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Sales Pipeline: Five KPIs Every Business Must Consider
Blog / Sales Management / Dec 4, 2013 / Posted by Richard Young / 14943 

Sales Pipeline: Five KPIs Every Business Must Consider

Sales Pipeline Management - VisualisedWhen you’re forecasting sales and the performance of your sales funnel or sales pipeline, your metrics are key.

That’s because metrics provide the analytical information you need to ensure your sales team (and sales funnel) are doing all the right things.

But what metrics should you measure?

Read on, and I’ll outline five of the most important.

#1: Sales Target

OK, so not really a KPI per se, but a super-important metric you need to set. That’s because your sales target is the benchmark and goal you can use to assess the effectiveness and overall efficiency of your sales pipeline.

With a sales target to focus on, you can manage and analyse your sales pipeline to ensure you’re moving in the right direction. And if you discover that you’re not, you can more quickly take the proactive action necessary to keep you on track.

So what do you want to achieve?

When setting your sales target, it’s important that you find the right balance. Aim to pitch your goal to generate growth BUT ensure it’s not so ambitious and unrealistic that you leave sales reps demoralized because they feel the target is unachievable.

Then, once you have your sales target, the next step is to start measuring your pipeline to ensure the numbers are stacking up to make your target achievable.

#2: Total number of lead / opportunities

The first metric to measure is the total number of leads / opportunities your business generates.

And whilst this metric is relatively easy to measure, the challenge is that these statistics are often available through a range of different tools. In turn, you need to do some high level analytical work to analyse the figures to make sense of them.

When identifying the total number of leads you’ve generated, you’ll want to consider:

  • Number of website visitors (available via Google analytics)
  • Number of subscribers to your blog (sign-up notifications)
  • Sign-ups for your lead magnet (sign-up notifications)
  • Number of respondents to an advert (tracking numbers)
  • Number of confirmed attendees to your webinar (sign-up stats)
  • Footfall through a retail shop (count)
  • Trade show registrations (sign-up stats) etc.

It’s important to attract leads from a large number of different sources. And once you’ve collected these leads, the next step is to qualify them.

#3: Ratio of leads to sales qualified leads

This ratio helps you differentiate between leads with potential and those that are non-starters. Not all leads are equal. For example, people who sign up for your free eBook may only be seeking information and have no intention of buying. In comparison, other leads will be red-hot. If you can differentiate between the two, you can decide where to focus your sales resources.

Here’s how to calculate your ratio of leads to sales qualified leads:

  • Count the number of leads over a period of time
  • Count the number of qualified leads over the same period of time
  • Divide the number of qualified leads by the total number of leads and multiply by 100
  • This will give you a leads to sales qualified leads ratio as a percentage.

For example, if you generated 250 qualified leads from 1000 leads, your leads to sales qualified leads would be 25%. That means you can expect 25% of your total leads to become qualified (or 25 out of every 100 leads).

This metric will help you determine:

  • Which lead generation strategies are working
  • Whether your strategies are bringing on the right type of customers
  • Which lead generation tactics are wasting your time
  • Whether your marketing is encouraging suitable prospects to contact you

In addition, your ratio of leads to sales qualified leads figure will enable you to define how many raw leads you need to maintain momentum within your sales pipeline. If you know how many leads qualify (on average), you’ll be able to predict how many raw leads you need to generate to nudge enough people onto the next stage of your pipeline.

Once you’ve qualified a lead and determined that they have the potential to convert into a customer, the next step is to provide a quote, – and then measure your quote to closure ratio.

Lead Generation Strategy for Sales Pipeline Management

#4: Quote to close ratio

Your quote to closure ratio measures the number of formal quotes given that have translated into an actual sale. This metric enables you to get a feel for the impact that price has on your sales funnel.

Here’s how to calculate this figure:

  • Count the number of quotes over a period of time
  • Count the number of successfully closed sales over the same period of time
  • Divide the number of sales by the number of quotes and multiply by 100
  • This will give you a closing ratio as a percentage.

For example, if you generated ten sales from 20 quotes, your quote to closure ratio would be 50%. That means you can expect to close 50% of your quotes (or 50 out of every 100 quotes).

This metric is also a good indicator of the speed in which you should nudge prospects through your sales funnel.

That’s because it’s not unusual for sales reps to quote too soon. When you get to the quoting stage it’s crucial you understand the complexity of the situation you’ve been asked to provide a solution for. If you quote before you fully understand what’s required, you risk losing prospects at this point. That’s because:

  • If your quote is too expensive, you could undermine your credibility
  • In comparison, if your quote is too low, you could be perceived as a cheap supplier.

Both cases will reduce your chances of converting.

#5: Sales leads to close ratio

This final metric is an indicator of your overall sales efficiency. That’s because it’s a measure of the number of leads that convert into an actual sale.

You’ll find that this ratio will vary significantly depending on whether you take raw leads or qualified leads – of course; the latter will always be a higher figure.

Here’s an easy way to calculate this ratio:

  • Count the number of sales leads over a period of time 
  • Count the number of successfully closed sales over the same period of time
  • Divide the number of sales by the number of leads and multiply by 100
  • This will give you a closing ratio as a percentage.

For example, if you had 200 leads and 50 sales, your sales leads to close ratio would be 25%. That means you can expect to close 25% of your leads (or 25 out of every 100 leads).

This metric helps you to get clear on where you need to spend your time and your money to generate the best possible conversion rate. If you drill down deeper into this metric, you should be able to get a feel for which geographical areas (if relevant) are most profitable, which marketing strategies work best and whether you need to focus on generating new leads or nurturing existing customers and prospects within your pipeline.

What do you measure in your Sales Pipeline?

How do you measure the performance of your pipeline? Which metrics do you base your success on?

Please let me know in the comments below.

About Author

Richard helped introduce CRM to the UK back in the '90s. With this wealth of knowledge, Richard helps organizations with their CRM and sales management processes in a practical and efficient manner.

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