4 Sales Forecast KPIs You Should Be Tracking

Authored by Chisom Uche on July 22, 2016

 

In the world of sales performance and management, there are hundreds, if not thousands, of KPIs you can use to track your sales team's success. Many of the choices of which sales KPIs you should be tracking depend on the industry your company is in and what type of sales team you work with.

What doesn't change is the fact that all metrics must evaluate how well you directly impact revenue. Avoiding relying exclusively on activity-based metrics such as emails sent, phone calls made, conversations had, number times they opened your email, etc are good ways of focusing on the core reasons your deals close. I'd like to offer you 4 very key KPIs that you can use to evaluate and coach your sales team.

1. Win Rate

This is probably one of the most tracked KPIs by any sales manager. The equation for win rate is:

# of Won Deals

Total # of All Closed Deals

The win rate is crucial because it helps you evaluate the strength of your pipeline. Clearly, the ideal situation for your win rate is going to be 100%, meaning you close every opportunity in your pipeline, but that's not realistic. If it does happen, you have a sales team full of Sandbaggers. Realistically, a healthy pipeline should have a win rate around 35-45%. Anything outside of that range and you should look deeper into the quality of the opportunities that your sales team is working and the tactics and win rates of each of your sales representatives individually. Do note that this metric does not take into account opportunities that just linger in your pipeline without closing. We call these 'zombie deals', and while they aren't accounted for here, they will be in another metric we will discuss later.

 

2. Commit-to-Win Rate

A good way to get a better idea of the quality of your pipeline is to examine your commit-to-win rate. This is different from the classic win rate in that it requires sales representatives to explicitly identify the opportunities that they will close in a sales period. By rule, a good sales team should have a commit-to-win rate that is above your standard win rate. If you don't currently have your sales representatives commit to closing certain opportunities, you should start. It helps you have a better understanding about your reps understanding of their pipelines, gives you more confidence in your sales forecast, and can help you be a more effective sales coach moving forward. The equation for Commit-to-Win rate is:

# of Won Deals That Were Committed

Total # of All Committed Deals

 

3. Average Time to Close

When you are reporting revenue projections and building a forecast, it's very important to track the time it takes for your opportunities too close. Having this information on your sales cycle can help set expectations with your sales team and give them a standard for which they need to perform. When looking at Average Time too Close, you should also dig deeper and separate the Average Time to Close Won and Average Time to Close Lost. Even you don't reach this goal, you should strive to have a lower Average Time to Close Lost than Average Time to Close Won if you don't then your team can get in the habit of spending too much time holding onto bad deals. Average Close Times vary by industry pretty heavily. Some have sales cycles that are only days long and other have cycles that are multiple months long. The best you can do is start tracking now and using a couple sales periods of data to determine your specific cycle time. Eventually, you should look into software that can track it for you (shameless plug- Contact Us for more info). It's pretty straightforward but the formula for calculating Average Time to Close is:

Δ (Close Date of Sales Opportunity - Created Date of Sales Opportunity)

# of Closed Opportunites in the Pipeline

 

4. Rate of Opportunity Pushes

The last sales KPI that you should be constantly tracking is the number of times your opportunities push. This is also how you monitor those 'zombie deals' that were mentioned before. This metric is typically very hard to track unless you constantly check in with your sales reps or have a high-quality pipeline management solution that can do this for you. The value of knowing how many times an opportunity pushes is that there is a strong correlation between the number of times an opportunity's projected close date changes and the likelihood that that opportunity will close. As a sales team, you want your average number of pushes should be as close to 0 as possible. If you identify sales reps that have opportunities that have multiple pushes, especially if they have committed those opportunities, you may want to prioritize that as a focus point during your next 1-on-1 with them. You'll want to calculate the Rate of Opportunity Pushes with this equation:

 

# of 'Expected Close Date' Changes to Your Opportunities

# of Opportunities in Your Pipeline

 

Again, this metric is often difficult to track because the number of times the 'Expected Close Date' of an opportunity is changed is a KPI that is typically not tracked. If you foresee your sales team struggling with this, consider looking for a pipeline management solution that can keep track of this metric for you.


By no means is this list supposed to be a list of the only sales KPIs that you should be tracking on your sales team's performance, but it is a very solid foundation for where you should start. Once you feel like you have a good understand of how your team performs in relation to these metrics, you'll want to begin coaching to improve performance in the areas that need improvement.

 

As always, we're here to help. If you would like more information on how we help our customers measure, track, and act on these metrics feel free to contact us!

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