There’s been a lot of discussion about sales metrics, but what are sales metrics, and why are they important to a sales organization? Put simply, sales metrics are a collection of organizational and individual performance ratios and indicators. Sales metrics are calculated based on collected data that describes an organization’s historical and ongoing sales processes. Sales metrics are used to evaluate and analyze the performance of a sales organization, and to ultimately improve performance and revenue.
Sales metrics also add value to sales and marketing activities by adding an understanding of the efficiency of the processes. Choosing and developing sales metrics is necessary when managing a sales team, and those metrics are crucial for those who manage a sales pipeline.
Key Metrics That Matter to Any Organization
There are many articles and blogs that discuss which sales metrics companies should use: “Top 5 Sales Metrics,” “Top 10 Metrics to Use Now,” “The 5 Sales Metrics That Matter Most.” And while all these articles are helpful in outlining which sales metrics are important, what about the core sales metrics that can be used in any organization? Although we understand each organization is different, and therefore, will have different needs and requirements, there are still some commonalities between them.
After discussions with sales leaders and sales reps, we found that there are some metrics that across the board organizations will track. So here’s our list on Sales Metrics 101: Amount-Won, Forecast, Target and Pipeline.
The Amount-Won is the total value of opportunities that have been won during a selected period. The Amount-Won is an important indicator of the sales reps performance. Sales leaders can analyze individual performance, and begin to see patterns of behavior from their sales reps. Based on those patterns, sales leaders can take this information and turn it into actionable insight, such as improving coaching for sales reps who have a low amount-won rate.
The sales forecast is the value of sales an organization expects to achieve in a period of time. Forecasts are always performed for a defined period of time, e.g. a month, quarter or year, but will often be repeated throughout the forecast period. One of the most important aspects of the forecast is accuracy because without an accurate forecast, decisions on expenditure cannot be effectively made. An over optimistic forecast means that an early opportunity to control spending will have been missed. A safe forecast means that opportunities to accelerate crucial projects will have been lost.
The way to achieve the best forecast is to work with up-to-date data, to collaborate across the organization, and to use historic forecast accuracy to better understand the current forecast to eliminate any bias. As a result, in every forecast cycle organizations will improve by applying these techniques and this means the forecast will also improve as a result.
The target is what the organization aims to achieve in total revenue for a particular fiscal period. This means that the total value of opportunities that are closed-won should be at least as high as the target. The target is a benchmark and goal so organizations can assess the overall efficiency and effectiveness of the sales processes.
Setting a target is important, and what’s equally important is setting a target that’s realistic. The goal is to generate growth, but it has to be a number that’s achievable. If the target is set too high, organizations run the risk of potentially demoralizing the sales reps, and ultimately, missing the target.
Now that the target is set, it’s crucial to measure the pipeline to make sure numbers stack up so the target is delivered. With the target in mind, organizations can analyze and manage the sales pipeline to ensure the sales team is heading in the right direction.
The sales pipeline provides visibility into the performance of your sales team. It tells you the total amount of revenue that could potentially be closed by your sales team. Tracking this metric allows accurate approximation of growth over-time and revenue projections.
Monitor your Performance with the Right Sales Metrics
Sales metrics are crucial to keep teams, investors, and executives informed and fully aware of how a company is performing. An easy and effective way to stay on top of performance is to have key metrics on a comprehensive dashboard, that’s both accessible and easy to understand.
Vortini has an extensive library of metrics for your organization to choose from. Metrics can be easily modified and customized for you. Information that isn’t useful to your company can be removed and new metrics can be added.
Jess is a communications professional and Vortini’s lead content/web developer. Her current interests lie in the intersection of sales technology and machine learning. In her free time she reads a book-a-week, practices yoga, and is an avid gardener.