Sales pipeline metrics are crucial for any business teams to analyze the performance of their b2b sales pipeline. By regulating the monitoring process through such metrics you can improve your sales results.
Is it true that anybody can be successful?
In Jimmy Carter’s book, Our Endangered Values: America’s Moral Crisis, he says,
“I believe anybody can be successful in life regardless of natural talent or the environment within which we live.”
The same can be said for sales. The whole point of sales is to be successful in the market regardless of the field.
But, success can be difficult. You need to understand every factor of your business pipeline to deliver a successful final product to your target audience. It also involves frequently reiterating your process and finding the best practices that satisfy your target audience’s pain points.
So, what is the best way to reiterate your sales process? The answer is a sales pipeline metric.
Imagine this, you are going to present an analysis of Q3 sales data in front of your upper management panel.
You might have tons of data at your disposal, but all of those data points may not work as intended. You need to know which sales metrics are important, and which are not.
Then, you come to know that the first step towards iterating your sales process is about understanding the sales pipeline metrics and segregating them in such a way that, you can effectively make a decision towards improving the sales of the next quarter (Q4).
As said, there are numerous pieces of data for sales pipeline metrics, it can be quite confusing at first, but don’t worry. You are in the right place. We will discuss the best eight sales pipeline metrics that can help you to gain more leads and close more deals.
8 Sales Pipeline Metrics to Know in 2023
In 2023, it is obvious that not all ideas are great ideas. But, at the same time, we cannot be sure whether the idea is great or not until we execute that idea. That seems paradoxical, but the same thing can be said for sales pipeline metrics.
At first, it is not possible to identify whether the particular lead is going to be a qualified lead or not, unless you execute some process to ensure that the lead converts into a qualified lead.
So, the first among the sales pipeline metrics on our list is the number of qualified leads.
- Number of Qualified Leads
- The Conversion Rate for MQL to SQL
- Win Rate
- Average Deal Size
- Customer Acquisition Cost
- Customer Lifetime Value
- Sales Pipeline Velocity
- Lost Deal Reason
1. Number of Qualified Leads
When the lead converts into a qualified lead, there is segmentation. It involves three types of qualified leads.
- Marketing Qualified Leads – AKA MQL, these leads are the start of the sales funnel. Imagine this is the step, where your target audience is interested in your product and ready for a conversation, but not ready to make that purchase. It is safe to say that the audience is on the fence and with the right steps, it is possible to take them into the next step in the funnel, which is SQL.
- Sales Qualified Leads – AKA SQL, these leads belong in the middle part of the sales funnel, meaning that your qualified lead is ready to make a purchase or at least they are in the final stage of the talk to make a purchase.
These above are the two major qualified lead types. But, there is another type that is suited for some of the fields that offer trial options for their service.
- Product Qualified Leads – AKA PQL, these leads are a special part of the sales funnel, where this type applies only to the business that offers some sort of trial for their product or service. If the qualified lead experiences the trial version of your product (usually free service) and is very much interested in the real version of your product or service, the qualified lead is known as the product-qualified lead.
Tracking this number of qualified leads can help you to understand whether your sales come from the funnel or through the trial version. It helps to ironclad your lead generation tactics and make more sales down the line.
2. The Conversion Rate from MQL to SQL
Next on our list is the conversion rate of marketing-qualified leads to sales-qualified leads. You have the numbers of the MQL and SQL separately. Now, it is easy to calculate the conversion rate.
The conversion rate in % = (Number of SQL/Number of MQL)*100
Why is the conversion rate important?
Conversion rate is one of the most important, if not the most important sales pipeline metrics for any business.
It is the only metric that directly shows the revenue of your business. Ensure that, as the top priority, you always have the conversion rate of MQL to SQL, or (PQL) for your next sales meeting.
Tip: Want to know how to increase the conversion rate? Use the CTA (Call-to-Action) technique in your enticing emails.
If you see a drop in the conversion rate from the previous quarter, one of the reasons might be miscommunication between your sales and marketing teams. Having regular meetings between the sales and marketing teams can help to bring out ideas and ensure that both parties are on the same page.
Since we are talking about the rates, it is important to know another sales pipeline metric that has a direct tell on your success rate.
3. Win Rate
The win rate is one of the sales pipeline metrics that seek the same objective as the conversion rate. It deals with the number of leads that are won, as well as the leads that are created but not won.
Here is the way to calculate these sales pipeline metrics:
Win rate in % = (Number of leads won/Number of leads created)*100
If it is dropping, there is likely a problem in the sales funnel, and it is better to use more effective sales tactics to improve the win rate.
What if you are creating a high win rate, but the total number of sales is not tallied with the lead? In this case, there is a problem with the marketing funnel. Having good marketing pipelines can help to bring more leads into the funnel.
4. Average Deal Size
Sales are always about the future with the present data. When it comes to a deal, always think about getting bigger. Mathematically, the average deal size is how much money you make over a specific period of time; usually every quarter of your sales calendar.
Average Deal Size = The sum of all money made from a deal over a specific period/Total number of deals
One of the best tactics to increase your sales, if your average deal size is comparatively lower on the market, is to identify your big guns of sales and focus your marketing tactics on those flagship products.
5. Customer Acquisition Cost (CAC)
CAC is a simple sales pipeline metric that involves the cost of acquiring a new customer. It is one of the most important factors that you should keep in mind when you are building the analysis report for your sales quarter.
The mathematical equation for CAC is:
CAC = Total expenses (in both sales and marketing)/ Number of new customers
This is the one sales pipeline metric that you should keep low as much as possible.
But, what if your CAC is higher than expected? Try to make a noticeable change in the expenses of the sales tasks. Even a small change can bring a noticeable drop in the CAC.
6. Customer Lifetime Value
Customer lifetime value, or LTV, is a special sales pipeline metric that tells you how valuable the customer is to your business in the long run. LTV is especially important for YMYL (Your Money, Your Life) websites. These websites, especially eCommerce websites, rely on the continuous purchase of the existing product, leading to customer success.
LTV can be calculated by:
LTV = Total revenue generated by the customer over a period of time/Associated costs per customer.
Check your high-revenue audience and gather insight. Based on that, tailor your marketing and sales strategy.
Quick Tip: If you want to measure the efficiency of your customer-acquiring process, take the ratio of LTV to CAC. The industry standard is 3:1, meaning that for every dollar that you spend, you get three dollars as the LTV.
7. Sales Pipeline Velocity
From the name, we can interpret that it has something to do with moving up in the sales funnel. This particular sales pipeline metric indicates how fast the prospect (lead) is moving up in the funnel.
This metric is much more similar to the average sales cycle. The average sales cycle is the time taken to close the deal.
Here is how the average sales cycle is calculated:
Average sales cycle = Total number of days to close a deal/Total number of deals
Identify the prospects that are stagnant in the B2B sales pipeline by using this metric. Once you clear those stagnant prospects, you can automatically lower the average sales cycle, which, in turn, increases the B2B sales pipeline velocity.
Tip: Use automation to streamline the B2B sales pipeline. This helps to identify the slow prospects and to make the right decision on how to clear those deals effectively.
8. Lost Deal Reason
This is one of the sales pipeline metrics that cannot be measured with numbers. Losing a deal is an integral part of sales for any business. It definitely has an impact on your business overall, but that does not necessarily mean you should not try again. Understanding what went wrong, performing RCA (Root Cause Analysis), and indexing your finding helps you to learn and close many more deals quickly and efficiently down the line.
1. What is a sales pipeline metric?
A sales pipeline metric is a cumulation of factors in the sales pipeline that can heavily influence your deal-closing process. The numbers help you to understand how efficiently you are closing deals and documenting the steps in the process. In order to achieve good metrics, try to incorporate internal KPIs and an automated CRM.
2. How do I forecast the sales pipeline?
The sales pipeline differs between B2B and B2C. For B2B, the sales pipeline usually involves collecting data internally among the sales team, and differentiating the stream of revenue in your business (if you have multiple revenue streams).
After collecting the data, measure the conversion rate for each KPI (Key Performance Indicator) in the sales pipeline, and apply the weighting calculation with the conversion rate to get you the forecasting of your sales pipeline.
3. Is the sales pipeline a KPI?
On the whole, the sales pipeline is not a KPI. However, the factors involved in the sales pipeline can be measured as the KPI. For example, the number of qualified leads can be measured as the KPI. Note, this can vary depending on businesses.
Yes, measuring and tracking all these metrics can be a headache and sometimes difficult. One of the best ways to have a good B2B sales pipeline is to focus more on internal workflow and tracking the performance of that workflow. But it is not necessary to manually work these tasks, you can automate the process and efficiently track the performance. Salesforce claims that 97% of sales leaders say AI gives more time to sell. Meaning more sales for your business.
This article hopes to give enough information on the sales pipeline metric.
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