If you work in sales, you probably know or have heard the term “KPI.” Key Performance Indicators, commonly known as KPIs, are measurable matrices that allow you to quantify an employee’s performance based on a predetermined target. It is widely used in many sectors of a company, including sales. There can be many types of KPI goals, such as how many new customers have arrived, how many old customers have come back, how much the sales have increased, and so on.

The significance of a KPI change with the sector and objective. So the question comes, what does KPI stand for in sales? Let’s dive into this topic and find out the answer.

What is KPI for Sales?

There is a predetermined goal for the sales team for a fixed period of time. KPI defines how much the sales team has achieved the goal. It also indicates how the performance of the team will impact the entire business. It includes benchmarks like average lead generation and conversion rate. Getting a bit complicated, right? Let’s look at an example to make it easy for you.

Suppose you are a salesman with a target of selling 100 apples in the past week. You have sold 75 apples at the end of the week. That means you have reached 75% of your weekly target KPI.

Remember, this is just a simplified general example of KPI, and there are many other things you have to deal with in real life. 

Why are Sales KPIs That Important?

Focusing on different aspects that contribute to business growth can be distracting. Instead of dividing your attention, using KPIs and micro goals will keep everything that impacts business success sorted and aligned. KPIs are sales targets and activities that add to your company’s growth. Sales leaders use KPIs to make sure that the team is working towards a specific goal.

Suppose you have a company. Now, you have a specific KPI sales, and you want to focus on the growth of your business. But you don’t have any target of generating leads. It will make your sales unstable, and your revenue will be like “stop and go.” Your sales team will not find any new opportunity to sell your products as there are no new leads. As an outcome, your sales pipeline will be empty and there will be no real growth in your business.

On the other hand, suppose you have a company, and you are focused on the growth of your business. You have planned a proper strategy for business growth, including quota attainment, lead generation, customer retention, and sales KPIs. In this case, you will be able to maintain existing customers, generate new customers, and keep your sales pipelines full, and your sales will have a steady growth. If you can keep this up, you will be able to surpass your goals and keep a consistent growth ratio.

Sales Metrics vs KPIs for Sales 

Sales KPI has a deep relation with sales targets. An example will make things easy here.
Suppose your yearly sales target is 2400 units. That means your monthly KPI is 200 units of sales. (200 sales each month x 12 month = 2400 sales a year)

Sales metrics are all calculable amounts of sales performance. It can be a count of activities done by sales reps, new sales leads in the sales pipeline, or measure progress for the company. Remember, it is not a must for your sales metrics to be connected to the final goals directly.

Most Important KPIs for Sales 

For a considerable amount of time, sales KPIs have been focusing on things like fresh leads, the quantity of closed deals each quarter, and individual targets. They are still important, but some other important KPIs require your attention. Ensure your business generates long-term strategy and predictable revenue while maximizing ROI. To do that, you have to track basic sales KPIs and the ones that establish the relationship between customers and employees.

Here is a list of the most important KPIs that you need to track.

Annual Contract Value (ACV)

ACV represents a customer contract’s amount of average sales over a year. This KPI is an important one. It helps you to identify cross-selling and upselling that boost contract value of the customers, resulting in revenue. If cross-selling or upselling is impossible for a product portfolio or pricing structure, a low ACV will mean you need new customers. The new customers will be able to drive a growth in revenue.

Formula: Yearly total sales value of contracts / Number of contracts = Average ACV.

Customer Lifetime Value (CLV)

CLV is the total purchase value of a client from your business including cross-sells, upsells, and renewals they made over the time of their business with your organization. It clearly indicates how successfully your team can build a trusted, valuable, and loyal relationship with the customers.

If your CLV is low, go through all the call transcripts from your best and regular customers. You can use AI-generated call summaries to identify which element moved the deal forward. 

Formula: (Average yearly purchase value) x (Annual average purchase for each customer) x (Average lifespan of a customer in a year) = Customer Lifetime Value

New Leads in Pipeline

It monitors the quantity of new sales leads placed in each representative’s (rep’s) pipeline in a given quarter. You need to have an exact number of leads depending on your conversion rate to hit the sales target. If your rep’s lead count goes under your KPI target, it is a sign that you should devote more time and attention to prospecting. 

It is a famous method to communicate with more people to boost your LinkedIn. You can simply follow the potential people, communicate with them by engaging in their posts, and also send connection requests.

Conversion Rate

Conversion rate, also known as win rate, is a percentage of each rep’s leads that results in closed deals. Normally, it is measured by counting per quarter of a rep. You have to go through the conversion rate of each rep. If a rep’s conversion rate is higher than the others, he is using effective sales strategies for your business. You can use these strategies to train the other sales reps. In this case, call recording and other analytics can come in handy. As a result, your overall conversion rate will increase and bring you stable revenue.

Formula: (Number of closed deals per quarter) / (Number of leads in the pipeline) x 100 = Conversion Rate

How can ProKPI Help Your Business Grow?

Setting KPIs for your business manually is a complicated and time-consuming process. To make things easier, we present you the ProKPI software. It will make assigning strategic business objectives fast and easy. Some of the major features of ProKPI are:

• You can set the company goal with it
• You can distribute goals to divisions, departments, teams, and even individual-level
• You can set your own goal with it
• Self-assigned goals have to be approved by a designation based hierarchy of authority
• You can set as many goals as you need
• You can divide the goals into yearly, quarterly, monthly, or even weekly based target
• 24/7 active online customer support system
• Reasonably priced subscription-based payment system

Not to forget, the interface of this software is user friendly and properly sorted. According to the Research Gate, the UX is a very important variable in tracking KPIs. Both the admins and employees can get used to this simple yet effective system in very little time.

Other than these features, we also focus on 3 major aspects of business growth.

Tracking Every Project Detail

You can track every detail of project management using ProKPI, including project name, duration, deadline, members, and everything. You can keep the control in your hand and closely inspect everyone’s contribution effortlessly.

Smart and Presentable Reporting
You can check the update and report of a project in graphs, pie charts, curves, and other smart methods. You can easily evaluate the team members and their performance from it.

Decision Making
You can update the KPI of the team members depending on their capability to get the best results. As you get the whole report in a smart and easy format, you can find out the issues and make proper decisions to solve them.

Considering everything, ProKPI will make your whole KPI assignment, reporting, and evolution system fast and easy. As a result, you will be able to reach and manage goals to grow your business further without any backlogs.

Final Thoughts

Regardless of your business, KPIs are highly important to track your business growth. Everyone expects an upgoing and stable business growth. Analyzing the KPI reports, you can find out what is stopping your business from growing further. 

You can create strategies that consider those weak areas to surpass them and achieve your target growth. Without KPIs, your growth will be stuck, and you won’t know what to do.

FAQs

What are the 4 P’s of KPI?

For marketers, the best guidelines for chasing after KPIs are mostly known as the 4 P’s of KPIs. The 4 P’s represent Product, Price, Place, and Promotion.

What are the vital KPIs?

In general, 5 KPIs are considered the most important for any business. They are:

Revenue Growth, Revenue Per Clients, Profit Margin, Client Retention Rate and Customer Satisfaction

What is SMART KPI?

SMART KPIs are designed to be specific, measurable, achievable, relevant, and time-limited. It provides companies with a framework to set realistic goals, track progress, and achieve success ultimately.