When you’re running a company that depends on sales, efficiency matters. That’s where sales metrics come in — these data-based measures help you gauge your company’s sales performance. That way, you can find ways to streamline sales and increase profits in a competitive marketplace. Whether you’re a small business or a larger corporation, sales metrics and key performance indicators (KPIs) can help you evaluate and improve your business.
Measure Sales Performance Using Metrics and KPIs
Sales metrics use financial data to measure your sales performance. One common sales metric is sales growth, which tracks how much your sales have increased during a set period. Another sales metric is the average purchase value, which measures the average amount of money that a customer spends during a single transaction. You can use sales metrics to:
- See how well you’re meeting sales goals
- Determine how profitable your company is
- Identify opportunities for improvement
KPIs are a type of metric. Metrics simply track a specific process in your business, such as performance or efficiency. KPIs are distinguished from other metrics by being “key” sales measures that are related to major priorities or goals of your business. For example, if a major goal of your business is to capture at least 20 percent of the available market share, you might use KPIs such as “number of new customers” or “customers who switched from buying from a competitor.
The exact KPIs and metrics you choose depend on your company and your goals. However, most businesses can benefit from using these four sales performance metrics:
1) Revenue by Product or Product Line
If you want to maximize your company’s profitability, it can be helpful to use a revenue by product or product line sales metric. If you’re selling more than one product, this metric helps you see at a glance which items are bringing in the most money. With that information, you can step up your sales efforts on your most profitable products or find ways to increase sales for slower-moving products. In some cases, you might decide to drop products that are under-performing.
2) Cost of Sales as a Percentage of Revenue
Your company’s cost of selling is all the money you spend to sell your products. It includes salaries, bonuses, and your sales staff’s work-related expenses. The cost of selling as a percentage of revenue metric shows you how much money you spend to bring in a specific amount of revenue. Imagine that for every $100,000 you earn in revenue, you spend $25,000 on sales. To find your cost of selling as a percentage of revenue, you divide $25,000 by $100,000 to get 25%. This metric tells you how efficiently your sales force is operating. The lower the percentage, the more efficient (and profitable) you are.
It’s helpful to track this metric over time. As your company becomes more efficient, the percentage should get lower. If your percentage is increasing, you might need to find ways to streamline your sales process. You might replace sales travel with video conferencing, for example. Another way to gauge your performance is to look at how your cost of selling metric compares to that of your competitors.
3) Action Metrics
Action metrics help you measure and evaluate the performance of your sales personnel. These metrics track any sales-related actions your salespeople perform on a regular basis. Examples of action metrics include such things as the number of contacts with potential new customers and the number of follow-up emails sent. Action metrics make it easy to measure your sales team’s productivity. It also helps you manage the team and figure out which actions are most effective in bringing in more revenue.
One important action metric for a sales team may be the number of calls they make per day. With this metric, you simply track how many phone calls each of your sales agents makes every day. You can compare this number to the agent’s overall sales revenue or to their customer retention numbers to see how well their activities drive towards sales outcomes. This helps you figure out how to guide your salespeople and increase their success rate. For example, imagine that Agent A’s sales drop significantly during a specific month. When you look at the calls per day metric, you see that it’s 50% lower than the previous month. In that case, you could help the employee learn to close sales faster over the phone, giving them more time to make additional calls and increase sales consistency.
4) Total Profit and Loss
When you’re evaluating your company, the total profit/loss metric is one of the most important key performance metrics for sales. This metric simply tells you how much money you earned and how much you spent during a given period of time. If you’re using QuickBooks Online, you can find this information quickly by running a profit and loss statement.
At the most basic level, this metric tells you whether you’re earning more than you’re spending. Over time, it helps you see if your profits are growing faster than your expenses — the ideal situation for most businesses. You can also use this metric to review how much you’re spending on different parts of your company. That way, you can find where you’re spending more or less than you budgeted for.
When you’re looking to build your business, tracking sales performance metrics can help. By keeping an eye on each metric over time, you can streamline your sales and find ways to bring in more revenue. Not sure where to start? Look to your accounting software to find important data about transactions and expenses. Using an accounting system, such as QuickBooks Online, you can generate a Profit and Loss statement automatically. Learn how today.