A key performance indicator (KPI) is a unit of measure that shows how areas of your business like sales are performing. KPIs help entrepreneurs focus on the most important performance measures, like number of leads. You typically set KPI goals and track your progress with software, which ranges from free to hundreds of dollars.
The key to measuring and tracking KPIs is using robust CRM software made for small business. Salesforce Essentials, for example, is a CRM with reporting and dashboard features that can help you track sales KPIs and keep them visible for a fraction of the cost of its well-known enterprise solution. For more information, sign-up for a free trial.
Who KPIs Are Right For
Everyone from business owners to individual sales professionals can find KPIs beneficial. For business owners, they can serve as a way to not only measure performance but to also ensure they are investing in the right sales activities. For individual sales professionals, they serve as a way to ensure they are managing their time and activities in a way that focuses on what they’ll be measured against.
KPIs are right for the following people in a small to medium-sized business:
- Business owners: KPIs help business owners invest their resources. If actual sales metrics compared to goals show the number of qualified leads is too low to meet sales objectives, business owners can decide to invest in lead generation or outreach training.
- Sales managers: KPIs can let sales managers know where to look to determine how their team is tracking to hit sales targets. They have the information to address any concerns around sales performance or recognize top team members.
- Sales teams: Sales teams can use KPIs as motivation to hit team targets. If there is a team sales goal around a KPI, stronger members of the sales team can be motivated to assist and share best practices with underperforming or less experienced team members.
- Sales professionals: Individual team members can use KPIs to track their actual performance compared to expectations.
KPIs are right for a variety of business professionals, from business owners to individual sales reps. They use them differently, but ultimately, KPIs ensure sales objectives are reached. However, to be most effective, they should be track consistently, and everyone on the team should have some degree of access to performance data.
How to Define KPIs for Your Business
Defining key performance indicators depends on a variety of factors. The type of business you’re in, the type of sales strategy you have, and your overall business and sales objectives all plays a role in determining what metrics are best for you.
Here are the components of defining KPIs:
- Review your sales objectives: Your sales objective should be defined in your sales plan. Examples include increasing sales revenue by 20% or increasing profits by 15%. If you do not have a sales objective, check out our article on creating sales plans.
- List metrics that relate to your objective: For instance, your sales objective could be to generate $100k in sales per month. Metric that could influence your team’s ability to achieve this objective might include things like the number of sales, value of deals, number of qualified leads, number of demos, etc.
- Identify the most important metrics: Ask yourself which three to four metrics are the most important? Which you should keep an eye on to let you know whether or not you’re moving towards or away from your sales objectives? These three to four metrics are your key performance indicators.
Example of How to Define KPIs
You’re a business-to-business (B2B) company selling software to medium and large manufacturing companies at a minimum price of $5k per year. Your business generates leads from e-book and whitepaper downloads, then your sales team qualifies the leads, conducts product demos, sends proposals, and close deals through signed contracts and purchase orders.
Your main sales objective is to grow your sales revenue by 20%. To support this objective, you determine each salesperson on your team needs to generate $100,000 per salesperson per month. Metrics that can influence their ability to meet this goal are price, total value of sales, total number of sales, number of e-book or whitepaper downloads, and the number of qualified leads of product demos.
You decide to focus on the three to four metrics most directly tied to how your team generates leads and close deals. The metrics you pick are dollar value of sales, number of sales, number of product demos for customers with budgets greater than $100,000.
How KPIs Are Used
KPI are used to measure how well a business is performing against stated sales objectives. In addition, they help focus teams. This is because they provide a value individuals can constantly watch, which then motivates them to take actions needed to achieve their individual sales goals.
Therefore, key performance indicators are used best when they are displayed in an easily digestible format. For instance, if you’ve determined that the number of product demos is critical to achieving your sales goals, you can create a report and track number of product demos during the month. You can even create a visual representation like a bar chart showing how many additional product demos you need to hit your goals.
How to Track KPIs
The most efficient way to track KPIs is by using a CRM. This is because CRMs allow you to track key sales functions like making calls, sending emails, and sending proposals. These tools also often allow you to track sales activities that happen outside of the CRM like notes from prospect or client meeting. Because activities are recorded in the CRM, you can then create performance reports and dashboards, which makes reporting easier.
If you don’t have a CRM, you’re also able to track KPIs manually using an Excel spreadsheet. However, to do this, you’ll need to create sales reports in Excel or Google Sheets, which will then need to be updated regularly to be effective. For more information on sales reports and how to create them, check our sales report ultimate guide with template article here.
KPI tracking software costs, features, and providers are as follows.
KPI Tracking Software Costs
Costs to track KPI range from free to hundreds of dollars per month depending on the software you’re using. These costs depend on things like licensing costs. However, many CRMs offers a free version with basic reporting capabilities that can be used to track key performance indicators.
KPI Tracking Software Features
Features offered by tracking software include the ability to create reports giving you specific information about your metrics and how you’re tracking performing against your goals. They also include dashboards which allow you to monitor multiple KPIs in one place. Tracking software also allows you to create visual representations of like charts, graphs, and even maps showing performance data.
Key KPI tracking software features include:
- Sales reporting: Sales reporting not only includes reports on actual sales, but it also includes reports on prospect-to-lead conversion, number of deals in the pipeline, product demos, and proposals sent.
- Dashboards: KPI tracking software lets you create dashboards with a variety of reports to help you keep KPIs visible and top of mind.
- Visual representations: This type of software also allows you to create visual representations like graphs and charts to help you see how you’re performing in key areas of your business or sales.
KPI Tracking Software Providers
CRM and business intelligence software both offer metric tracking tools. CRM software features that things like sales reporting, prospect engagement tracking like email open rates, and visualizations like graphs and charts. Business intelligence features used to track metrics include the same ones as CRMs with additional tools like multiple dashboards, visuals including maps, KPI widgets, and pivot tables, being able to import data from many sources.
Below are a few KPI tracking providers.
Salesforce Essentials is a small business CRM created by Salesforce. It allows you to track KPIs like deals closed, number of qualified prospects added, conversion rates. This CRM is great for small businesses with plans and likelihood to grow into larger businesses that can take advantage of Salesforce’s more advanced tools and can afford them as their prices range from $25 per month per user for Essentials to $150 per month per user.
ZohoCRM features a variety of reporting on KPIs in sales and prospecting. You can build sales reports focused on revenue or by product. You can also track deals won or lost by sales representative and lead conversion rates by industry. This CRM is great for small businesses with modest KPI tracker budgets that offer a variety of products. Prices range from $12 per month per user to $35 per month, per user.
Zoho Analytics is data analytics software that allows you to pull data from a variety of sources such as CRMs, customer support, and accounting software to create reports and data visualizations that provide insights across all areas of your business. This is a great tool for businesses wanting insights from both sales focused KPIs as well as KPIs from other business areas. Pricing starts at $22.50 per month for two users.
Why KPIs Matter
KPIs keep you focused on the most important business metrics. For instance, if your business relies on B2B sales, you want to focus on the number of qualified leads entering your sales funnel because it determines the number of deals you’ll close. Focusing on these metrics emphasizes the importance of the number of qualified leads and lets your sales team know they must focus on and prioritize activities, generating qualified leads.
Another reason KPIs matter is because they ensure you meet your sales objectives. KPIs should be based on your sales objectives. If your sales objective is to increase sales revenue by 20%, your KPIs should focus on metrics specific to sales revenue like dollar value of sales and number of sales. Both value of sales and the number of sales increase revenue and therefore help you reach your sales objectives.
A third reason KPIs matter is because they can be used to measure individual performance and create both incentive and training plans. Incentive plans based on KPIs let your sales team know how they’re doing compared to your expectations. They can be rewarded and recognized for meeting or exceeding expectations based on your KPIs. If they fall short, they can be trained in certain areas like prospecting or closing techniques until they meet or exceed KPIs.
Frequently Asked Questions (FAQs)
What are some examples of KPIs for sales?
Examples of KPIs include number of lead magnet downloads, number of calls, email open rates, number of product demos, and similar sales metrics.
How should I use a KPI?
KPIs should be used to help you focus on the most important performance measures for your business. For instance, the like number of qualified leads entering your pipeline gives you an indication of how many deals you can expect to close in your sales cycles.
How should I track KPIs?
The best way to track KPIs is with KPI tracking tools that can be found in CRM or business intelligence software. You can also track KPIs manually using spreadsheets.
Bottom Line―What Is a KPI?
KPIs are important because they help you and your sales team focus on what’s important in your business. If you’re underperforming in certain areas, your KPI tracking will show it and alert you to actions you need to take to achieve your sales or business objectives. CRMs and business intelligence software make it easy for small businesses to track KPIs and adjust their sales strategies as needed to reach their sales objectives.
The best way to measure KPIs is with CRM offering these features. Salesforce Essentials has reporting and dashboard tools to track sales KPIs, keeping them visible to you and your sales team. For more information, sign-up for a Salesforce Essentials free trial.