If you are in the business of selling products or services, making business decisions on hunches is the last thing you want. Doing so leads to wasted man hours, money, and lost opportunities.
Your sales decisions should be analyzed thoroughly to know what works and what doesn’t – so you can double down on what works. Not only that, you can make forecasts to manage inventory, and do hiring efficiently, By the end of this article, you’ll know how to do precisely that.
WHAT to analyze: Seven important metrics
First, let’s start with the WHAT – That being, the metrics you can analyze to understand sales performance. Here are the metrics you can follow:
- Lead to customer conversion rate:
Converting leads is the only reason you do marketing. Lead to customer conversion rate tells you the effectiveness of your sales efforts. It also tells you the strength of your marketing campaigns as optimal campaigns give you leads that are more likely to convert in the first place.
You can calculate it by:
(Number of leads converted/ Number of leads contacted) x 100%
- Sales Growth Rate:
If you had to choose only ONE metric to track your business performance, Sales Growth Rate would the one. This metric directly impacts your profit margin and revenue – making it important to track.
Sales Growth is usually tracked on a monthly, quarterly, and yearly basis. You calculate the sales growth rate by:
(Revenue in current quarter / Revenue in the previous quarter) x 100%
- The lifetime value of a customer (LTV):
Based on your previous history with customers, you must have an estimate of what an average customer pays you during their journey as a customer.
Over time testing out different products, you find out that customers who buy certain products tend to stick longer and buy other product lines. You must focus more on those customers to increase your profits. It also doesn’t hurt to know that selling to existing customers is 4X cheaper than acquiring new customers.
How do you find such customers? By gauging the lifetime value. You calculate lifetime value by:
Lifetime Value = (Customer Value * Average Customer Lifespan)
- Sales per region:
If your business performs has prospective clients across different regions, you should assess this metric.
Depending on your sales per region, you can deploy fewer or more sales representatives accordingly. You can also learn about which products sell in different locations – letting you know which products to produce more and double down on promoting them.
As a side effect, you can see which markets are competitive. By doing competitor research on those markets, you can learn how to frame your products to prospects with unique messaging.
- Call and Emails per Sales Representative:
Sales is a numbers game. The success of your sales efforts is directly proportional to the number of calls your sales team makes.
You have to understand the volume of sales calls done by every sales representative to get an idea about their products and how they are contributing to your sales funnel.
If a representative has fewer sales compared to their teammates, you can trace it down to their call & email volume. If it’s low, you have to increase it. If it’s high, then you have to look into factors like lead quality, the skills of the sales representative, etc.
- Sell Through Rate
The sell-through rate is another underrated sales performance giving you insight into the percentage of inventory that is sold within a specified period of time after the launch. It’s a crucial metric to gauge supply chain efficiency and an important part of the system used to create sales forecasts.
To calculate your sell-through rate, first, find the number of units of a product that you have sold. Next, divide that number by the number of units of the product that you have in stock. Finally, multiply that number by 100 to get your sell-through rate as a percentage.
- Product Performance
If you deal with multiple products, this is one of the most important sales performance metrics you will be required for, as it gives you a clear insight into what’s actually working and what you need to do something about. With this metric, you can create a clear distinction by identifying your clear winners – the products which have the highest performance and your lower-performing products – the ones that might need some modification or improvement.
HOW to analyze Sales Performance
Now that we know WHAT to track, let’s tackle the HOW because just data in itself isn’t enough. You want the relevant professionals to work on it. Here’s how you do it:
- Select the metric that you want to track:
Metric do one thing: They tell you a story about what’s wrong with a specific problem faced by your business.
You want to map out a metric that’s relevant to your strategy development. You can select the timeline according to daily, weekly, monthly, quarterly, etc. In some cases, tracking metrics daily is a good idea.
- Analyze the metrics using tools:
To find out if the numbers are up to your satisfaction, you need tools. For a simple reason, on the scale, manual observations get time-consuming and hard to keep up with.
There are a variety of tools to help you with analyzing data: Microsoft Excel is the most sought-after. If your use case is very specific, you can look up relevant tools online.
- Communicate your findings to relevant stakeholders:
Either way, you communicate the findings to the people who can take action based on the data. Your personal conclusions drawn from the data can be an interesting addition to their perspective.
Use graphs, pie charts – any visual elements – to aid your findings. They help convene the gravity of the problem better.
As discussed, analyzing your sales performance saves you from the singular path to failure: relying on gut instinct instead of data.
By simply knowing what to look for and what to do with it, you’ll know what your customer wants, what revenues and Key Performance Indicators(KPIs) to forecast, and of course, get more profitable.