Tracking the right KPIs is critical to driving growth, improving decision-making, and ensuring sales teams stay on track to meet organizational goals. Without the proper metrics, it’s easy to lose sight of performance and miss out on potential revenue opportunities. Below, we’ll explore the most important KPIs every sales team should monitor, how to calculate them, and how they contribute to success.
1. Lead Conversion Rate
This KPI measures the percentage of leads that turn into actual customers. It’s calculated by dividing the number of converted leads by the total number of leads and multiplying by 100.
Formula:
Lead Conversion Rate = (Converted Leads / Total Leads) × 100
Data needed:
- Total leads generated during a specific period
- Number of leads that converted to paying customers
- Metadata on leads related to lead souce (Recommended)
How to calculate:
Use CRM data to aggregate the number of leads by stage (e.g., qualified leads, meetings held, deals won). Roll up this data monthly or quarterly to spot trends and improve targeting.
Why it matters: High conversion rates indicate effective prospecting and nurturing, while low rates may signal gaps in qualification or follow-up efforts.
How to optimize: Regularly review lead quality, adjust outreach techniques, and collaborate with marketing to refine lead generation.
2. Sales Pipeline Health
Pipeline health involves tracking deals at various stages of the sales funnel, assessing their value, and estimating close dates. A rollup of individual deals across each stage provides the necessary data.
Key metrics within pipeline health:
- Number of active deals
- Total deal value
- Average deal stage duration
- Probability of closing
Data needed:
- Individual deal information (stage, value, age, probability of close)
- Historical conversion rates per stage
How to calculate:
Use a CRM system to generate a rollup of deals by stage and calculate pipeline velocity (deals closed per period). Consider using weighted pipeline projections based on the probability of closing each deal.
Why it matters: A healthy pipeline ensures a steady flow of revenue and prevents periods of low sales performance.
How to optimize: Regular pipeline reviews and forecasting help identify bottlenecks and areas where deals stall, allowing for timely adjustments.
3. Customer Acquisition Cost (CAC)
CAC measures the total cost of acquiring a customer, including both marketing and sales expenses, over a given time frame.
Formula:
CAC = Total Sales and Marketing Costs / Number of New Customers
Data needed:
- Total marketing expenses (advertising, content creation, campaigns)
- Total sales expenses (salaries, commissions, CRM tools)
- Number of customers acquired during the period
How to calculate:
Aggregate costs across departments and roll up expenses into a quarterly or monthly total. Divide by the number of new customers acquired to determine CAC.
Why it matters: High CAC can indicate inefficiencies and negatively impact profit margins.
How to optimize: Improve lead qualification processes, invest in more efficient marketing channels, and focus on retaining high-value customers.
4. Average Deal Size
Average deal size reflects the average revenue generated per closed deal and can indicate whether your sales strategy is targeting the right customer segments.
Formula:
Average Deal Size = Total Revenue from Closed Deals / Number of Deals Closed
Data needed:
- Total revenue from closed deals within a given period
- Number of deals closed
How to calculate:
Roll up revenue data from individual deals and divide by the number of closed deals. Segment by deal size to identify opportunities for upselling or cross-selling.
Why it matters: Larger deal sizes mean higher revenue without needing to acquire additional customers.
How to optimize: Train the sales team to upsell premium services and refine pricing strategies to maximize deal values.
5. Net Retention Rate (NRR)
Net Retention Rate measures the percentage of recurring revenue retained and grown from existing customers over a specific period, excluding new business. It includes revenue gained from upsells, cross-sells, and expansions while subtracting revenue lost due to churn or downgrades.
Correct Formula:
NRR = [(Starting Revenue + Expansion Revenue - Churned Revenue) / Starting Revenue] × 100
Data needed:
- Revenue from existing customers at the start of the period
- Revenue from expansions, cross-sells, and upsells within the period
- Revenue lost from churned or downgraded customers
How to calculate:
Focus solely on customers who were active at the beginning of the period. Exclude new customers acquired during the period. Aggregate the revenue changes and calculate the ratio of retained and expanded revenue compared to the starting revenue.
Why it matters:
NRR above 100% shows that revenue from existing customers is growing even after accounting for churn. SaaS companies with positive NRR can grow sustainably without relying solely on new customer acquisition.
How to optimize:
Enhance customer success programs to promote renewals and expansions. Offer upsells through tiered pricing, add-on services, or premium features, and focus on reducing churn through proactive support and engagement strategies.
Conclusion: Aligning KPIs for Continuous Growth
Tracking and understanding these KPIs enables sales teams to allocate resources effectively and optimize performance. The key to success isn’t just tracking numbers— it’s consistently reviewing them, identifying actionable trends, and making data-driven adjustments to support long-term growth. Ready to optimize your KPIs for better results? Contact me to discuss how operational improvements can drive your business forward.