Any new business or established company aims to increase revenue and expand its customer base. That’s all but impossible to do without a comprehensive understanding of your sales pipeline data.
With the available sales pipeline technologies, it’s also possible to have a surplus of data. This makes it difficult to distill the important data and act accordingly. Gaining insight into your sales pipeline pinpoints weaknesses while underscoring pipeline strengths.
Instead, you can strategically monitor these five sales pipeline metrics to improve lead conversions and reach new markets.
- Any successful Customer Relationship Management (CRM) system provides insights into a business’s sales pipeline—but an information overload can be unwieldy. Instead, focus on the sales metrics important to your industry and particular business.
- Your sales pipeline should track leads through the sales process, from generation to conversion. Collecting data from each step (as relevant to your business) allows you to allocate resources to the areas most in need of improvement.
- Change your strategy from one of reactivity to proactivity. When you know your customer pain points, you can implement a business response and marketing strategy addressing the issues.
What Are Sales Pipeline Metrics?
To understand your business’s health, you must understand the sales pipeline in all its complexities. But you can’t get the information from one metric alone.
Instead, business analytics professionals need to identify and track data around their key performance indicators. The more advanced your CRM platform, the easier it is to determine what causes some leads to convert and drives others to a competitor.
You can analyze your sales pipeline to reach sales targets—or maintain current goals.
You can predict revenue, anticipate lead conversion and plan for market expansion by tracking key indicators. Tracking metrics also:
- Allocates resources to improving your worst-performing metrics
- Develops an advertising strategy that highlights how you’ve improved those metrics
- Provides training to staff members who contribute to the data of key metrics
5 Sales Pipeline Metrics To Monitor
Don’t try to manage all metrics at once—it’s difficult to devote enough resources to fixing one problem when you spread yourself among multiple issues. A more effective approach targets the metrics important to your particular business and industry as a whole.
1. Customer Acquisition Cost (CAC)
The customer acquisition cost (CAC) measures the time and expense of gaining a new customer.
Even though this customer likely brings in new revenue, the expense required to attract and cultivate the relationship offsets that revenue. Factors to evaluate include:
- Marketing expenses
- Advertising expenses
- Employee costs (e.g. salaries, commissions and salaries)
A “good” cost depends on your industry and product. The lower the cost, the more efficient the pipeline. If your CAC is too high, consider analyzing the efficiency of marketing staff or devoting more time only to those potential customers most likely to convert.
2. CAC Payback Period
After determining your business’s CAC, the next step is to determine how long it takes to regain the expenses of new customer acquisition.
This metric establishes your company’s baseline profitability by highlighting the point at which the customer turns a profit. Knowing the average period allows you to plan for a predictable and consistent income.
For some SaaS companies, a CAC payback period of 12 months or shorter is preferable. But as with your sales pipeline metrics, the most acceptable timeline depends on your business.
3. Opportunity Cohorts
Each point in your sales pipeline plays a designated role. How do you know at which points leads convert to customers? Through an opportunity cohort.
This sales pipeline metric tracks the frequency at which a lead becomes a customer at each step of your pipeline. Analyzing this metric requires software that measures leads and sales as a function of time. A quality CRM program can determine the conversion rate at any point.
However, you can determine this by hand with the following formula:
(Total Conversions / Total Leads) x 100
An opportunity cohort may convert based on:
- Type of business
- How you define each point in the sales pipeline
- The amount of effort dedicated to each stage
4. Average Sales Cycle
Similar to the opportunity cohort metric—which groups customers by the point at which they convert—the average sales cycle tracks the time required for a sale to close.
Tracking this metric will reveal when you can expect to earn revenue. With this point in mind, you can forecast more efficiently and accurately. For example, one study estimates that the average sales cycle length for businesses in the SaaS industry is 84 days.
You can improve your average sales cycle by:
- Developing marketing content that communicates the benefit of hiring your company
- Reducing your free trial period to encourage leads to convert
- Determining the points in your sales pipeline at which users experience the most frustration
To determine your average sales cycle, divide the total days in your tracking period by the number of sales closed.
5. Pipeline by Sales Rep
You don’t have a sales pipeline without sales representatives. Tracking total sales or negotiations by sales rep illustrates the effectiveness of each rep.
To calculate pipeline by sales rep, first determine the conversion rate at each point in the pipeline for each sales rep. Then, calculate the average at each point for your company. This will underscore those reps falling behind and highlight the most successful ones.
Compare the insights gleaned from each set of employees to determine the type of training that would be most beneficial. For example, if a particular sales rep loses leads at the negotiation stage, they may be playing too much hardball. A session on negotiation tactics could be appropriate.