This article was originally posted on Innovacorp.com: https://innovacorp.ca/blog/key-metrics-building-healthy-sales-funnel
What Does it Take to Build a Healthy Sales Funnel?
Of course, you need outstanding sales people, a great product and a repeatable sales process.
But unless you track the right metrics, you’ll be missing out on critical information about your business.
Metrics give a snapshot of your strengths and weaknesses. They tell you how well your sales process is working, what needs to be improved, and what areas to focus on to drive growth.
Needless to say, this will make a huge difference in making your sales consistent and predictable.
This article will walk you through the key metrics for every stage of your sales process, but keep in mind, this article offers an overview of general best practices, and you might require additional metrics specific to your business.
Metrics vs. KPIs
Let’s take a step back and clarify one important question: what is the difference between a metric and a Key Performance Indicator (KPI)?
To put it simply, a KPI measures performance and success, while a metric is a number within a KPI that helps you track progress.
Depending on your business, you should be measuring between five and 10 KPIs.
For example, a KPI might look at the rate of client acquisition, but the number alone won’t tell you why it’s above or below expectations.
You will also need to know which metrics feed into each KPI.
The next step is to break down each point of the sales funnel; the top of the funnel, sales, and post-sale, and look at the key metrics at each phase.
(If you would like to get hands on experience and optimize your sales funnel with the right metrics, sign up for the upcoming two-day workshop with Skaled CEO, Jake Dunlap.)
Top of the Funnel Metrics
At the top of the funnel, there are three key metrics you’ll want to focus on: the lead funnel conversion ratio, the activity conversion ratio and the multi-touch attribution analysis.
The lead funnel conversion ratio measures the percentage of leads converted at each stage. This will show you which points run smoothly, and where you might be running into roadblocks.
Next up, look at the activity conversion ratio. This is the number and type of activities needed to move a lead into the opportunity stage. This number should decrease over time as your process becomes more efficient and targeted towards your ideal customer.
Finally, the multi-touch attribution analysis helps you accurately determine the most effective marketing channels by understanding which channels eventually lead to conversions. These will be the channels where you should focus most of your attention.
Now let’s take a look at key sales metrics to track.
Evaluating Your Sales Process
To see the big picture of how a sales person or sales team is performing, there are a number of key metrics you can evaluate.
For example, you will want to know the opportunity funnel conversion ratio, or the percent of opportunities that move into the next opportunity stage.
Similarly, the average sales cycle duration will give you important insight into how long it typically takes to close and win a deal.
You will also want to look at the overall pipeline, number of bookings, your team’s win rate and total revenue.
Yet even once the sale is complete, you still have one area to analyze that can make a huge difference to your entire sales funnel.
Never Skip the Post-Sale Analysis
The post-sale analysis is a gold mine of valuable insights.
This is where you should look at the number of sales by customer segment, and sales by product or service type.
Why is this so valuable?
Quite simply, identifying your ideal customer is one of the biggest challenges any business faces. By analyzing sales based on customer segment and product, you’ll be able to improve your product as well as your overall marketing and sales strategy.
A few other metrics not to overlook?
Keep an eye on incoming and outgoing revenue so you know whether the new business offsets lost business and completed contracts. This data, alongside your pipeline metrics, will help you define your goals.
Finally, retention and churn metrics are vital indicators of customer loyalty, success of upsells and renewals. This will also signal when it’s time to implement a new feature, change your service or give more attention to customer service.
Now that you have a better idea of which metrics to track, the next step is to align your sales team on stages and definitions.
Getting Your Sales Team on the Same Page
While everyone is familiar with the term “leads”, it might mean different things to different salespeople. To get everyone on the same page, review the sample stages and qualification criteria.
For example, you might say the first stage for a lead is, “new, not yet contacted”. Then, you would go through each stage. Working, engaged, disqualified, nurture, and specifically define what each one means.
You would then apply the same process to opportunities, customers and upsells.
Measuring the Right Metrics Leads to Healthier Sales Funnels
Now you have a better understanding of how every stage of the sales process provides valuable feedback into the overall health of your business.
Once you have your KPIs in place, you can decide what metrics to evaluate to know what is working well and what areas need improvement.