As the saying goes, “you can’t manage what you can’t measure.” Sales metrics are critical to the success of your business because they give you a barometer for how you’re doing and benchmarks for your progress over time. Plus, when you choose the right key performance indicators (KPIs), you can improve alignment among your cross-functional teams, so together, you can achieve common strategic goals.
But without a clear vision of the sales KPIs that matter most, your team could be looking at a range of disjointed data. Here’s how to ensure that your business selects the right sales KPIs, shares agreed-upon definitions, and tracks these metrics consistently—to get your entire revenue team on the same page.
What are sales KPIs and why are they important?
Sales KPIs are metrics that revenue teams use to track performance for their overall business, specific departments, or individual team members in order to measure success and keep everyone aligned.
While every KPI is a metric, not every metric is considered a KPI. Defining what counts as a KPI helps you make the distinction between the metrics you need to track to run your business as usual, versus the metrics that will get you closer to achieving your strategic revenue targets.
It’s important to keep in mind that not all KPIs are strategic. Some KPIs are operational, according to research from the Revenue Operations Council (ROC), a group of established RevOps experts delivering market education to the global RevOps community. Here’s how the ROC distinguishes operational KPIs and strategic KPIs:
- Operational KPIs: Every organization has standard KPIs it needs to track, such as revenue, new logos, pipeline coverage, and retention. These are operational KPIs and they help assess what’s actually happening in the business in real time—and whether the team is on track or needs to course correct.
- Strategic KPIs: Strategic KPIs are more specific and narrative. They exist in service of organizational-level strategic growth initiatives, such as going public or expanding into new markets. This type of KPI should help confirm assumptions about the organization’s strategy or illuminate where adjustments are needed.
Strategic KPIs represent shared goals across the revenue team. Properly identifying and tracking sales KPIs can mean the difference between growth and stagnation for your sales team and your business. In fact, in a Forrester study surveying over 300 B2B sales and revenue operations executives, 31% of respondents cited old or low-quality data as a key reason for sales forecast variability, while nearly 60% said accessing real-time revenue data was important.
With these findings in mind, each organization should choose KPIs that make the most sense for their industry and long-term business targets. Further, KPIs should be tracked in a shared source of truth, which is a powerful resource that empowers full revenue teams with access to key data, keeping everyone up to date and working in tandem toward shared goals.
Top 12 sales KPI examples
Sales KPIs help your revenue team stay aligned by providing common targets for everyone to work toward. It’s critical to map out what KPIs are most important to your sales team and then clearly define them so that everyone is on the same page.
Here are 12 common KPIs that sales teams use to measure their progress and success:
- Annual recurring revenue (ARR). Annual recurring revenue, or ARR, is the total amount of contracted revenue that your company brings in each year. It’s calculated as follows:
ARR = (Total value of a contract) / (Number of contract years)
- Average revenue per user (ARPU), also called average revenue per account (ARPA). ARPU and ARPA both refer to the amount of money that a company brings in per subscriber, user, or account in a particular time period. To calculate ARPU or ARPA, divide the total amount of revenue coming in within a given time period by the average number of subscribers during that same time period:
ARPU or ARPA = (Total amount of revenue in a given time period) / (Average number of subscribers during that time period)
- Quota attainment. Quota attainment is defined as the percentage of deals (either by quantity or by revenue) that a sales rep has closed relative to their set quota for a given time period. It’s calculated as:
Quota attainment = (Number of closed deals or revenue in a given time period) / (Quota for that time period)
- Win rate. Win rate refers to the percentage of deals that are closed-won within a specific time period. You calculate win rate by dividing all the won opportunities by the total number of closed opportunities:
Win rate = (Total number of won opportunities) / (Total number of closed opportunities, both won and lost)
- Conversion rate. Your conversion rate is the number of qualified leads that result in closed-won deals. It’s typically listed as a percentage, which you calculate as follows:
Conversion rate percentage = (Number of leads converted into sales) / (Total qualified leads)
- Average selling price (ASP). Average selling price, which is sometimes also called average deal size, is the average dollar amount of each closed deal. The equation used to calculate ASP is:
ASP = (Total value of closed deals over a specific time period) / (Total number of deals)
- Net dollar retention (NDR). Net dollar retention, or NDR, is a percentage that accounts for renewals, upsells, and churn to show how your business retained revenue over the course of a year. This metric helps illustrate your business’s health and growth potential over time. You calculate NDR as follows:
NDR = (Beginning ARR - Churn + Expansion) / (Beginning ARR)
- Gross dollar retention (GDR). Gross dollar retention, or GDR, is a percentage that accounts for churn in the context of your business’s overall annual revenue. Note that this percentage does not include upsells or cross-sells, differentiating this stat from NDR. You calculate with a formula that is similar to NDR but does not include the growth or expansion numbers. The equation for GDR is:
GDR = (Beginning ARR - Churn) / (Beginning ARR)
- Addressable churn. Addressable churn is customer attrition that your organization can prevent. Interventions to avoid churn include addressing gaps in support, product fit, and adoption. Addressable churn is quantified as the sum of dollars associated with account churn or contractions.
- Non-addressable churn. Non-addressable churn is customer attrition due to factors that your organization typically cannot control. Possible causes include champions leaving the business, budget cuts, an organization going out of business, etc. Similar to addressable churn, non-addressable churn is expressed as the sum of dollars associated with account churn or contractions.
- Sales linearity. Sales linearity is defined as the steady and predictable pattern in which deals close throughout the quarter. An example of sales linearity would be if sales reps attain 20% of quota by the end of the first month of the quarter, 50% by month two, and 100% by the end of the quarter.
- Sales cycle length or time in each sales stage. Sales cycle length refers to the average amount of time it takes for a new customer to move from the opportunity stage to a closed deal. In other words, it represents how long it takes for a prospect to move through every sales stage, from start to finish, when they become a customer.
For example, let’s say you want to see how long opportunities typically take to go from making contact with a prospect to pitching your product in a meeting. You’d take the historical start and stop dates for this sales stage among your opportunities, add them all, and divide by the number of opportunities to find the average length of time that your potential customers spend in this stage. You’d do this for each stage in your sales cycle to get a good picture of how opportunities move through your pipeline.
How to choose the right sales KPIs for your team
Because key performance indicators illustrate what success looks like for your organization, it’s critical to choose the sales metrics that matter most to your business, measure them consistently, and make them visible and accessible to the entire team with a shared source of truth, such as a revenue operations platform.
You’ll also need to create a KPI lexicon to ensure everyone is working from the same playbook and speaks the same language. Otherwise, you risk confusion and lost growth opportunities through scattered, unclear, and outdated data.
“One of the biggest problems I see is when different teams bring their own reports with their own data, each from a different source,” says Karan Singh, Vice President of Revenue Operations at Procore Technologies and member of the ROC. “What happens is they end up spending the entire meeting debating whether the data is accurate, where it came from, or how it was pulled, instead of actually strategizing on next steps.”
There are three key steps for choosing the right KPIs and using KPI terminology for your organization.
1. Define your goals with a cross-functional team
First, sit down with each group of stakeholders in your cross-functional revenue operations team—including sales, marketing, and customer success—and map out what your shared goals are. Create a list of what you all think the most important KPIs will be for your team, factoring in your company’s overarching strategic goals and clearly defining each KPI. Agree on the calculations you’ll use for each metric and designate the systems from which information should be sourced (such as your revenue operations platform or CRM).
Questions to ask your team include:
- What is our shared goal?
- Why is this outcome important for our business?
- How can we gauge progress toward this outcome?
- What can we do to influence a positive result?
Ensuring everyone stays aligned and uses the same terminology is critical.
“We just went through an eight-month KPI standardization process,” says Procore’s Singh. “We asked ourselves: ‘What is annual contract value? How do we define a customer? What do our KPIs actually mean down to the field level?’ Aligning on these definitions is critical to ensuring the entire revenue team is on the same page every step of the way.”
2. Use specific, actionable, and measurable metrics
The metrics you designate as your KPIs should be directly linked to your overall business goals, and you should also be able to directly impact those goals by providing strategic insights. That means KPIs should be specific, actionable, and measurable.
One way to ensure you choose actionable KPIs is by following the SMART principles. SMART stands for specific, measurable, attainable, relevant, time-bound:
- Define a specific outcome.
- Make sure you can measure progress toward this outcome.
- Ensure the outcome is attainable.
- Confirm your goal is relevant to your organization and its growth.
- Establish the timeframe needed to achieve this outcome.
Record your KPIs in a clear, easily accessible resource for the entire revenue team to use. Consider using a chart or worksheet that contains your agreed-upon KPI terminology, definitions, calculations, and relevant data sources. Many companies choose to centralize this information in a shared source of truth, like a RevOps platform.
3. Review and update your KPIs over time
Make sure to pressure-test your new KPI resource with your go-to-market teams. Review and update KPIs over time as your goals evolve, and consider designating a teammate to own those updates so that they remain clear and consistent. You can also add this document to onboarding materials for your go-to-market teams to establish alignment upfront.
Download the Sales KPI Worksheet
Download our Sales KPI Worksheet to help you select, define, measure, and leverage the best KPIs for your organization. This chart is based on real-world insights from members of the Revenue Operations Council and their years of experience growing revenue at world-class companies.