Your sales pipeline covers every stage of the customer acquisition process from leads to after-sales support to repeat business. While revenue is a good indicator of success, it only measures what’s coming out of the pipeline – in other words, the result. It doesn’t account for leads that have “leaked” out. To be successful in sales, you need to track specific sales pipeline metrics.
Tracking sales pipeline metrics becomes easier to do as your company grows, and the volume of leads you are managing increases. Any improvement in your conversion rate will lead to a direct increase in revenue. These increases can be substantial.
The metrics below will help you measure your success in attracting attention, getting prospects to consider your brand, and making customers choose you over your competitors.
Let’s get started.
1. Sales Cycle Length
How long does it take you to close a sale? For B2B businesses, the sales cycle can take anything from 1 to 12 months. The exact length depends mainly on the value of the products or services.
Looking at your sales cycle lengths, and their different variables can help you identify what makes individual salespeople more effective, or why certain products have a higher conversion rate.
Create a graph similar to the pie chart above, accounting for the length of your successful sales cycle for at least the last year. This data will show you the average length of your sales cycle. You can analyze this information alongside the type of products being sold and the salesperson handling each sale. Insights gained from this can help you maximize your sales cycle efficiency.
2. Opportunity Win Rate
Your success rate for closing deals will depend on your target market, your niche, the products you sell, and the area you serve. Knowing your opportunity win rate and comparing it against your competition will help you identify areas for process improvement.
You can calculate your opportunity win rate using the formula below:
Win Rate = (Number of deals won / Total number of opportunities) X 100
This number gives you a glimpse into your effectiveness in closing deals. It is also one of the factors that go into calculating your cost of sales. If you increase your win rate by 100% in one month, it means you were able to close twice the number of deals with the same number of sales reps, or through the same sales process.
3. Ratio of Leads to Sales Qualified Leads
The ratio of leads to sales qualified leads measures how efficiently your sales team is qualifying leads and starting to move them through the sales process. It is also a measure of the quality of the leads you generate.
If your ratio of leads to sales qualified leads is low, it might mean you’re not attracting quality leads – that is, people likely to make a purchase. As a sales pipeline metric, your ratio of leads to sales qualified leads is useful for understanding the effectiveness of your targeting. It can also provide other insights.
For example, if one of your sales reps has an unusually high lead qualification ratio, see what you can learn from them. Maybe they have an excellent understanding of the customer persona or your products and could teach their methods to others in the team.
You might need to provide additional training for those who are facing challenges with lead qualification. Maybe they’re targeting potential customers in the wrong industry or trying to sell in a territory that is a captive market for another brand.
Knowing your leads to qualified sales leads ratio will help you identify what practices are working, which ones you should change, and how you can improve your customer targeting.
4. Average Deal Size
Your average deal size is a useful sales pipeline metric for assessing gross revenue. Your average deal size can:
- Help you identify whether your products and services are priced appropriately.
- Shows how much customers are willing to pay for your products.
- Identify what type of customer to target
This metric is most useful among salespeople, especially when they’re calculating their sales goals and progress towards them. For example, if a sales rep has a yearly goal of around $1,000,000, they can divide this total by the number of deals they expect to close and the average deal size. If they intend to close 200 deals for 2020, each sale should have an average value of $5,000.
5. Deal Profitability
Deal profitability is an important sales pipeline metric. After all, it’s essential to understand how much of the gross revenue from a contract actually ends up in the company bank account.
To measure deal profitability, first, calculate how much you will be spending to land the deal. This refers only to deal-specific costs, such as hourly staff costs, travel, documentation, or client entertainment. Deduct the total expenses incurred from the value of the deal. This figure tells you the profitability of a deal.
Knowing your deals’ profitability makes it easier to either justify spending on deal-related expenses or backing off from opportunities that cost too much to win. Spending strategically to win contracts is vital, and by measuring deal profitability, you’ll be able to make wise choices.
Moreover, an analysis of deal profitability can indicate which types of contracts generate the most revenue for your company. In this sense, deal profitability to understand when assessing what types of contracts to go after, but also what products or services you could offer as upsells.
6. Revenue By Product Line
Revenue by product line is a sales pipeline metric that measures how each of your product lines is performing based on total sales. It is particularly useful if your business has more than one product line, as you can see which ones are performing the best.
When you know your revenue by product line, you can start determining which products should receive the most marketing resources. It also enables you to examine the reasons some of your products are performing poorly. Are there issues quality, lack of availability, or poor after-sales support?
Understanding your business’s revenue by product line will help inform which products you should focus on in a project proposal for a prospective client. You may even choose to scale back on the promotion of underperforming products or services based on this metric.
7. Customer Lifetime Value
When you make a sale, you are not just sealing the current deal. You are starting a relationship with your customer. The customer lifetime value metric is a measurement of this relationship in terms of projected profits based on the length of the relationship and transactions made in that time:
Customer lifetime value helps to measure your marketing campaigns’ effectiveness and to pinpoint the customer types who are likely to generate the most revenue. An analysis of customer lifetime value can help you identify strategies you can put in place to maximize revenue after customer acquisition.
Remember: customer retention is much more cost-effective than acquiring a new customer. Using the CLV metric will help you decide where to allocate your precious resources.
8. Customer Churn
While CLV measures how much you can expect to earn from a customer over the lifetime of your business relationship with them, customer churn measures the rate at which customers do not make a repeat purchase. In other words, it measures how many of your customers decide not to do business with you anymore.
Churn rate is a particularly useful metric for businesses who take recurring payments at regular intervals, such as those that use a subscription model. If you’re running a SaaS business, for example, you can use the customer churn rate to predict future earnings. It can also help you identify patterns that might be a cause for concern.
If your churn rate is on an upward trend, your customers might be dissatisfied with something, like poor customer service, increased costs, or diminished product quality. Once you detect a correlation between a business decision and an uptick in your customer churn, you can either mitigate the effects or reverse it altogether.
9. Pipeline Stage Conversion Rate
The further your leads move through the sales pipeline, your higher your chances of winning a deal or making a sale. You need to be able to break down your sales pipeline into stages. If you can do this, and analyze the drop off at each stage, you can forecast sales.
Analyzing your pipeline stages’ conversion rates will identify which stages slow down the sales process, and the gaps that result in leads leaking from the pipeline. For example, if you discover that you’re able to attract leads, but they find your proposals unattractive, you can fix the way you present your suggestions.
Knowing your pipeline stage conversion rate is a lot like fixing a broken pipe. You don’t focus on the stages where everything is flowing smoothly. You adjust the parts where your leads fall out, ensuring they stay in the pipeline until they make a purchase.
10. Age of Sales Opportunity
Do you feel like you’ve been working on an opportunity forever? If so, you’ll want to look at a sales pipeline metric called the age of sales opportunity. This metric measures the time since a sales opportunity was created. It can be used to track how much time a lead stays in a pipeline stage.
The older the opportunity, or the more time your prospect spends in your sales pipeline, the less likely you are to win the deal. It could indicate a lack of interest from the prospect or a lack of follow-through from the sales rep. As time goes on, your prospective customer might find a more attractive option or simply choose not to continue with their project.
Identifying old sales opportunities will help you trim down your list to deals that are still winnable. It also enables you to have one last go at closing the deal before giving up on a prospect.
11. Sales to Support Ratio
Measuring your sales to support ratio will help you identify which products require the most customer support. If lots of support is needed, it might be because it is not easy to use, or the documentation is not sufficient.
A good sales to support ratio indicates that your product is well-designed and user friendly. A product that’s easy to use will always be more attractive to customers.
This metric will also show which of your products are taking too much of your support staff’s time. While this might indicate strong demand for the product, it’s also a sign that your customers are not happy with what you’ve given them.
Using the essential sales pipeline metrics to your advantage
The metrics we’ve discussed don’t just allow you to monitor your sales pipeline’s past and current state. They are also useful tools for predicting future sales figures, deciding which of your products you should promote, and determining which salespeople are performing the best.
You must see these metrics as dynamic measurements of your business’s performance. Because conversion rates will fluctuate according to the business climate, you need to keep refining your parameters. At different times you might put more emphasis on some metrics over others or replace them entirely.
Many businesses are hesitant about embarking on big-ticket projects right now. This might mean your average deal size will take a hit. These metrics will help you to see where your business is performing well and how you might make up for the shortfall in revenue.
Knowledge is power. The more metrics you use to measure your business’s performance, the better equipped you’ll be to make sound decisions that will ensure its health now and in the future. Here’s to making better choices based on more robust data!