Sitting at the intersection of product and customers; strategy and revenue or even top management and employees, your sales team is the driving force behind your business. The key to a top-performing team lies in its data-savviness and ability to measure its performance. In other words, your sales team should constantly be keeping an eye out for some key metrics.
Today, we bring to you today the top 10 metrics a sales team should absolutely track to ensure you are aligning your sales with your business’ growth and strategy. The key metrics we present today span the big four responsibilities of your sales team ranging from measuring their activity, their sales to the efficiency of the sales pipeline and their lead generation processes.
MRR Growth Rate
Average Revenue Per User (ARPU)
Lead Velocity Rate (LVR)
Average Deal Size
Sales Cycle Length
Customer Acquisition Cost (CAC)
Customer Churn Rate.
The MRR Growth Rate measures the change in MRR compared to a previous period in time. The MRR, or monthly recurring revenue, is the total revenue generated by subscriptions over the course of each month.
While the MRR will allow you to gain key insights into the subscription behaviour of your customers. The MRR’s growth rate has gained great popularity within sales teams because it allows teams to track the rate of growth of your business. This metric is great to understand how fast your business’s revenue is growing. It will help management with decision making, scaling the business and predictability.
To measure MRR growth rate, you simply subtract from the current MRR last month’s MRR as shows here:
The formula to find the MRR is the following:
When looking at the MRR, we should look at its trend over time. This trend will reveal critical information about the health of your business as it is directly related to the amount of revenue coming in. Looking at industry benchmarks can be useful as this metric varies with the stage of growth of your business, taken out of context this metric can be misleading. A reasonable target of growth rate has been deemed to be between 10-15%.
The Average Revenue per User measures total revenue generated for each active user. In general, the metric is calculated on a monthly basis.
While the MRR will give you an overview of your business’s performance, the ARPU dives into granularity as it focuses on the average spending of each of your customers. The ARPU tells you exactly how much each user consumes of your business. It helps you understand your customer better by trickling down groups of customers and their preferences. A low ARPU indicates that you are spending a lot on marketing, supplies and support but also that you will need to acquire thousands of users in order have a strong MRR. On the other hand, a high ARPU ensures a longer CLV (Customer Lifetime Value). To resume, the ARPU gives you direct look into the your financial stability, your price alignment and the efficiency of the sales and marketing teams.
To calculate this metric, you can use the MRR formula displayed in the section above.
When looking at the ARPU, we should look at a graph. This graph can reveal prices and packages that some segments/cohorts of customers tend to select more often than others. Trends can also help you identify upsell and down-sell trends.
Quota Attainment measures how long it takes for your sales team to hit their target quota within a certain time frame (usually monthly or quarterly).
Knowing your business’s quota attainment allows your sales team to forecast their future revenue by knowing when they will achieve their quota. It is also a great boosting metric as usually sales are compensated when they achieve numbers above their quota.
You should be displaying the sales quota attainment metric as a trend. In fact, observing how this trend evolves reveals a lot about your sales team’s ability to reach their quota as much as about what management’s expectations about their sales teams skills and processes are. It helps align overall company objectives with sales effectiveness.
The Lead Velocity Rate (LVR) represents the growth of the number of qualified leads on a monthly basis. Simply said, the LVR tells you how many users you convert to actual customers month over month.
The Lead Velocity Rate will gives you insights into your pipeline’s efficiency and your user growth perspectives for the future. The key advantage of this rate is its real-time characteristic: at any given time you are given a clear view of your incoming revenues month after month. Contrary to MRR and other lagging revenue metrics, it is easy to react and generate more leads before the month’s end. Additionally, the LVR is a reliable predictor of the incoming sales revenues: increasing the total qualified leads month after month can only lead to higher revenues and growth prosperity.
Generally calculated with the MRR Growth Rate we discussed earlier, the formula for the LVR is the following:
Lead Velocity Rate varies heavily across different industries and services. It is easier to keep track of the metric as a trendon a monthly basis and quarterly basis. On a monthly basis in order to be able to react on sales leads and make use of the “real-time” advantage of the LVR. On a quarterly basis to have an overall view of the growth of your business and their sales performance.
The Win Rate metric measures the success of your sales, as it represents the percentage of closed deals.
Within any sales team, the Win Rate is often the most frequently looked at metric. This is only logical as not only does a high win rate translate into a healthy and well-performing business, but it also helps win a higher market share. The win rate also gives a clear vision into which practices close more or less deals, giving insightful information about which strategies or time periods bring more business or not. The win rate’s state gives two key information to the business: the level of skills of your sales team and the evaluation of your targeting and market strategies.
There exist many different ways to calculate win rates, often it depends on the variables you include and the state of your business. The most common formula is the following:
There are different ways to look at your win rate. A great way to make sure you get all the information from that metric is to track it on a monthly basis against your competitors’ estimated win rate. This will allow you to 1) keep track of your own win rate growth and 2) determine to what rate you win/loose deals against your competitors and to which competitors your deals are going too. A histogram showing the win rates of your business and its’ competitors each month would be a good indicator of your competitiveness.
The Average Deal Size, also referred to as the Average Selling Price, is the average dollar amount of each closed deal.
The Average Deal Size tells you how you contracts evolve (or not) on different time periods. Depending on where you want to be in the next 6 months, you want to have a good control on this number. The Average Deal size not only tells you what direction your pipeline is heading but it will also help track the progress of your different sales team members. The metric is also linked to the Sales Cycles (we discuss next) as the larger the deals, the longer their sales cycles will take and vice versa.
The Average Deal Size can be looked at in two manners:
Sales Cycle Length is time it takes a new customer to move from the opportunity stage to a closed deal, on average.
The length of the sales cycle is very helpful when it comes to building sales forecasts, sales targets and measuring the efficiency of your sales processes. It gives a clear view into potential bottlenecks in your sales pipeline (awareness, intent, desire and action). With this in hand, it becomes easier to improve your processes and understand your pain points. Typically long sales cycles often stem from wrong sales channels, bad team training, poor leads or wrong timing.
The Sales Cycle Length metric is best compared as a single entry compared to previous months. By doing this, your sales teams can easily track the change in the Sales Cycle Length over a certain period of time.
The Sales Conversion Rate measures your sales team’s ability to convert leads into customers.
Conversion rates are critical to align your marketing & sales teams and boost their performance. Imagine the marketing team manages to bring in 150 leads for your sales team to convince. After a certain period of time (usually a month), sales team manages to win 15 of those leads. The conversion rate is of 15% and tracks the progress of sales and marketing teams efforts. Conversion rates are great to attribute leads to particular marketing activities and channels by measuring the metric by certain campaigns, channels, cohorts, etc. Being aware of this rate will help your business increase conversions in different stages of your product life cycle by gaining insights on what works or not with your marketing campaigns.
Left alone, the conversion rate does not make much sense. It is good to look at it either as a trend of your past performance over time or compare it to other industry benchmarks.
The Customer Acquisition Cost is the amount of money it costs your company to acquire a new customer.
This is one of the first metrics you’ll want to measure. Measuring this metric allows you to make important decisions for keeping your company afloat. For example, you don’t want to be spending too much money on customer acquisition if it doesn't yield a profit. This metric helps you decide how much money should be spent on attracting customers while keeping your company profitable.
CAC is calculated by adding the costs associated with converting prospects into customers (marketing, advertising, sales personnel, and more) and dividing that amount by the number of customers acquired. This is typically figured for a specific time range, such as a year or a fiscal quarter.
When looking at Customer Acquisition Costs, looking at a number at a specific point in time won’t get you far. It should be displayed:
Customer Churn, or customer turnover, is the number of customers you’re losing in a predetermined time period.
Churn rate is a dreadful, but super important metric. It allows you to know how many customers are deciding to leave the business and helps you understand how this is impacting revenue. More importantly, it enables you to elaborate strategies to retain your customers.
Example: if your business had 250 customers at the beginning of the month and lost 10 customers by the end, you divide 10 by 250. The answer is 0.04. You then multiply 0.04 by 100, resulting in a 4% monthly churn rate.
Your churn rate should be displayed as a trend. In fact, you need to be able to compare the churn rate across different time periods. This allows noticing when there is a spike in the churn rate so that you can act quickly upon it.
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