It’s no secret that we’re really into making data based decisions for your business. It’s one of the fastest and most important parts of growing a brand. We’re really excited about this article because we’re able to help you identify the key sales metrics that you should be tracking for your company and what you should be looking for with each one.
What Does “Key Sales Metrics” mean?
Key sales metrics is just a jargon-y way of saying, “this is the stuff that matters in your biz.”
We’re very holistic in the way that we look at sales, because we know that everything in a business is connected. We know that what marketing campaign you run today is going to affect your sales tomorrow—if you run a sitewide sale this week your average sales will likely be down for a week or two because everyone is stocked up, or if you send a coupon code in every single email you will train your community not to buy from you without a coupon code.
This is stuff we know after years tracking key sales metrics and watching the longitudinal trends in the data. Aside from gathering general knowledge of sales trends across all industries, we highly recommend tracking your sales throughout your specific business so you can get a feel for what to expect from you brand.
Why are Sales Metrics Important?
Simply put, tracking your key sales metrics is important because you need to know how well your business is doing.
Further, you need to know where you’re making and losing money so that you can make decisions about the direction for your company.
Like tracking your email metrics, tracking your sales metrics will give you incredible insight into what you can be doing better with your sales and marketing, what products are resonating the best with your community, and what areas you’re doing well (and not so well).
Without this kind of information around your business, you’re making decisions in the dark about what’s working and what you should be doing to improve.
Sales Metrics Best Practices
I suggest tracking your most important sales metrics monthly using a spreadsheet and watching the trends.
Daily or weekly tracking is okay to do, but DON’T get caught up in the smaller day to day, especially in the beginning. You’re going to see major fluctuations and that’s not super helpful for watching sales over time and can lead to making knee-jerk business decisions that aren’t good for you long term.
The best sales metrics are the ones that have a direct impact on your bottom line and help you make decisions about what to focus on moving forward. They help you see where you’re losing time, attention, and money plus where you can refocus to bloom your brand.
What are the 13 Key Sales Metrics to Track?
Alright, hopefully I convinced you that tracking your key sales metrics is important and you’re excited to track them. There are an endless amount of things you can track, but here are the top 13 key performance indicators for sales.
1 – Growth
This is where you start: ARE YOU GROWING? What areas are growing the fastest, and what needs a little more attention?
This is a big picture, yes or no question. You need to know if you’re growing as a business, but it’s essentially a vanity metric because just knowing whether or not you’re growing doesn’t answer your “where” or “how.”
It’s also nonspecific. “Growth” could mean in followers or it could mean in revenue. But growth in followers doesn’t mean more money and growth in revenue doesn’t mean growth in profit. You need to go deeper into your metrics.
2 – Profit and Loss
Where are you making money? Where are you losing money?
This is arguably the next best step after answering, “are we growing?” because this answers, “where are we growing?” and “where are we spending?”
The P&L statement is purely money related and you’re going to write down a pretty basic overview of everything you made and spent in a certain period of time. Officially this is a yearly thing but investors will ask often ask quarterly and when they are asked for a cash infusion.
This is typically broken down into things like, revenue (types and totals), operating cost (cost of goods sold, research, interest, admin, general expenses), profit (from goods and investments), and taxes.
Typically this will give you a very good idea of whether you’re spending too much or not making enough—both of which can severely impact your bottom line, but since they’re two totally different things, it’s worth noting.
3 – Cost of Acquisition (CAC)
How much does it cost to get people to buy your product or service? The ideal CAC is going to completely depend on the price of your product or service. The goal for most brands is to make money over time with repeat customers and lifetime value but sometimes this is a one-off purchase, so you need a direct profit immediately. Decide that for your business.
Here’s a super basic example: You’re spending $300/month on ads and you’re pulling in 10 customers from those ads. Your cost of acquisition is $30.
If your product costs more than $30, that’s great – you profit out the gate. If not, check in with your lifetime value and repeat customer rate to see if that initial loss is worth it over time for you to keep running those ads.
Cost of Acquisition is a huge hurdle for most businesses. Our Front End User Experience Audit for website has been super helpful for this with the people we work with. It helps the customer find exactly what they’re looking for and it helps you communicate what you’re offering so that your CAC decreases over time.
4 – Conversion Rate
We wrote an entire article about conversion rate already and why this is so important to track. Essentially there are two things that effect your conversion rate:
If your traffic increases without a sales increase, your conversion rate is going to plummet. If your sales increase without a traffic increase, your conversion rate is going to improve. Ideally you want to see this number between 2-5%. If it’s higher, that’s great, but then you need to check that you have traffic coming in.
This is a big one for most businesses. We always ask about conversion rate along with traffic and sales when we start working with people that sell online because we can diagnose an issue pretty quickly with that information. If you want to chat about improving your conversion rate and then keeping it stable while you scale, jump on a call with us.
5 – Return on Investment (ROI)
What marketing are you paying for, is it paying for itself + some? If not, is it valuable in another way?
Knowing how much you’re investing and what you expect to get in return is a super important sales metric to track.
This is another place we look holistically at a business. It’s simple to look at a number and tell if, via sales, a business is getting a high ROI, but sometimes the goal is a bit different than that.
Sometimes a campaign doesn’t cost anything but time to run, is it worth the time? What about value content? Is it valuable to your subscribers? I’m writing this article right now, it doesn’t cost anything but it’s going to take a few hours with research, SEO, and keywords. What would a worthwhile ROI be?
If no one reads these articles or clicks on them from social media, is it worth it?
Expand your definition of ROI to include more than just money, because time is money too and value/attention is a currency that means a lot in today’s business world.
Tracking monetary ROI is pretty easy. How much did you spend, how much did you make?
When you’re tracking your other initiatives with time/value, keep ROI in mind and decide if each initiative is worth the time.
6 – Average Order Value (AOV)
How much does your average customer spend on an order? This is a figure that most shops will just tell you so that’s just a figure you have to find in your metrics—but one you should pay REALLY close attention to.
Ideally, your customers will pay for more than one product, buy an upsell, and not always use a coupon code. You want your AOV to be higher than the average cost of one product. If it’s less than that, you might need to retrain your customers by reducing the coupons you send out.
It might also be worth focusing a bit on upsells or package deals with your products.
7 – Lifetime Value (LTV)
Over a customer’s lifetime with your company, how much do they spend? Is it higher than your AOV? You want it to be.
Being that we build loyal digital communities, LTV is one of our favorite numbers to focus on. Like AOV, it’s going to be something you can find in your shop.
This is the number that tells you the most about how you’re doing.For most businesses, you want this to grow and keep growing because it means people are coming back over and over again. This is one of the best indicators of brand loyalty out there.
If your AOV and your LTV are the same, it means that people aren’t coming back. If your AOV is higher than your LTV, it means that people don’t come back AND that your AOV is skewed by wholesale orders or people buying more products one time.
HOWEVER, if your LTV is higher than your AOV – preferably double or triple – it means that you’re doing a great job being valuable to the people that love you, and it’s time to reach out to those customers, get user generated content, and get into their networks.
8 – Repeat Customer Rate
How many customers come back to buy again?
The repeat customer percentage you want will change with the amount of traffic that you have and the industry you’re in, so take these stats with a very general idea. If you want to talk about your niche, book a call and we can help you with these figures.
In the beginning, you want it low enough to indicate that you’re gaining consistent new customers but you’re also providing value, around 20% would be great.
As you grow and your company ages, you want to see that number getting higher, not lower. If you’re seeing around 50% repeat customers after a couple of years, you’re doing great! People are coming back but new people are also coming through.
If you’re over 50% you need to add traffic influx. Dipping under 20% means either your product isn’t valuable or you’re not interesting to your customers for a second purchase. You need to have a better product, diversify your product range, or focus heavily on community building.
9 – Coupon Codes Used
Compare the number of orders with coupons to the number of orders you have all together. If you’re only making sales when you have coupons, you should get in on our Webinar – Mastering the Soft Sell so you can learn a bit about how to value your products and untie your sales to your coupons.
10 – Campaign Performance
It’s okay in the beginning to throw campaign ideas in the wind and do them all. Seriously, we want you to try everything – and keep trying everything. BUT TRACK IT.
Which campaigns did the best? What did you try that wasn’t worth it?
Is there something that went really well or really poorly and you weren’t expecting that? Make notes with hypotheses about why the campaigns went one way or another and use this information to make decisions about how you’ll run things in the future. This is also great to focus on visual communication and voice – what did your audience seem to resonate with in your campaigns?
11 – Sales Cycle Length
When do your customers need to re-up on their products? This is general knowledge that you should just HAVE about the products that you offer, especially if it’s consumable. Look into how long it take sot use your products and then target those customers and remind them it’s time to re-up their product.
12 – Churn Rate
Churn rate is about where in the sale cycle people drop off and is directly related to sales cycle and repeat customers.
You want people to buy from your over and over again – studies show that people aren’t super likely to buy a second time without a little encouragement but it actually gets easier to sell to people once they’ve purchased two or three times happily.
Make sure that you’re focused on that second and third purchase and pay attention to where people drop off in their cycle and support them through that time so they’re likely to purchase again.
13 – Target
This is last because it should be obvious. Set sales and growth goals, at least yearly, if not quarterly. Are you hitting them? How far off are you?
If you’re not completing your goals, you should have enough information from all the things you’re tracking above to have a pretty clear idea about what you can improve to hit your targets.
Once you start looking at these stats and making decisions based on what is actually going on, you’ll start hitting your targets pretty soon—keep your head up and keep on going. You’ll make it!
Want to chat about how you can track your key sales metrics or what your data means?
Jump on a call with us. We’re going to save you a ton of time so you can hit those goals.