5 Sales Performance KPIs to Closely Monitor in 2022

Image source: Freepik

We all cannot deny the fact that sales are the lifeblood of every business. It does not matter in which industry you are operating, if you are able to constantly maintain your sales target, you will manage to succeed in the business. 

However, in order to maintain something, first, you need to track it and after that, you can improve the same. But what exactly are the key parameters on which your sales performance can be measured and how those parameters can be calculated?

This is where the role of KPIs comes into play. KPI is an acronym for key performance indicators which are quantifiable measures that can assist businesses in tracking the performance of different processes. Multiple departments and industries have different KPIs that can assist in measuring the growth of the corresponding industries or departments. Similarly, there are certain KPIs that can assist in measuring the performance of the sales department.  

Therefore, this blog will effectively highlight the crucial key performance indicators that will help businesses to track their sales performance in 2022. 

5 Crucial Sales Performance KPIs to look out for in 2022

1. Gross Profit Margin

The main objective of every business operating in the contemporary world is to earn maximum profit. You as a business leader would also want to keep enhancing the profit margin and in order to attain the same, it is essential for sales managers to keep tracking gross profit margin.  

Gross profit margin is one of the most important KPIs for measuring the sales performance of a business because it assists in calculating the profit that is earned by a business. To simplify, gross profit margin refers to the amount of money that is left by the business after all the manufacturing expenses are paid off. 

It is a crucial KPI because it assists in calculating the efficiency of businesses in earning profits by selling the product or service in the market. Calculating the gross profit margin percentage can also highlight the key areas where spending is higher than a requirement. Furthermore, businesses can effectively reduce the expense cost from the key areas to increase the gross profit. 

How to calculate the gross profit margin?

Gross profit margin is calculated as a percentage and it can be calculated by the following formula,

• Gross profit margin (%) = (Total revenue – COGS) ÷ Total revenue  x 100 

Where,

Revenue = Total revenue generated by the company in a certain period,

COGS = COGS stands for cost of goods sold which refers to the amount invested in the manufacturing of the product. 

To comprehend the formula a little better, below illustrated is an example, 

Let’s assume that you are an owner of a manufacturing company and in the fiscal year 2020 – 21, you generated total revenue of $50,000 and the total costs of goods sold in the same year were $17,500. Hence, by implementing the formula of gross profit margin we get, 

Gross profit margin (%) = {(50,000 – 17,500) ÷  50,000} x 100 = 65% 

This implies that in the fiscal year 2020 – 21 your manufacturing company generated a gross profit margin of 65%. 

• Key takeaway – For different companies and industries, 50% – 70% is considered a healthy gross profit margin.  

1. Revenue Per Employee 

In order to be successful in the business world, it is essential that every salesperson should focus on generating the maximum revenue for the business. In order to operate most efficiently, it is essential for sales managers to keep a track of revenue generated from each employee. That is where the role of revenue per employee comes into the light.  

Revenue per employee refers to the amount of revenue generated by each employee in the company. It is one of the important KPIs that can assist you in tracking the efficiency of your sales team. 

To elaborate, if the efficiency of the revenue per employee is low, it can indicate the requirement for more or replacement of existing employees in a team. 

How can you calculate the revenue per employee?

Revenue per employee can be yielded by the following formula, 

• Revenue per employee = Total generated revenue ÷ Total number of employees

Probing further, to understand the KPI more effectively, let’s take an example, 

Let us assume that your manufacturing company this time manages to generate a revenue of $700,000 in a year and the total number of employees responsible for the same were 32. So, using the formula we get, 

Revenue per employee = 700,000 ÷ 32 = $21875

This implies that every employee in your company manages to generate a revenue of $21875 in one year.

• Key takeaway – Revenue per employee varies from company to company. However, as per Klipfolio Metric HQ, a good Revenue per Employee lies between $43,000 for companies generating $1 million as their total revenue, to $230,000 per employee for enterprises earning $50 million or more as their total revenue.   

1. Sales Cycle Length 

Sales cycle length refers to the time taken by an agent to completely seal a deal. It starts from the time the customer first gets in touch with you to the time he/she says yes to the product. 

The sales cycle length can be a crucial KPI for measuring the sales performance as a short sales cycle length reflects the higher efficiency of your sales team in convincing the customer to make a purchase. Whereas, a long sale cycle length reflects that the salesperson is not able to seal the deal with the customers which can indicate the requirement of training or replacement of the salesperson. 

How to calculate the sales cycle length?

• Sales cycle length = Total number of days it took to make a deal  ÷ Total number of deals closed 

Probing further, let us understand the formula by an example, 

Let’s assume that it took a total of 12000 days for your sales team to close 96 deals. By implementing the formula, 

Sales cycle length = 12000 ÷ 96 = 125 days

This implies that on average it took 125 days for your sales team to close a deal.  

• Key takeaway – As per a sales benchmark research by Implicit, the average sales cycle length of B2B businesses is 102 days. 

1. Churn Rate

Every time a business lost its customers, it affects the overall revenue of the company. Hence, it is really essential for the companies to keep the track of churn rate of the company to measure the customers’ loyalty. 

Churn rate is also known as attrition rate refers to the number of customers that discontinue buying from a business within a certain period of time. It can also be used to calculate the rate at which employees leave a company. 

In terms of clients, churn rate as a percentage can be a significant performance indicator to measure the sales performance because it can assist in calculating the retention rate of the customers. This can further reflect the efficiency of the businesses in retaining their customers. A better retention rate of the customers will assist you in earning healthy profits for a long period of time. After calculating the churn rate, companies can effectively imply multiple strategies and tactics to reduce the churn rate effectively.  

How to calculate the churn rate?

The churn rate can be calculated by the given below formula, 

• Churn rate = {(Total number of customers at the beginning – total number of customers at the end) ÷ Total customers at the beginning}  x 100 

Let us take an example to understand the calculation of the KPI more effectively,

Let’s suppose that the total number of customers for your manufacturing company at the starting of the month were 18900 and by the end of the year, the total customers that were retained were 16500. Hence, by implementing the formula we get, 

Churn rate = {(18900 – 16500) ÷ 18900} x 100 = 12.6%

This implies that 12.6 % of your total customers discontinued buying from you in the particular month. 

• Key takeaway – In order to enjoy healthy profit, the average churn rate of a company should lie between 5% –  15%.  

1. Customer Acquisition Cost 

Your customers are the major pillar defining the success of the company. But you as a business owner would agree to the fact that convincing customers is not a piece of cake. Moreover, it is also essential for the sales managers to keep a track of the average cost it takes to acquire a new customer. That is where customer acquisition cost comes into play.  

Customer acquisition cost refers to the cost spent by a comp