KPI (Key Performance Indicator) is an index that measures and evaluates the performance of a department within a company or the operation of the entire company. Each department within the company will have different KPI evaluation indices. In Sales, KPI plays an important role in evaluating employee performance as well as measuring the capabilities of the entire team.
Accurate performance evaluations will motivate employees to work harder because their contributions are recognized. Furthermore, when businesses have the right perspective on their employees, they will save on training and recruitment costs.
As a team manager or sales department leader, you need to be aware of the following key metrics:
1. Sales Target – Target Revenue
This index is usually provided at the beginning of the year, quarter, and month for the sales department to use as a target. Managers can adjust it as appropriate to improve employee performance.
With this KPI, your business needs to establish an accurate frame of reference. Sales staff can become discouraged and exhausted by the pressure of overly ambitious targets, so you need to consider the actual total revenue for the recent period and set achievable figures.
Target revenue – one of the key metrics in Sales
2. % Connected – Successful connection rate to customers
Successful connection rate = Total number of customer calls answered / Total number of customer calls made.
This index helps businesses evaluate data quality and forecast monthly revenue as accurately as possible.
3. % Lead to sale – Successful sales ratio/potential customers
Success rate = Number of orders sold / Number of interested customers.
The index helps businesses accurately predict their potential monthly revenue. This is a criterion for evaluating sales staff based on the ratio of successful contracts/orders to the total number of leads you currently hold.
From this information, you can identify which leads are high-quality and which have the potential to become customers.
Typical diagram in the lead funnel
4. Average purchase value
Average order value = Total order value / Total number of paid orders.
This index is used to measure the average value of each order. Based on this, sales staff can determine the estimated contract value for each potential customer.
If each customer spends more money on an order, the company's total revenue will increase. That is why the APV index is a significant metric that businesses need to analyze and find ways to improve, as well as to evaluate the quality of their sales team.
5. Sales growth – Monthly revenue growth
Revenue growth rate = (Next month's revenue – Previous month's revenue) / Previous month's revenue
This index measures sales growth or decline to assess actual business performance and adjust monthly revenue targets accordingly. A ratio less than zero does not necessarily indicate negative growth. If revenue for one of the periods prior to the current period is zero, the revenue growth rate is undefined.
Refer to Amazon's quarterly revenue growth report
Some notes during the process of creating an index to evaluate sales staff
Must be measured based on actual data
The measurement criteria must be based on specific data or actual events. Because these figures will most accurately reflect the work process of employees and the results achieved.
High expectations from senior management are a good thing, but setting overly high standards or KPIs without considering the actual situation of the sales team can inadvertently cause them to feel pressured, discouraged, or even lead to them quitting.
Aligned with the company's mission, vision, and values
The company's vision, mission, and core values will serve as guiding principles throughout its operations. These principles must be thoroughly understood and appropriately applied to the weekly, monthly, and yearly plans of sales staff. Only then can the company as a whole, and the sales team in particular, easily achieve their goals and develop according to the established plan.
Suitable for the nature of the business and the employee's level
Each business will have its own unique characteristics. Each level and position of sales staff will also have differences. Therefore, you should customize the criteria based on your company's business field and employee level. For example:
- B2B companies are characterized by business-to-business relationships, so the contract value of each customer will be large. Therefore, you can evaluate based on aggregate revenue figures or the average value of contracts.
- B2C companies, on the other hand, specialize in business-to-consumer transactions. Therefore, management can evaluate the performance of sales staff based on the conversion rate of customers and potential customers.
The above are five important metrics and considerations that businesses need to know in order to manage and evaluate their sales teams. If you are looking to develop a high-quality sales team, please contact us for detailed advice!
