang on to them!

Formula: (Number of customers who decided to upgrade / Total number of customers) x 100

Cross-sell rates, on the other hand, measure the percentage of customers who purchase more products or services than they originally intended. Again, convincing a paying customer to buy more products is a sign of an excellent employee committed to reaching their sales performance targets.

Formula: (Number of customers who made extra purchases / Total number of customers) x 100

Analyzing upsell and cross-sell rates helps identify effective sales strategies, measure a sales team’s performance, and encourage sales reps to push goods and services even harder. In the long term, keeping track of this metric could enhance revenue growth and ensure you differentiate your business from close competitors. For example, your sales reps could improve their chances of upselling by offering an attentive customer experience and tailored recommendations.

6. Sales Cycle Length

Sales cycle lengths represent how much time it takes for sales opportunities to move along from the initial contact with a potential customer to a completed deal that generates revenue.

Formula: Total number of days from initial contact to completed deal / Number of closed deals

Measuring sales cycles can help businesses assess the efficiency of their sales process. Ideally, businesses should aim to keep their sales cycle as short as possible, allowing them to handle high volumes of customers at once. You can also use the sales cycle length to generate sales forecasts, budgets, and resource allocation plans.

7. Customer Acquisition Cost

Customer acquisition cost (CAC) identifies the average cost a company incurs to acquire a new customer, incorporating the cost of sales and marketing activities. For example, you’ll need to add up the cost of paid social media ads, follow-up emails, and other outreach activities.

Formula: Total expenses incurred by sales and marketing team / Number of new customers acquired

Analyzing your CAC will assess the efficiency of your sales and marketing efforts, helping you optimize your resource allocation and set realistic financial goals. If you’re planning to approach investors for funding or grants, they may use your CAC data to decide whether your business is scalable and likely to thrive.

8. Customer Lifetime Value

Customer lifetime value (CLV) tells sales managers how much net profit they can expect to gain from the average paying customer throughout their entire relationship with the business. It’s useful to assess CLV alongside CAC to measure the long-term impact of acquiring and retaining customers.

Formula: Businesses tend to measure customer lifetime value KPIs differently depending on their business model. For example, companies that frequently use discounts and promos may need to make financial adjustments. Here’s a basic formula for businesses of all types:

Average Purchase Value x Average Purchase Frequency x Average Customer Lifespan

Wherein:

Average Purchase Value = Amount of revenue generated per individual transaction.
Average Purchase Frequency = Average number of purchases a customer makes within a specified period.
Average Customer Lifespan = Average duration of a customer’s relationship with a company.

Keeping track of CLV helps sales teams identify their most valuable customers and focus on nurturing long-term, sustainable relationships. CLV can also help businesses decide how much they are willing to invest in new and current customers. If the CLV is low compared to the CAC, they’ll need to reassess their marketing and sales tactics. Some sectors are primed to attract high CLV scores, while others are likelier to attract one-time customers who don’t need to make repeat purchases. Taking such factors into account will help business leaders draw up detailed, realistic growth plans.

9. Close Ratio

Last but not least, the close ratio measures the percentage of sales opportunities that lead to successful conversions. Also known as conversion rate, the close ratio helps sales managers ascertain the effectiveness of their sales team.

Formula: (Number of deals closed / Number of sales opportunities) x 100

Keeping a close eye on your close ratio will help you track sales performance and important trends. You can identify your best individual sales reps, as well as those who may require a little extra assistance. Close ratio metrics can also help you with sales forecasting and process optimization. Spotting the stages at which customers are most commonly lost, for example, will help you come up with targeted solutions that benefit the whole team.

Master KPIs with Maven

As you can see, measuring important KPIs is a vital task for a sales manager. However, with so many potential KPIs available, how can you ensure you’re analyzing the right numbers and drawing accurate conclusions? This is where Maven comes in.

Maven is an expert-led learning platform ready to teach you everything you need to know about sales KPIs, customer retention, reaching sales targets, and much more. Why not join our AI-Powered Sales course to supercharge your sales operations and save money and time in the process? Our Business Building Master Class is another fantastic course for business leaders looking to scale their businesses through informed, KPI-driven strategies. Finally, our Crash Course in GTM Metrics is the perfect primer for business professionals keen to set better goals and quickly get to grips with sales KPIs.