Building your sales strategy without tracking sales metrics and KPIs is similar to driving on an unknown road without a map. The risk is quite high and a simple wrong turn can take you to an entirely different direction than expected. This is how critical sales metrics are to sales operations management. 

Sales metrics like monthly revenue, win rate, customer lifetime value etc. provide the much needed visibility for your sales team. In fact, the State of Sales Performance Survey of 2019 reveals that over 32% of sales reps preferred an insight into sales metrics over awards as a morale booster to sell more. These are accurate indicators of sales productivity and also help sales managers monitor the efficiency of their teams.

Tracking the right sales metrics will help Sales managers and Sales Ops professionals have a better understanding of which goals to target. That way, they can guide sales reps better on what they need to do, what are the expected outcomes and the time frame to go after.

But, with so many sales metrics out there, how does a sales manager decide which ones to track? Also, what is a KPI and how does it differ from a sales metric? What are Leading and Lagging metrics and should you really care about them? With an overwhelming sea of information, it is natural to feel confused. With this article, we aim to bring some clarity and help you do right by your team and the business.

What Are KPIs & Why Every Business Needs Them?

The full form of KPI is Key Performance Indicator — these are basically metrics that indicate the performance of your business. Specific to every business, Sales KPIs are a small set of ‘key’ sales metrics they should be tracking to optimize sales performance. Think of this as an all-in-one dashboard to get a focused and actionable POV of your sales performance. 

Some common examples of KPIs include lead conversion rate or monthly/quarterly revenue target. Sales pipeline velocity is another important one. Together with sales metrics, KPIs can provide a comprehensive approach to sales management. This can be done in a series of actions:

• Identifying your organization’s key sales goals

• Choosing relevant KPIs and setting targets

• Tracking important sales metrics

• Review and analysis

• Taking action to refine sales processes

• Using KPIs for decision-making

• Conveying results to the team and stakeholders

Leading Metrics and Lagging Metrics: What do they mean

While we are on the topic of KPIs, it is important to have a basic understanding of leading and lagging sales metrics — to help you identify the best sales metrics to track and analyze.

Let’s circle back to the “car driving” analogy. While driving the car, you keep an eye out for the road signs and directions to take the right turns and exits. Meanwhile, the milestones along the road give you an idea of how far you have reached. Both carry equal importance in helping you reach your destination.

In sales metrics, leading indicators or leading metrics are like the road directions/signs that help you envision the road ahead for your business. Consider, for instance, pipeline volume or number of calls per sales rep. These are predictive metrics that can help you gauge your future sales performance. Leading indicators generally represent the behaviors or activities that directly influence sales outcomes. Hence, they are also considered as input metrics.

• Some commonly used leading indicators include:

• Number of qualified leads generated

• Number of sales meetings scheduled over a time period

• Number of sales follow-up calls per rep

• Lead response time

• Frequency of using certain CRM tools

  
  
  

Lagging metrics or lagging indicators, on the other hand, are similar to the road milestones that give you an idea of how far you have reached. Hitting the right milestones all along your Sales quarter will ensure that you reach your sales quota at the end of the quarter. These indicators or metrics help you assess if you’re on the right track. Based on them, you can assess the effectiveness of your sales strategy. Since they represent final outcomes of sales activities, they are also called output metrics. 

The most commonly tracked lagging indicators include:

• Net New Revenue

• Number Closed/Won deals

• % Growth in Net Revenue 

Are Leading Metrics Actually Better Than Lagging Metrics?

There is a common notion among sales managers that leading metrics are actually better than lagging metrics. Many of them tend to fixate on the former, arguing that tracking past attributes is useless. But are they right? Let’s find out. 

Leading and lagging sales metrics have a relationship of effort and outcome. Leading metrics tell you about your level of input. Sales activities performed in a day is a good example of an input metric. 

Meanwhile, lagging metrics tell you about the output. Eg - “We were able to achieve $2 Million in net new revenue over the last quarter”. This revenue is the direct outcome of your organization’s sales efforts throughout the previous quarter. 

Data shows that sales performance and productivity are best measured by leading metrics instead of lagging ones. This is because the former offers more actionable insights to proactively impact sales outcomes, like predictive value, real-time feedback or early alerts.

Lagging metrics, on the other hand, are useful to measure the performance of your Sales Organization as a whole. These are usually measured over a quarter (or a longer time period). Hence these are good markers to understand the outcome of the past quarter’s sales activities. 

Like everything else in life, there is no guarantee that leading metrics will always drive the desired outcome. But higher effort definitely increases the odds of reaching your business goals. 

Using The Right Metrics At The Right Place

Amid a sea of sales metrics, only a handful should be used to set up as KPIs for an organization’s sales cycle. Both sales metrics and KPIs are quantifiable numbers that indicate performance.

Here’s a way to help you visualize the relationship:

To understand this better, consider the following example. Your sales leader promises a revenue goal to the CEO. The conversation would usually look something like this — “We will achieve a 25% jump on our revenue this year, resulting in a $5 million revenue year. Quarter over quarter, this looks something like this - $600K, $900K, $1.5mil, $2mil for this financial year.”

Sales leaders will convey the quarterly goals to the VP of Sales. “Hey John, for this year, our quarterly goals look something like this - $600K, $900K, $1.5mil, $2mil. Let’s get this engine going!” 

Next, these goals are conveyed to the Sales Managers. It is then their job to translate them into actionable metrics. “OK, to hit the $600K goal for this quarter, we need at least $2 mil in the pipeline. At $100K AOV, this means we need to get 20 opportunities. And with 10% lead to opportunity conversion, we need at least 200 leads.”

These metrics then go on to become performance metrics for the sales team. For a team of 5 SDRs, generating 200 leads in a month would mean 40 leads a month each — around 10 leads per week. This can be further translated to the number of phone calls or outreach an SDR should do (input metrics) on a daily basis to be able to hit 10 leads/week goal. Another metric a lot of successful sales teams keep an eye on is the lead response time.

Using a structure like the example above and using it to set individual goals for each sales rep can be immensely useful. Regular performance reviews using the input (leading) metrics is also crucial — while working with the reps on their personal strengths and weaknesses and adjusting the individual KPIs as necessary.

To be able to effectively translate organizational goals into individual goals will turn your sales organization into a well-oiled machine. An organization where everyone knows what they are responsible for and how their work will translate into revenue or some other tangible goal, is definitely headed for success.

Conclusion

By adopting a data-driven approach, businesses can steer their sales efforts towards sustained growth and success. This is where sales metrics play a critical role in analyzing, assessing and strategizing sales objectives. 

In a nutshell, sales metrics are indispensable tools for assessing and improving sales performance. How you utilize the different types of metrics determines the efficiency and overall performance of your sales team, and thereby, the success of your organization. We hope this article helped reduce some of the complexity around different types of metrics, including the lagging and leading indicators, sales metrics, KPIs, and input or output metrics.