Running a small business is a lot like running a marathon. To get to the finish line successfully (which, in this case, is coming out in the black each quarter), you have to pace yourself along your journey, consciously expending your energy only when it really counts. This is especially true in sales, where focusing on the wrong thing can mean neglecting something that would have made a bigger impact.
Small business sales KPIs run the gamut in terms of scope and use. To make sure that you’re revving up action on the sales KPIs that matter most, you need to know which of them are essential to operating your business effectively and which are interesting but ancillary. Below, we’ll go over the six SMB sales KPIs that you should definitely be tracking, with advice on why to measure them and how.
1. Sales Lead Prioritization
Let’s start with a KPI that you’re probably already measuring already though possibly not getting full utility out of: lead qualifications; in particular, prioritizing your leads according to sales potential.
Remember — the name of the game is focus. You need to know where the most time- and cost-efficient place is to channel your resources, and for that, you need to know which leads are most worth your sales team’s energy.
To figure it out, rank each of your prospective customers based on estimated sale amount and deal probability, then set your sights on the ones at the top. It’s a smart way to organize your efforts, and the more you do it, the better you’ll get at qualifying your leads. If you’d rather leave it up to math, rank each lead by taking the value of their potential sale and dividing it by the total number of leads. Then prioritize accordingly.
2. Opportunity-to-Customer Conversion Rate
This next KPI is an obvious extension to Sales Lead Prioritization. Closely tracking the percentage of qualified leads who ultimately go on to become customers is key both for conversion purposes and for informing how you prioritize in the first place.
To measure your Opportunity-to-Customer Conversion Rate, take the total number of sales you made, divide it by your total number of leads, and multiply it by 100. The number you’re left with is the percentage of leads who paid off by converting into customers.
3. Visitor-to-Lead Conversion Rate
Is your website optimized to carry your leads down the sales pipeline? One of the best ways to find out is to calculate your Visitor-to-Lead Conversion Rate, which tells you how much of your traffic is converting in some way.
Measure your Visitor-to-Lead Conversion Rate by taking your total number of website-driven leads, dividing it by the total number of website visitors, and multiplying that number by 100.
You can repeat this formula for more specific conversion metrics by swapping out the total number of leads in general for the total number of leads who closed a deal, total number who signed up for a demo, etc. In addition to giving you a clear picture of the numbers, doing these calculations will also highlight where your website is succeeding and where it could use some work.
4. Sales Closing Ratio
The decision stage is one of the most tenuous parts of the sales cycle, especially the time in between sending out a proposal and closing a deal (or not). See how well you’re performing in this critical period by calculating your Sales Closing Ratio.
To calculate, divide the total number of proposals you sent out in a designated time period by the total number of closed deals. This number will cue you in on your sales team’s efficiency in this area, as well as whether you’re improperly qualifying and/or prioritizing your leads.
5. Sales Cycle Length
All businesses need to know how long it takes them to close a deal. This is helpful for allocating resources, and also for pointing out flaws in your process.
Figure out your average Sales Cycle Length by adding up the total number of days it took each of your customer-converted clients to go from first contact to a closed deal, then divide this number by the total number of deals that you made. Compare your Sales Cycle Length with both your industry average and, even more importantly, your own metrics. Calculate this KPI each quarter for ease of comparisons over time.
6. Average Cost Per Lead
How much does it actually cost for you to sell your products or services? One way to determine this is to calculate your Average Cost Per Lead, which lets you know how much you’re spending to generate each lead on your prospect list.
To calculate, take the total amount of money you spent on marketing in a set period and divide it by the total number of leads you acquired. You can do this for each marketing channel as well — such as Instagram, for example, or emails. Just be sure that you only divide by the leads driven from that specific form of marketing.
Use these KPIs to determine your sales best practices, and share them across your team so that everyone is on the same page. Putting numbers to these otherwise hard-to-visualize concepts is one of the most effective tools you have for targeting efficiency where and when it counts.