Sales Key Performance Indicators (KPIs)
SALES KEY PERFORMANCE INDICATORS AND METRICS
A Sales KPI or metric is a performance measurement that is used by sales teams and by the top management to track the effectiveness of relevant sales activities within a company. These measures help in optimizing your sales performance, sales funnel and sales cycle length.
This set of quantifiable measurements are used to gauge a company’s overall long-term performance.
They help determine a company’s strategic, financial, and operational achievements, especially compared to those of other businesses within the same sector.
Key Takeaways:
- Key performance indicators (KPIs) measure a company’s success versus a set of targets, objectives, or industry peers.
- KPIs can be financial, including net profit (or the bottom line, gross profit margin), revenues minus certain expenses, or the current ratio (liquidity and cash availability).
- Customer-focused KPIs generally center on per-customer efficiency, customer satisfaction, and customer retention.
- Process-focused KPIs aim to measure and monitor operational performance across the organization.
- Generally speaking, businesses measure and track KPIs through business analytics software and reporting tools.
I like to referr to this as key success indicators (KSIs), KPIs vary between companies and between industries, depending on performance criteria
For example, a software company striving to attain the fastest growth in its industry may consider year-over-year (YOY) revenue growth as its chief performance indicator. Contrarily, a retail chain might place more value on same-store sales, as the best KPI metric in which to gauge its growth.
Types of Key Performance Indicators (KPIs)
Financial Metrics
Key performance indicators tied to the financials typically focus on revenue and profit margins. Net profit, the most tried and true of profit-based measurements, represents the amount of revenue that remains, as profit for a given period, after accounting for all of the company’s expenses, taxes, and interest payments for the same period.
Calculated as a dollar amount, net profit must be converted into a percentage of revenue (known as “net profit margin”), to be used in comparative analysis.
For example, if the standard net profit margin for a given industry is 50%, a new business in that space knows it must work toward meeting or beating that figure if it wishes to remain competitively viable. The gross profit margin, which measures revenues after accounting for expenses directly associated with the production of goods for sale, is another common profit-based KPI.
A financial KPI that’s known as the “current ratio” focuses largely on liquidity and can be calculated by dividing a company’s current assets by its current debts.
A financially healthy company typically has sufficient cash on hand to meet its financial obligations for the current 12-month period. However, different industries rely on different amounts of debt financing, therefore a company ought to only compare its current ratio to those of other businesses within the same industry, to ascertain how its cash flow stacks up amongst its peers.
Customer Metrics
Customer-focused KPIs generally center on per-customer efficiency, customer satisfaction, and customer retention.
Customer lifetime value (CLV) represents the total amount of money that a customer is expected to spend on your products over the entire business relationship.
Customer acquisition cost (CAC), by comparison, represents the total sales and marketing cost required to land a new customer. By comparing CAC to CLV, businesses can measure the effectiveness of their customer acquisition efforts.
Process Performance Metrics
Process metrics aim to measure and monitor operational performance across the organization.
By dividing the number of defective products by total products produced, for example, businesses can measure the percentage of defective products. Naturally, the goal would be to get this number down as low as possible.
Throughput time represents the total amount of time it takes to run a particular process. For example, a drive-through restaurant throughput can measure how long it takes to service an average customer; from the time they make their order to the time they drive away with their food.
Limitations of Using Key Performance Indicators (KPIs)
Some of the disadvantages to using KPIs include:
- The long time frame required for KPIs to provide meaningful data
- They require constant monitoring and close follow-up to be useful
- They open up the possibility for managers to “game” KPIs
- Quality has a tendency to drop when managers are hyperfocused on productivity KPIs
- Employees can be pushed too hard aiming specifically for KPIs
Special Considerations
KPIs do not necessarily have to be solely tied to financial data.
While profits and debt levels are indeed important key financial indicators
In this overview, I will show you the most critical KPI examples for sales that enables you to manage your sales more effectively and optimize as well as analyze every single sales process in detail. In order to make a complete picture of your sales development and data, we suggest you create a professional sales dashboard that will centralize your KPIs in an interactive form and enable you to dig even deeper. That way, you will be able to control your sales activities, identify potential bottlenecks, and optimize your sales BI processes more effectively. Besides, online reporting software such as datapine will ensure your reports are automated, easily sharable, and deliver up-to-date KPI data.
Here is the complete list of the top 17 sales KPIs and metrics that every sales rep and manager should know:
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