Inside sales is a numbers game. By bringing your team inside, you trade customer face-time for more transparency (and less T&E). That transparency, combined with strong processes, allows sales leaders to build a predictable revenue machine. More transactions, higher data quality, easier manager oversight facilitate the use of analytics to measure past performance and predict future results. It’s the Moneyball of business.
But math can be hard. Trust me; I had to read books like this back in college.
In order to make your sales analytics actionable, they need to be simple. Execs, sales managers, and sales reps need to clearly understand the numbers (and the math behind it) in order use them in any meaningful way.
With that in mind, here are the three metrics you need to manage your sales team, and how you can peel back the onion on each when there is a problem.
What It Is: This is the number of sales opportunities your team closed, won OR lost. If you shut down an opp, it counts here.
What It Means: This metric gives you a sense of your pipeline. In baseball parlance, it tells a sales leader how many completed at-bats a player had in a certain period. Like with any other metric, you need solid process in order to trust it. Don’t let your reps keep deals open and constantly push them out – you need rules on when to close an opportunity. Once you have that, this number will tell you whether your rep, or your team, worked enough pipeline to hit their goals.
Peel Back the Onion: If your team isn’t closing enough pipeline, start by seeing how much they are opening. If that number is fine, it means the deals either haven’t finished their lifecycle (and you should work with your reps to smooth out the rollercoaster of opening and closing), or that your team is pushing deals out instead of closing them. That only gives false promise to your pipeline, and is a reminder to implement objective, inspectable criteria for closing opportunities.
If the opportunity creation number is low, you have a pipeline problem. Check all the normal sources: MQL count, prospecting activity (dials and emails), channel referrals, trial downloads, and anything else you’re counting on to generate deal flow. Find out which one is off, and start the triage process to correct course.
Average Sale Price (ASP)
What It Is: The average price of all the deals you won. You can use any sales figure you’d like, so long as you’re consistent: MRR added, CMRR (committed monthly recurring revenue), bookings, ACV (annual contract value), etc.
What It Means: Quite simply, your ASP explains the size of deals you are winning. If you start to move up-market and hunt bigger deals (knowingly or accidentally), it will pop here. This is a difficult metric for your team to game, and the math is simple. Don’t let that lull you into ignoring it though.
Peel Back the Onion: If your ASP has shown significant movement from your historical average (or from your annual plan), start the investigation by digging into your entire closed pipeline (the opps from above). What is the average size of the opportunities you closed? Now compare that to your ASP. If they are consistent, it means your pipeline has changed. Look back at your pipeline generation efforts to see why you are attracting different sized deals. Was it your new white paper for small businesses? A conference full of Fortune 500s leads?
If your ASP is not consistent with the average size of your closed pipeline, it’s a result of sales execution. Perhaps your team went whale hunting, only spending time on large opportunities. Or maybe some reps learned that small deals are much easier to close, and focused time there. Note that changes to your ASP are not inherently bad; you just need to understand what happened and why so you can react (or not) accordingly.
What It Is: How many of your closed opportunities you won. Mathematically, it’s [Closed Won Opps] / [Closed Won + Closed Lost Opps].
What It Means: This is your success rate for your sales team. If Closed Opportunities reflects your at-bats, then Win Rate is your batting average. Note this is a win rate by percent of units, not by dollars, because your ASP handles the deal size. Scrutinize these two in tandem, as often attacking larger deals will increase your ASP but decrease your Win Rate.
Peel Back the Onion: Behind your overall revenue number, this is the most scrutinized metric in sales. It can also be one of the toughest to diagnose. Here you need to understand the full funnel of your customer acquisition, from lead to deal. Look again at your pipeline generation and see if your outbound team had a spike in performance compared to your MQLs (and whether your outbound leads close-won at a lower rate than your MQLs, as they do for most firms). Changes in your lead flow will result in changes in your Win Rate.
Next, check your process compliance. Did you convert leads to opportunities consistently? Did you Close-Lost deals by your objective rules, or was there some foul (i.e. inconsistent) play? Finally, look at your sales funnel. This tells you how your opportunities moved from stage to stage. If you lost too many opportunities early, it’s time to coach your team on better qualification. If the funnel took a nose dive in the final stage, that may be a signal your team needs help with negotiations. Or perhaps the cards just didn’t fall your way last month. After all, like in baseball, some games even your best hitter goes 0-4 (or for the nerds, Law of Large Numbers doesn’t explain scenarios with a small number of observations).
Sales = [Opps Closed] x [ASP] x [Win Rate]
So why are these the three most important metrics? It’s simple multiplication. Put them all together, and you’ll get your exact sales number for the period. The opps you closed (won and lost), what percent of them you won, and how big those wins were.
The three metrics are quite literally the foundation of your sales results. Track this equation over time, and compare it to your plan. Once you see where you are off, you can easily dive in and peel back the onion. And just like that, you’re playing like a Hall of Fame metrics-driven sales leader.