5 Sales Metrics to Rule Them All

5 Sales Metrics to Rule Them All:from Wide Angle by Timur Hicyilmaz
This is the time of year when many are thinking about what goals they’re going to commit to. And part of this process also involves a consideration of the metrics the organization needs to measure and report on. This is always a tricky thing since the number of metrics is endless and you don’t want to settle on a dashboard that simply reports on what has happened and that offers no insight into how things are developing.
The solution is to try and model out the sales process and provide different individuals with numbers that will make it easier for them to deliver against their commitments:

• For reps, the metrics will be tend to be around the pipeline and will want to contain a mechanism for evaluating the quality of the opportunity as well as the usual pipeline metrics that are more focused on volume.

• Similarly, managers will want to have access to aggregate and trend information so that they can help achieve the desired outcomes. We would always recommend that any manager dashboards also include some softer measures, assessing the development needs of individual reps, as well as a measure of the quality of the relationship between the manager and the rep.

That said, I do believe that there are some metrics that absolutely every sales leader should know and track since they provide crucial clues as to what is happening. This is a personal list, and so I’d love for people to chime in and nominate some of their favorite metrics and why they like them.
The list is as follows:
1) Gross margin/sales per head
Measuring margin per head (revenue in a pinch) is fairly obvious and blunt, but it remains a crucial measure of the sales force’s efficiency.
Basically, this metric needs to show an increase each year and really comes into its own in the early stages of any decline in demand when it is very tempting to deliver revenue by simply throwing more commercial resources behind the sale. Instead, I would argue that a decline in this metric is always cause for some alarm and that leadership first needs to dispassionately identify the cause of the decline before committing to any further resources: chances are that something more fundamental is wrong.
2) The sales cycle
This is a more difficult metric to report on since few companies do a good job of tracking how long individual deals take to come to a resolution (or increasingly, simply wither away in no decision). That said, sales cycle time is also one of the best leading indicators of market demand. Interpreting it requires some detachment, but an across the board improvement of the sales cycle (especially with less good fit customers or less capable reps) is likely an indicator of increased demand and it’s a good reason for investigating whether or not the sales force needs to ramp up to fulfill the latent demand.
Conversely, if the sales cycle slows down across a large group (and especially your star reps), then this is a definite sign that the market has slowed. For the sales leader, the challenge will be to resist to ask for more resources but to start a more fundamental process of trying to determine how customer preferences might have changed. And if you do not have systems to measure sales cycle time, you can do worse than to periodically survey people as to whether their sales cycles are changing – you are looking for the systemic change, not the absolute number.
3) Share within different categories per customer or market segment
Long-term success in sales isn’t just about the odd blockbuster; it’s also about deepening relationships and becoming more involved with existing customers. Improvements in share are superb indicator of the quality of the relationship. Declines in share tend to indicate that a competitor has changed something about their approach or that customer needs are shifting. Similarly, a persistent inability to sell across different categories tends to suggest a problem with the underlying value proposition.
4) Customer loyalty scores for different segments
Periodically asking your customers questions around whether they want to continue to purchase your product, whether they are interested in new offers, and whether or not they would recommend you is simple, the data is easy to analyze and provides invaluable attitudinal data that you can use for trend analysis purposes. In B2B, in particular, the buyers tend to be reasonably well known and even if the samples are small there is tremendous value in knowing how the few important people think about the relationship.
5) Churn/retention rates for different customers
Too often reporting only takes place on a financial level, but you also need to know the rate at which a company is adding or losing customers. For one thing, it’s likely impossible to grow your business unless your customers keep on coming back. In the short-run, it might be possible to maintain earnings by shedding less profitable customers, but reporting on the number of active/inactive customers offers valuable clues in terms of a company’s market appeal. This is critical since an accidental pursuit of earnings can easily result in a situation where a company loses touch with the bulk of a market and fails to appreciate the potential for disruption from below until it is too late.
Again, these are my favorite high-level metrics for evaluating how a business is running, what are yours and why?