RevOps Co-op Weekly #29 - Sales Metrics: KPIs to Coaching Tools

Sales metrics come in various flavors, and each layer of leadership needs a different level of detail, from in the weeds to above the clouds.

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Sales Metrics: KPIs to Coaching Tools

Sales metrics come in various flavors, and we’ll be exploring some of the most common metrics by audience. Each layer of leadership needs a different level of detail, beginning with the extremely in-the-weeds front-line management report up to the more general executive reports. Analysts should aim to prepare a story for sales leadership to tell come quarter-end whether they knock it out of the park or miss their number.

In the perfect world:

  • Reports are automated and available at all times

  • Data refreshes a minimum of once per day

  • An analyst helps front-line management understand potential red flags on a weekly basis

  • Upper management gets an update from the analyst every other week in the first two months of the quarter and weekly at the end of the quarter

  • Leadership is given a debriefing at the end of the quarter

At a minimum, your company should establish a reporting cadence that prevents big surprises during a quarterly update. Leadership should prepare to answer questions before they happen, which means front-line management should know whether their direct reports are on target for the quarter within the first few weeks of quarter kick-off.

While there will be some variability depending on what kind of product you’re selling and the sales cycle your selling team experiences, I’ve found that the greatest variability comes from the type of sales department and who they report to. For example, if you have an inside sales organization that reports to marketing, you may see different metrics tracked than if that same department reported to sales. Marketing is going to be more concerned about whether or not leads are followed up on. Sales typically focuses more on activity metrics and sales conversion rates.

Let’s dig into the different metrics from top-down and see how different organizations track their sales team performance.

First, A Quick Glossary of Terms

Attainment - An individual, team, region, or department percent achieved compared to their assigned quota (calculated as Net Revenue / Quota).

OKR - Objectives and Key Results. A goal setting and tracking methodology used to determine whether teams are achieving goals that align with company initiatives. For example, a company decides one OKR is to increase net new sales by 80%. Marketing and sales may share the OKR and each own KPIs specific to their department.

KPI - Key Performance Indicator. These metrics are typically used to gauge whether or not larger company goals are on track. For example, if my OKR is to increase net new sales by 80% year-over-year, my sales team KPIs would likely include a net new pipeline generated goal as a leading indicator and quarterly new logo, a net new revenue, and total customer count goals.

YoY - Year-over-year growth percentage. This can compare a full year of activity but typically compares a given quarter in one year to that same quarter in the prior year. This helps gauge progress accounting for seasonality. If Q2 is the slowest quarter because everyone in Europe goes on vacation, comparing it to Q1 to gauge success will give a bleak story whereas looking at the prior year’s quarter may actually show growth. It is typically calculated as follows:

(Year 2 Number - Year 1 Number)/Year 1 Number

QoQ - This is a comparison of one quarter to the quarter immediately proceeding it. The quarter-over-quarter growth percentage is typically calculated as follows:

(Quarter 2 Number - Quarter 1 Number)/Quarter 1 Number

Time to Productivity - The number of days or months that elapse before the average salesperson hits a target percentage of quota. The target percentage is rarely 100%. At past companies, we considered “productive” 80% of attainment or higher.

Tenure - How long a salesperson has been with a company, usually in three to six-month groupings such as 0-3 months, 3-6 months, 6-9 months, and so on.

Revenue Mix - This typically refers to the ratio or percentage of revenue divided out by opportunity type: Net New, Expansion, and Renewal. Sometimes the term is used to express Sales Mix, which is the ratio or percentage of revenue divided out by product type.

Sales Mix - The ratio or percentage of revenue divided out by product type.

Churn - The percentage of customers lost during a given time period. This can be calculated in multiple ways, the simplest being the number of lost customers during a given time period divided by the number of customers at the beginning of the period. 

Pipeline Sourced - This measurement is an attempt to determine how much pipeline is coming from marketing, partner-sourced opportunities, or sales generated opportunities. Many opportunities come about as a result of efforts from multiple departments, so this should really only be used as an estimate.

Pipeline Coverage - The pipeline number needed to hit quota. This is usually determined by looking at a number of quarters and dividing the pipeline set to close for the quarter on the first day of the quarter by the revenue sold by the end of the quarter. An average of several quarters should be taken to determine typical pipeline coverage ratios.

Executive Metrics

‍As we indicated before, sales executives and sales leadership should be armed with a comprehensive overview of what happened during the quarter. However, quarterly business reviews don’t need the same level of scrutiny. The sales executive should be expected to field questions but not volunteer detailed, drill-down reports. The board should only see the very top layer of metrics with some summary reports that will help answer questions should the quarter not go as planned. 

The top layer of metrics are:

  • Net revenue by quarter

  • % quota attained by quarter

  • YTD Attainment vs. Prior Year Attainment

  • Churn 

Backup Q&A Slides:

  • Mix of new/expansion/renewal

  • Goals met or revenue gained by product family

  • Goals met or revenue gained by region

  • Ratio of sales territories staffed/open/ramping

To get a holistic view of sales, we recommend reporting at least five running quarters, with nine quarters being ideal. This view will give some insight into seasonality and trends.

Quarterly reviews should not be used to understand an individual salesperson’s performance. At their most granular, these reports should show activity by team or region. It should be up to sales leadership to monitor individual performance, and we’ll get into those metrics in a moment.

Should the quarter go wrong, encourage your leadership team to speak to market trends and leading indicators. For example, what did marketing activity look like? Did something happen in the market that prevented them from executing on traditional campaigns?

As an example, we look at 2020 and how the global pandemic impacted in-person events. Many marketing departments had to scramble to figure out how to make up for the deficit in leads. As a sales leader, I would want the executive team to understand that my department will struggle to make up for the deficit in marketing leads. Being in revenue operations, you’re able to dig upstream and downstream to help tell a story and explain why achievement is different from expected, whether positive or negative. 

Just don’t forget to discuss your findings with the other executives before the board meeting! Always sit with the CMO and review trends that negatively impacted sales so they don’t feel broadsided in the review.

Sales Leadership Review

Many of the metrics reviewed during a sales leadership review are similar to the first category, but we’re going to look at them in a slightly different way. To understand whether there’s an issue with a product, a team, or some contributing department—whether it’s channel or marketing—we’re going to look at numbers in a few different ways.

We’re going to look at:

  • Pipeline sourced 

  • Pipeline coverage 

  • Achievement by tenure 

  • Achievement by region 

  • Achievement by opportunity type

  • Achievement by product type

  • Ratio of sales territories staffed/open/ramping

Again we recommend at least five quarters of activity (if not nine), so trending and year-over-year performance are obvious.

One of the new metrics we look at during the sales leadership review is opportunity source.  Source reporting is inherently problematic. It’s dependent on whether you have the proper infrastructure to capture which activity preceded the opportunity. Do you have a deal registration process in place? Do you have campaign capture automated for marketing upon opportunity creation? 

Even if these things are in place, indicators can be missed. For example, if a sales lead comes in for Tom Jones and Tom refers the salesperson to Jenny, then whatever activity led Tom Jones to your site will not be captured as the opportunity source. Sales will use Jenny as their primary contact, and the source will be sales sourced rather than marketing sourced.

Source reporting and attribution reporting should only be used to directionally indicate whether there’s been a significant shift in marketing leads and pipeline generated or partner leads and pipeline generated.

When inspecting sales volume by region, also consider market maturity. If your company is expanding into new markets, they likely won’t be as productive as fully skilled markets. If you’ve had a higher than average amount of attrition, your sales leader will also want to factor that into their performance story. Look at regional team and performance by tenure.

Finally, look at the percentage of salespeople contributing to revenue. Let’s say five out of 35 salespeople contribute your revenue. The leadership team will need to dig into why performance isn’t scaling. This will require more qualitative research, like reaching out to the front-line managers and salespeople themselves to understand whether there’s a product issue, product knowledge issue, or other problem.

Front-Line Management (Full-Cycle Sales)

One of the VPs of sales I worked with established something he called a “do your job” report. The report included several metrics that accurately predicted whether or not representatives were on their way out the door. We looked at activity levels to some degree, but we focused primarily on pipeline and quote activity.

We measured:

  • The last time logged into CRM

  • Pipeline generated

  • Pipeline generated by source

  • Quotes generated

  • Meetings held

  • Number of accounts touched

  • Number of times logged into CRM during the month

By measuring these activities each quarter for several quarters, we could compare activity volume across individuals and spot people who were likely in trouble. The biggest indicator that somebody was in trouble was a low number of quotes generated in the CPQ tool. If they were reporting to the manager that they were on target to meet their quota commitment, and they had only generated two to three quotes for the quarter, that manager knew the likelihood of them meeting their number was very low. If they weren’t logging into their CRM, creating meetings, or creating pipeline, these were all red flags, with the direst being a lack of pipeline.

If pipeline generated by source was anemic in any category (whether it be full-cycle sales generated, inside sales generated, or partner generated), we knew the territory was in trouble. Even if the representative had logged many meetings and quotes, we understood that it was likely they wouldn’t have enough pipeline to get them through the quarter.

We also measured the volume of opportunities by stage and conversion rates to determine if there were sticking points in the sales cycle they needed coaching on. Pipeline by product and revenue by product were also measured to see if the salesperson was avoiding any categories due to compensation design or lack of confidence.

Front-Line Management (Inside Sales)

Whether you label them BDR, SDR, or just “inside sales,” this department could report either to the VP of sales or the CMO. Either way, we recommend developing metrics that hold salespeople responsible for following up on marketing leads in addition to measuring prospecting activity. If sales is held accountable for lead follow-up and a particular channel isn’t performing, you’ll have a stronger argument to reassess whether that category is routed to sales or nurtured.

Inside sales metrics should include:

  • Percent leads followed up on

  • Percent leads accepted

  • Percent leads converted

  • Number of meetings set

  • Number of meetings converted into an opportunity

  • Meeting conversion rate

  • Pipeline generated

  • Pipeline conversion rate

  • Bookings generated

  • Booking conversion rate

How you compensate your sales inside sales team will determine how aligned they are with your full-cycle sales team. Aligning payment with bookings is always ideal but not always practical. If your sales cycle takes six months, your inside salesperson may or may not stick around to collect payment. This immediately impacts their ability to earn an amount that will keep them interested in the position for more than a few months. In those cases, compensation will likely have to be aligned with pipeline generated. 

As someone who has seen meeting generated volume as the primary compensation metric without a qualitative measurement (such as percent converted to pipeline), I can confidently say that rewarding volume over quality will have negative impacts. Pipeline and bookings are much better options in terms of alignment.

Does your business have a different way of looking at things? Drop us a line! We’d love to hear how you would change these recommendations.

Link to RevOps Co-op blog post 👉 Sales Metrics: KPIs to Coaching Tools


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