What are important KPIs to track sales performance?

The significance of sales KPIs

KPIs are quantifiable metrics that serve as a compass for your business, helping you understand how well you're doing in areas that matter the most.

In other words, they’re more than just acronyms, buzzwords, or numbers on a dashboard. Instead, KPIs are glimpses into your business health that allow you to track sales performance, understand customer behavior, and find ways to level up operational efficiency.

For example, if you're looking to boost your ecommerce sales, KPIs can reveal the impact of your digital marketing campaigns or how quickly your customer service team resolves issues. From there, you can allocate your resources more effectively, restructure your pricing strategy, or brainstorm new promotional tactics.

Key sales KPIs to monitor

By keeping an eye on sales KPIs, you'll be better equipped to make informed decisions that can lead to business growth.

Here's a rundown of the sales performance metrics that business owners should have on their radars:

1. Sales revenue: The total money generated from sales before expenses. This is one of the most straightforward ways to determine the health of your business and the effectiveness of your sales strategies.
2. Gross profit margin: The percentage of your revenue that is pure profit after covering the cost of goods sold. To get this number, use the formula [(sales revenue - cost of goods sold) / sales revenue] x 100. If the percentage is low, it may be time to rethink your pricing strategy.
3. Sales conversion rate: The percentage of shoppers or site visitors who become customers. A higher rate may indicate that your sales funnel and marketing efforts are effective. Track it using the formula (number of conversions / number of visitors) x 100.
4. Lead-to-customer conversion rate: The percentage of leads that become paying customers. To calculate it, divide the number of new customers by the number of leads and multiply by 100.
5. Customer acquisition cost (CAC): How much it costs your business to acquire a new customer. You can determine your CAC by dividing total sales and marketing expenses by the number of new customers acquired.
6. Churn rate: The percentage of customers who leave your service over a given period. A high churn rate is a red flag that needs immediate attention – customers may be dissatisfied with the quality of your product or service. Calculate it with (number of customers lost / number of customers at the start) x 100.
7. Customer lifetime value (CLV): The total revenue your business expects to earn from a customer throughout their entire relationship with your business. The greater your CLV, the more long-term value a customer brings — this means you should be investing marketing resources in loyalty programs and campaigns that re-engage existing customers. Determine your CLV by using the formula (average purchase value x purchase frequency) / customer churn rate.
8. Average purchase value: The average value of each customer transaction. Simply divide the total sales revenue by the number of transactions.
9. Sales growth rate: The rate at which your sales increase or decrease over a specific period. To figure out your sales growth rate, subtract last period's sales from this period's, divide by last period's sales, and multiply by 100.
10. Sales by channel: The revenue generated from each sales channel like online, in-store, or via third-party platforms. This KPI helps you identify which channels are most effective for your business.

Analyze sales metrics to achieve business success

By understanding and monitoring key sales KPIs diligently, you can fine-tune your strategies, optimize your business operations, and set your business on a path to sustainable growth.

The result? A more profitable business that customers love and always return for more.