Have you ever felt like you had a good grip on your company’s sales pipeline, only to have the numbers change and send you back to square one? Sales pipeline metrics can be tricky to nail down, sort of like nailing Jell-O to a wall – especially as your business grows and changes. But that […]
Have you ever felt like you had a good grip on your company’s sales pipeline, only to have the numbers change and send you back to square one? Sales pipeline metrics can be tricky to nail down, sort of like nailing Jell-O to a wall – especially as your business grows and changes. But that doesn’t mean you should ignore them; tracking the right metrics is essential to a healthy sales pipeline. So what should you be looking at? Let’s look at the essential sales pipeline metrics for 2023, and the formulas for those.
But first, who’s up for a quick review on KPIs?
What is a sales pipeline KPI?
A sales pipeline key performance indicator (KPI) is any metric used to track the progress of leads through the pipeline. Metrics let reps measure the performance and effectiveness of their sales activities against concrete numbers. By tracking KPIs, businesses can gain insights into where deals are getting stuck, what stages of the sales process need more attention, and how effective the team is at converting leads into customers.
Common sales pipeline metrics include conversion rate, deal value, cycle time, and average sales price and deal size, among many others. But which sales pipeline metrics should your business focus on to have the most impact towards a smooth and efficient sales process? Let’s take a look at a few top metrics and their importance.
Are you paying attention to the sales pipeline vs. funnel conversations?
Many people are unsure of the difference between a sales pipeline and a sales funnel. In short, a sales pipeline is a list of potential customers, while a sales funnel is the process that leads them from being potential customers to actual paying customers. A well-designed sales funnel will take into account each customer’s needs and interests, and then guide them through the steps of the buying process.
What sales pipeline metrics should you track?
There are a lot of pipeline metrics out there, and it can be tough to choose which ones to track. Here are a few that we think are the most important:
- Number of leads in your pipeline: This metric gives you an idea of how many potential customers are waiting to be converted into actual customers! When combined with some of the metrics below, it can help you forecast possible revenue as well.
- Conversion rate: Your conversion rate measures how many of your leads are moving to the next stage. A low rate indicates leaky spots in your pipeline where leads might be dripping out, while a high conversion rate means your sales process is working and you’re moving prospects through effectively.
- Average sales price: This sales pipeline metric helps you see how much revenue you’re generating per sale. It’s important to track because it allows you to budget for marketing and sales expenses and make the most strategic decisions for sales pipeline management.
- Average deal size: You can use this metric to see which deals are worth pursuing and which ones aren’t. If you’re only closing small deals, you may need to rethink your strategy to tackle larger ones.
- Closing rate: The final key pipeline metric tells you what percentage of sales are ending happily ever after. A company with a low closing rate is good at generating leads, but not so much at converting them into sales. This could be due to an issue with the product itself, but just as often it’s a problem with the sales process. In that case, it’s time to determine where to invest more resources in order to improve your pipeline conversion rate.
Next, we’ll dive into common sales pipeline formulas and give you examples of how to use them.
1. Sales pipeline conversion rate
The pipeline conversion rate is the measure of how many sales leads get converted to the next stage. It could be a lead converting to a sales-qualified lead, a lead converting from your landing page, or a variety of other conversions. If this number is too low, your campaign, tactics, or touchpoints need to be analyzed and fixed. So if you want to make more money, focus on improving your sales pipeline conversion rate.
How to calculate sales pipeline conversion rate
Sales pipeline formula: (number of leads who moved to next stage) / ( total starting number of leads) = conversion rate
Example: You have 100 leads sign up through your lead capture form. You send out a killer email campaign, and 10 leads love it so much that they convert into opportunities.
10 / 100
Your conversion rate = 0.1 or 10%
2. Sales pipeline velocity
Sales pipeline velocity is a metric that tells you how quickly your prospects are moving through your sales pipeline stages and generate revenue. Tracking this number can be a first step towards adjusting your sales strategy; for example, if you notice that your velocity is increasing or decreasing quickly, you can adjust your tactics to keep up with leads or fill up the pipeline to reach goals.
How to calculate sales pipeline velocity
Sales pipeline formula: (number of opportunities) x (deal value) x (win rate) / (length of sales cycle) = pipeline velocity
Example: You have 10 opportunities in your sales pipeline that add up to $100,000 and your win rate is 30%. An average sales cycle for you is 90 days.
10 deals x 100,000 x 0.30 / 90
Sales velocity = $3,333.33 in deals a day
3. Average sales cycle
The average sales cycle is a way to measure the amount of time it takes for salespeople to close deals. The average B2B sales cycle can vary depending on the product or service being sold, but it typically lasts from 3 months up to a full year. Salespeople use this number to track their progress and identify areas where sales pipeline tools can be implemented to speed up the process. One helpful tool is Lusha, our B2B LinkedIn email finder Chrome extension tool. Use it when you’re prospecting on social media and it’ll deliver accurate and updated email addresses and phone numbers (business + direct dials). It’ll speed up the sales cycle by helping you prospect and qualify leads quicker. And a faster sales cycle often means higher close rates and better performance!
How to calculate average sales cycle
Sales pipeline formula: (total number of days it takes leads to convert to customers) / (number of deals won) = average sales cycle
Example: It takes 30 days to close 3 new deals.
30 / 3
Average sales cycle = 10 days
4. Customer acquisition cost
Customer acquisition cost (CAC) is the total cost of binging someone from the beginning to the end of your sales funnel. This figure includes all the marketing and sales expenses associated with landing a new lead, such as advertising, salaries, and commissions. CAC can vary depending on the business, so it’s important to know how yours compares to your industry to ensure your sales efforts are profitable.
How to calculate customer acquisition cost
Sales pipeline formula: (total sales and marketing expenses) / (number of new customers) = CAC
Example: You have a sales and marketing budget of $100,000 and acquire 100 new clients over the course of a year.
$100,000 / 100
Customer acquisition cost = $1,000 per customer
5. Win rate
Win rate is the percentage of opportunities that you convert into sales. But be careful! Don’t confuse win rate with conversion rate, which measures the percentage of leads that are converted into sales opportunities or move to the next stage.
How to calculate win rate
Sales pipeline formula: (number of deals you closed) / (number of opportunities) x 100 = win rate
Example: You have 10 sales opportunities, and you win 5 of them.
5 / 10 x 100
Win rate = 50%
6. Average deal size
The average deal size allows salespeople to forecast how much revenue they can generate from closed deals. It’s quite helpful for sales pipeline analysis; if the average deal size is too small, it means they’ll need to close a lot of deals to generate a significant amount of revenue. If the average deal size is large, it means that reps should focus on high-value leads only.
How to calculate average deal size
Sales pipeline formula: (total value of all deals in your pipeline) / (number of deals) = average deal size
Example: You have $100,000 worth of deals, and 12 deals in total.
$100,000 / 12
Average deal size = $8,333.33
7. Customer lifetime value
This pipeline metric estimates the total revenue that a customer could generate over the course of their relationship with a company. In other words, it’s a measure of how much money a customer is worth to your business. Knowing which segments have the highest customer lifetime value (CLV) will help you create campaigns to target them!
How to calculate customer lifetime value
Sales pipeline formula: (average order value) x (number of orders a customer places over their lifetime) = CLV
Example: The average order cost is $50, and customers make 3 purchases per month.
50 x 10
Customer lifetime value = $150
8. Churn rate
In its simplest form, churn rate is the percentage of customers who cancel their subscription or service within a given period of time. A high churn rate can be indicative of several problems, such as poor product quality, lack of customer support, or an unmet customer need.
How to calculate churn rate
Sales pipeline formula: (number of customers who unsubscribe) / (total subscribers at the beginning of the period) x 100
Example: 100 people unsubscribe from your service in a month, and you started the month with 1,000 subscribers.
100 / 1,000 x 100
Churn rate = 10%
9. Revenue growth
Revenue growth is the lifeblood of any business. With no or low revenue growth, a business will eventually stagnate and die. That’s why this sales pipeline metric is so important. It’ll help you track your progress towards your revenue goals, and give you a clear picture of where your sales efforts are falling short. By tracking this, you can identify bottlenecks and take corrective action to keep your revenue growth on track.
How to calculate revenue growth
Sales pipeline formula: (current period revenue – prior period revenue) / prior period revenue) x 100
Example: In April, you generated $10,000 in sales, while in March you generated $8,000.
($10,000 – $8,000) / ($8,000) x 100
Revenue growth = 25%
10. Revenue loss
Sales pipeline revenue loss is a serious issue for any business. When potential customers are lost at any stage of the sales process, it can have a major impact on the bottom line. Fortunately, there are simple steps that businesses can take to prevent sales pipeline revenue loss. It is important to keep track of the revenue loss each month.
How to calculate revenue loss
Sales pipeline formula: (previous month’s revenue – current month’s revenue) / (previous month’s revenue) x 100
Example: You made $10,000 last month, and this month you generated $4,000.
($10,000 – $4,000) / $10,000 x 100
Revenue loss = 60%
11. Number of referrals
Referrals are massively important in sales because they help fill the pipeline with new leads. A referral is simply a recommendation from one person to another. In the sales context, referrals typically come from customers or clients who have had a positive experience with a product or service. Since these people have already been sold on the value of the product or service, they’re more likely to refer others – and those new relationships will be formed on trust. Encouraging referrals can help to accelerate the sales process and improve all the other sales metrics.
Simply set up a referral program and track the number of new leads.
No formula needed.
12. Reasons for losing deals
Have you ever been absolutely sure you had a deal in the bag, and then lost it at the last minute? There’s nothing worse than watching your sales pipeline dwindle. Every time a deal falls through or a lead goes cold, it feels like you’re losing a little bit of your soul. Okay, maybe that’s a little dramatic, but it still sucks.
Lost deals are inevitable, but they happen more frequently to sales reps who don’t monitor their pipeline closely. For example, if a customer expresses interest in a product but then doesn’t follow up with a purchase, the sales rep may assume that the deal is lost. However, if they had continued to track the sales pipeline, they would have seen that the customer was still interested and just needed a bit more time or more information.
Sales reps need to be vigilant and calculate revenue loss for this sales pipeline metric.
Key takeaways
- What is a sales pipeline KPI?: A sales pipeline key performance indicator, is a measure of the health and effectiveness of your sales process. A good pipeline KPI will help you track your progress towards your sales goals, and identify areas where you need to improve.
- What are the most common sales pipeline metrics?: The number of leads in your pipeline, conversion rate, average deal size, average sales cycle, win rate, churn rate, revenue growth and loss.
- How to track metrics?: Download Lusha, the contact finder and lead enrichment tool. Not only will you get business emails and phone numbers, the tool will update your CRM with firmographic data. That way, you’ll always know who is a qualified lead in your pipeline and get accurate numbers when implementing formulas. Sign up for a 14-day free trial today! Quantify the impact Lusha can make on your business by using our sales revenue calculator.
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