What are KPIs (Key Performance Indicators) and how should you use them to increase sales?

Daria Olech

2022-11-07

You can’t run a company without thinking about numbers and other data, which tell you about important processes in your business. Check what key performance indicators (KPI) are and in what way they can measure progress in your company. Do you want to know more about KPIs and organizational objectives? Read our article.

KPI – what does it stand for?

The KPI acronym stands for a key performance indicator. The key performance indicator (KPI) is a quantifiable measure of performance over time for a specific objective. It enables you to check if your sales activities reflect the finances, and how they influence your company.

Everyone, who runs their own business, should explore the topic of key performance indicators, and know how to set them. It is crucial, regardless of the size of your company, customer satisfaction, number of clients or specification of the branch.

Undoubtedly, you want to know if activities undertaken by you and your sales teams are effective and if everything goes in the right direction. Unfortunately, there is no universal set of key performance indicators for every branch.

Different key performance indicators (KPIs) are suitable for different business units and departments. You have to develop marketing KPIs (e.g. to increase inbound leads) for marketing campaigns in order to track progress in this area.

Other strategic KPIs will be perfect in the sales department (sales KPIs). However, it is possible to choose certain features which a good KPI should have.

Right key performance indicators – what are they?

• First of all, you have to define KPIs precisely. They should reflect the stage of the development of your company. Thanks to them, you can identify some tendencies and discover recurring patterns. Key performance indicators provide you with all the necessary information about the revenue growth.
• Best KPIs allow you to know more about the every stage of a sales process of a given product important in your business. Tracking KPIs is necessary if you want to know about risk factors in advance.
• You should set KPIs before any actions are taken. It is important if you want to achieve your strategic goals. KPIs will measure performance of different activities.
• A KPI metric should have a numeric value. It is useful to make sure that your organizational goals are achieved, and on what level the process is.
• Your company should also meet smart KPI requirements. SMART KPIs are specific, measurable, attainable, relevant, and time-bound.
• Key performance indicators (KPIs) are associated with a balanced scorecard. It is a strategic management performance metric that helps run the business effectively. The balanced scorecard tracks KPIs and shows different perspectives: customer satisfaction, financial point of view, internal process and the future tendencies.

• financial point of view, internal process and the future tendencies.

Leading indicators and lagging indicators – do you know the difference?

There are two types of key performance indicators that you should be aware of – leading and lagging indicators. Using leading and lagging indicators to measure performance in a company, provide you with the most holistic view.

A leading indicator allows you to measure the performance before your business starts to follow a particular trend. It is possible to measure future performance. Thanks to a leading KPI, you can predict interesting changes, perceive new opportunities and choose profitable trends. As a result, leading indicators can cause an increase sales revenue and your company will achieve its strategic objective.

A lagging indicator enables you to measure the historical performance. It means that you gain the knowledge about what happened after following a given trend. Lagging idicators tell you a lot about the performance management of a process.

Leading indicators (leading KPIs) and lagging indicators are important and can be use both, but it depends on the process, and they have to be utilized in right proportion. The leading indicator allows you to look forward and the lagging indicator triggers off a reflection.

You have to remember to choose right KPIs in order to achieve strategic goals.

Why are key performance indicators so important?

The business likes numbers which are useful. “If you can’t measure it, you can’t improve it,” said Peter Drucker, the management consultant and expert, responsible for foundations of the modern business corporation. This sentence tells a lot about the idea of key performance indicators, KPIs.

KPIs, key performance indicators, are essential because they enable you to control the work of your sales teams and evaluate the organization’s progress in achieving its strategic objectives. It’s important element of tracking progress of the company.

Right key performance indicators are indispensable if you want to keep an eye on your business, and you are focused on risk factors. Tracking KPIs allows you to change the decision if something goes wrong and your business operations aren’t successful.

Effective KPIs focus on business operations can lead not only to measure progress in a company, but also to predictions and actions in the future. For example, you can broaden your knowledge about the customer satisfaction or the customer retention. Moreover, performance metrics allow you to have more information about the customer lifetime value.

There are a lot of different KPI examples. You can use key performance indicators in the HR department to check your employee satisfaction or track metrics in internal processes, e.g. IT operations.

KPI: examples in different areas

As we have said it so far, there is no universal set of key performance indicators. If you define KPIs, you have to think about such individual factors as: the size of a company, its distinguishing features, products, necessary net profit margin, gross profit margin, business units or the time your sales team needs to generate revenue.

You have to be aware that you can define qualitative KPIs or quantitative KPIs. It depends on your needs and strategic objectives. You can develop KPIs for a marketing team e.g. the cost of marketing campaigns, customer acquisition cost, and then choose, and track KPIs for the e-commerce: conversion rate, the time spent on the website.

If you deal with the call center, you should define such KPIs as: number of calls, number of successful meetings, number of satisfied clients or an average time of conversation. The most obvious KPIs for the sales department are: the number of sales and the number of meeting with clients.

Usually, companies that define financial KPIs, choose them to have more information about, e.g. net profit margin and gross profit margin. Marketing KPIs are needed to show a customer lifetime value. CLV is a total worth of a customer to a business throughout a business relationship.

How can key performance indicators motivate the employees?

People whose work is based on key performance indicators often complain about their situation. Have you ever wondered what makes them so unhappy? Is it easy for them to face up all challenges related to numbers and targets they have to achieve? There are a lot of performance indicators disliked by employees.

Usually, it is related to the fact that employees have strategic goals impossible to achieve. It is even worse if numbers aren’t supported by an analysis. The effect is predictable. The result of employees’ work is not satisfying, and they are frustrated. It becomes obvious that employee satisfaction levels aren’t high in such companies.

You don’t have to do a lot to make use of key performance indicators. If they are specific, measurable, attainable, relevant, and time-bound, they have a positive impact on the work of your team. You will find more information about it in the next part of this article.

A key performance indicator – a chance or the worse nightmare of salespeople?

Salespeople are among the main groups which experience the pressure because of key performance indicators. It is obvious that everyone feels inconvenient when their actions are evaluated.

Many people are critical towards some systems of evaluation. We are distrustful and think that we can’t compete with certain numbers which are set to prove our effectiveness at work. Financial metrics can be cruel, as sales teams often think.

However, there are several reasons of how right KPIs can be useful and salespeople should be more open-minded about this idea. Key performance indicators can be their real allies in gaining new clients. Every performance indicator can be their friend. Sometimes everything depend on the attitude.

KPIs and the employee performance level

• If you set key performance indicators which are measurable, the salespeople will know that they can affect on the financial results of the company.
• You will be known as a talented analyst, and workers will be sure that they can infuence the financial KPIs. Their work can be measured.
• Sales people will be able to choose right tasks and thanks to that, accomplish their goals.
• Being equipped with knowledge and data, they will be able to work on their effectiveness.

How to start and measure KPIs? The key performance indicator in the strategy of your company

Are you thinking about KPIs while reading this article? Are you curious if they really measure the customer satisfaction or customer acquisition costs? Do you want to know how to set right KPIs? Or maybe you think that you chose a wrong KPI as the most important one? Read information below.

How to choose the best KPIs for your company? The most important thing is to set your business goal. It has to be achievable, but you need to know all the details in order to analyze different phases of the process.

The owners of the companies often fall into the trap set by the old and well-known procedures. The recurring mechanisms that generate sales. If you read this article, you probably think that it’s the high time to get to know new methods of working.

What can help you in setting key performance indicators for your company? The solution is to check the new Sales Acceleration application.

How to set key performance indicators and have the information that you need?

Sales is a complicated process which consists of many factors. It is not enough to compare the value of sales and the number of meetings with clients. In order to have the exact information about the situation in your company, you need to have the specific knowledge, and strategic KPIs.

Instead of long discussions with managers, and wasting time, you should use a new tool to measure performance in your company.

Salesbook is the first Sales Acceleration application in Poland which helps you to set accurate key performance indicators for your company.

Salesbook will gather all the information about the effectiveness of the process and will allow you to customize offers to your clients. What you should do, is to answer the questions about plans, strategic goals and financial results. Which a performance indicator is the most important? Which one performance indicator isn’t so relevant?

What KPIs should you set in a sales department?

When we think about the process of sales, we imagine salespeople who accomplish their goals. One of the basic key performance indicators is the value of sales.

However, it’s not the only one key performance indicator that you should bear in mind. What else is important if you want to define KPIs?

The basic key performance indicators are:

• average amount of sales,
• effectiveness of sales,
• number of meetings with clients,
• number of ended processes.

Lead time, time is money

Lead time is another element of sales and an example of key performance indicators. It is the amount of time that passes from the start of a process until its conclusion, e.g. from the contact with a client to the moment when he or she receives the offer. In what way is it important and what is the relation between the lead time and the key performance indicator?

If you have the information about the lead time in your company, you can improve the whole process, and increase the effectiveness of a team.

The key performance indicators which you measure, using Salesbook

Salesbook is the Sales Accelaration application, an innovative reporting software. It gathers the information about the activities of salespeople, and report about them automatically.

It makes the job of salespeople and managers easier because they can set KPIs on the basis of the gathered information. Moreover, they are equipped with the complete knowledge of what KPIs measure. After receiving a KPI report, they can track progress and take certain steps.

Salesbook’s CRM system contains a lot of modules necessary to improve the work of salespeople as well as their managers.

How does the KPI module work?

This module is a solution which allows you to define KPIs, track, measure them and adjust them to your business’ needs. Of course, you can also set a plan in Salesbook.

Below you can see the KPI module and KPIs which are reflected by: the value of margin, the number of offers or the value of contracts.

Every key performance indicator has its value.

What else can you know thanks to this module? You can define the number of transactions or the number of clients for a given salesperson in the certain time.

You will know the employee performance and if he or she is far from reaching the goal.

The biggest advantage of this module is an opportunity to use KPI dashboards – you can see the data presented graphically.

Relation between the Leads module and key performance indicators

The Leads module can contain a lot of information that a salesperson wants to have.

A salesperson can fill in such information as: notes after meetings and offers, upload necessary files or choose new tasks.

There are many more information related to KPIs, e.g.:

• the beginning of contact and the duration of the process,
• the value of a contract,
• number of clients,
• number of ended meetings,
• number of planned meetings,
• statuses of sales opportunities and reasons for their closure.

However, Salesbook can provide you with more information, which can be used to increase the sales in your company.

What information can you find in the Reports module?

The Reports module has also a significant meaning, as far as key performance indicators are concerned. Thanks to this module, you can analyze the result of sales in relation to specific products, and the time needed to sign the contract. Moreover, you can find out who works in the most effective way.

What else can you find in this module?

• accepted offers in relation to the number of meetings,
• the number of leads in the certain time,
• the value of sales divided into users and products,
• effective and ineffective meetings,
• the reasons for interrupted meetings,
• recommendations,
• the sales forecast.

The points above are only some of the information that Salesbook can provide you with.

Can KPI be presented graphically?

We’ve said almost everything about key performance indicators, but however, you may have one question: is it possible to present KPIs graphically and in an attractive way?

Salesbook enables you to show the important data to your business partners and managers during a meeting.

KPIs measure the effectiveness – how can they boost the business?

Certainly, you have a lot of information about key performance indicators after reading this article. It’s the time to draw conclusions and to sum up what we know.

What do you gain by analyzing KPIs?

• You have the relevant and detailed data about processes in your company. You can rely on numbers and facts if you set a main goal and take care of the condition of your company.
• You don’t waste your time on planning, long meetings and analyzing KPIs on your own. Salesbook will do it for you.
• KPIs track processes, so you can define the most effective elements in the organization and implement them in your company. You can make such profits as you want.
• By choosing good KPIs, you have an opportunity to focus on the most profitable elements in your business. Of course, you can decide not to continue some of them.
• Thanks to key performance indicators, you can monitor organizational goals, and you are able to modify them if it is required. Performance metrics are very important if you want to combine goals and marketing.
• If you define KPIs which are based on statistics, you motivate salespeople to work. On the other hand, they see the specific data and feel more responsible for their job.

Check how Salesbook helps to increase sales by 53% on average

If you want to know all features of Salesbook, schedule a free demo, and our specialist will show you how this tool works and how to use it to analyze KPIs.