An illustration of your prospects’ position in the sales funnel is provided. To identify what is and isn’t functioning as well as the advantages and disadvantages of your sales process, you must routinely analyze and assess the metrics related to your sales pipeline.
The goal of sales pipeline metrics analysis is to ascertain the reasons behind a particular prospect’s success or failure in the final set of steps leading up to the closing of a sales contract. Using the appropriate CRM solution, you must evaluate the key sales KPIs and objectives in order to carry out a thorough pipeline analysis.
We’ll talk about 11 sales pipeline metrics that you should keep an eye on in order to enhance your sales funnel.
1. Number of Qualified Leads
Anyone who has interacted with your company is referred to as a lead. A qualified lead is a future potential customer who meets specific predefined criteria of your company’s needs. Only willing leads are categorized as qualified leads, indicating that they freely offered the information. As a result, purchased leads and databases are not considered qualified leads.
You can’t complete deals without solid leads, which nearly goes without saying. Keep track of your total inbound and outbound leads to ensure that your sales team has enough qualified leads to hit the revenue goals of your company. If you’re running low on qualifying leads for the next quarter, that’s a red flag. Put everything on hold and focus on finding a solution.
Consider increasing your marketing budget to attract additional prospects, training salespeople on keeping their contact lists up to date, and using prospecting technologies to receive real-time alerts regarding position changes among your prospects.
Lead scoring software can also help you increase the quality of your leads. These systems can automatically assess parameters like geography and engagement to trim your list of less desirable prospects.
You may also use funnel software to automatically collect visitors as sales leads and group them according to how engaged they are to qualify them.
2. Average Sales Cycle
The sales cycle is the time it takes to convert a lead from the first contact to a closed sale. You can spot opportunities languishing in your pipeline once you know how long your sales cycle will run.
These deals have been in your pipeline for an extended period compared to typical deals in your sales cycle. Concentrate on those deals, figure out what went wrong, and devise a plan to move the deal along more quickly. It can slow pipeline velocity if a lead takes too long to transit through each stage of the sales funnel (more on this below).
Calculating the length of a sales cycle for a specific contract is as easy as calculating the time interval between:
- When the initial contact was made
- When was the transaction finalized
The average sales cycle duration is then calculated by dividing the number of days to closure by the number of closed agreements.
Another technique to speed up a slow sales cycle is to automate the prospect follow-up process. Perhaps inactivity or delays occurred because a representative failed to contact them or check if they had any questions. Reps can program follow-up emails to send at a regular cadence using a CRM like Sell.
3. Customer Acquisition Cost
Client Acquisition Cost (CAC) is the cost of gaining a new customer to purchase a product or service. It’s one of the KPIs or metrics that enables you to obtain a measurable estimate of each consumer’s costs and a long-term picture of how much you generate from each conversion.
When analyzing whether or not your sales funnel is effective, you should evaluate this at a bare minimum. You may use statistics to establish the average client per acquisition, as illustrated in the image.
So, if your CAC is greater than the norm, you must make adjustments to your sales business’s expenses. A modest modification like allowing business expenses only when related to prospects of a specific deal size can sometimes make a significant difference.
4. MQL to SQL Conversion Rate
MQL to SQL conversion rate is a sales KPIs metric that measures the proportion of marketing-qualified leads converted to sales-qualified leads. It’s one of the most accurate ways to assess lead quality and a good indicator of how successful your lead generation campaigns are.
Read Also: How to Make Money With Sales Funnel
The ideal MQL to SQL conversion rate measure is roughly 13%. That indicates for every 100 MQLs, each marketing campaign should yield at least 13 successful SQLs.
To improve your MQL to SQL conversion rate, you must first determine why you’re getting fewer leads. Is it possible that your landing page is just not optimized enough anymore? Perhaps you must clean up your email list to drive more leads from your email marketing efforts. Or maybe you need to set up an entirely new marketing strategy?
Whatever the reason, you’ll need to do your research and fine-tune your strategy accordingly. Then, continue to track the same KPIs and see whether your changes are working. Consider using ClickUp’s resource management features to help you measure progress and manage your team more efficiently.
5. Customer Lifetime Value
Lifetime Value (LTV) is a metric that determines how valuable each client is throughout a business relationship. It’s a critical metric for eCommerce platforms which rely primarily on repeat sales from the same clients.
Analyze low and high-performing audience segments to improve LTV and adjust your sales and marketing activities accordingly.
Customer lifetime value is a helpful tool for determining the effectiveness of your marketing initiatives and identifying the customer types that are most likely to create money. An analysis of client lifetime value can aid in developing strategies for maximizing income once a customer has been acquired.
Remember that keeping an existing customer is far less expensive than obtaining a new one. The CLV metric can assist you in deciding where to deploy your limited resources.
6. LTV to CAC Ratio
The LTV to CAC ratio is a measure that compares the lifetime value of a client to the cost of acquiring them. If your LTV to CAC ratio is 5:1, it means that for every $1 spent, you earn $5 in client lifetime value back.
The Corporate Finance Institute set an industry benchmark for LTC to CAC at 3:1.
You are unlikely to make money if your leverage is only 1:1. Conversely, a 5:1 ratio implies that you need more leads to expand your business, which means you could benefit from running more marketing campaigns.
7. Win Rate
The win rate is a figure that represents the number of qualified leads that become clients. Keep track of this figure in your KPI reporting throughout the periods you specify, such as quarter to quarter, to see how it evolves.
The number of closed deals divided by the number of leads, opportunities, or meetings yields the win rate %. It’s also possible to compute it at each stage of the process.
Consider the following scenario:
- A victory rate of 3% is based on 100 leads and three closed sales
- With 25 opportunities and three finished agreements, you have a 12 percent victory rate
Suppose you detect a low or deteriorating win rate percentage at a certain point in the pipeline. In that case, it’s critical to figure out why and then devise a strategy to enhance the conversion path rapidly.
Alternatively, if your win rate is high, but your overall sales are down, it could indicate that you have a prospecting or marketing issue.
8. Sales Velocity
Pipeline velocity is the pace at which a lead passes through your sales pipeline. As a general rule, the faster, the better. The faster a lead converts, the more time you have to devote to other possibilities.
You’ll need to improve at least one of the levers in the equation to raise your sales pipeline velocity. Improve your win rate, boost deal size, or shorten the average sales cycle.
In contrast to an aggregate total, the sales velocity allows you to observe the money that your sales force pulls in daily.
Knowing this can help you determine which days of the month are the most productive. That can be useful for everything from increasing outreach on specific days of the week to determining the best weeks to persuade team members to take vacation time.
9. Average Deal Size
Your sales strategy and the pace of your pipeline will be influenced by the average value of a won contract. What is the average revenue generated by a deal?
You can only start planning for the future and strategizing strategies to enhance your deal size once you know your deal’s size. Determine how you’ll deploy team resources based on your typical deal size.
Suppose half of your account executives are closing enterprise accounts, but your average transaction size is only $5,000. In that case, it might be a wiser use of resources to shift some account executives to smaller accounts.
Bigger deals typically take longer to convert because there’s more money at stake and resources needed in the decision-making process. Smaller transactions, on the other hand, proceed significantly faster.
10. Total Pipeline Value
Add the value of all the deals in the pipeline value—that’s the entire worth of your pipeline.
The bigger the number, the better because it means more revenue opportunities. However, you can’t expect all the deals in your pipeline to close, so you need to be careful when you estimate the total pipeline value.
Break down the total pipeline value per stage, such as lead, opportunity, and meetings scheduled.
As you get closer to the conclusion of the pipeline, you’ll see that the total amount drops. On the other hand, these prospects are the most likely to sign on the dotted line. To compare sales rep performance, use the overall pipeline value.
11. Deal Profitability
Sales pipeline metrics are deal profitability. After all, it’s critical to know how much of a contract’s gross revenue ends up in the company’s bank account.
To determine transaction profitability, first, determine how much you’ll have to spend to land the deal. Only deal-specific costs, such as hourly labor, travel, documentation, and client entertainment, are included.
Subtract the entire cost of the transaction from the overall cost of the transaction. This statistic represents a deal’s profitability.
Knowing the profitability of your transactions makes it easier to justify investing in deal-related expenses or avoid changes that are too expensive to win. It’s critical to spend strategically to obtain contracts, and you’ll be able to do so if you track deal profitability.
Also, a transaction profitability study can reveal which contract kinds create the most money for your organization. Deal profitability is vital when deciding what types of contracts to pursue and what items or services to offer as upsells.
How do You Assess the Sales Pipeline?
Performing a sales pipeline analysis can be a very intimidating undertaking if you are unsure of how to go. We have compiled a list of crucial actions to assist you in getting started:
- Define your sales pipeline
The first step to analyzing your sales pipeline is knowing what it looks like in the first place. This means identifying all of the people, processes, tools, and tactics you use throughout your sales process and creating a visual representation of how they’re implemented.
- Assign responsibility
Who will conduct your sales analysis? Sales teams are typically responsible for conducting a sales pipeline analysis. That said, organizations with RevOps models in place may assign them to a cross-functional team that includes members from all revenue-impacting departments, including Marketing, Sales, Finance, and Customer Success.
- Identify your key metrics
In the section above, we walked you through a list of metrics commonly included in a sales pipeline analysis. Identify the ones that are most important to your organization and that you’ll use as KPIs for measuring pipeline performance.
- Leverage your technology tools
CRM systems and other revenue management platforms provide data-driven insights for a sales data analysis of your pipeline; often using AI and automation to provide them at scale. These tools should be utilized as part of your sales pipeline analysis, particularly to automate reporting, ensure the highest levels of accuracy, and enable smart forecasting to inform future strategies.
- Develop reporting processes
Formalize reporting processes for your sales pipeline analysis as much as possible. You should have already identified your most important metrics. Now consider:
- Who should receive a report on the results of your analysis?
- How will you develop an action plan based on your report?
- What ongoing processes will you put in place to track key metrics on an ongoing basis?
A sales pipeline analysis empowers you to take control of your revenue potential with stronger, more intentional sales strategies at every stage of the B2B buyer journey. Over time, it helps you achieve more predictable revenue streams that lead to higher growth.