How to calculate KPI for sales and application samples simply and quickly

KPI for sales is an index to evaluate job performance and plays an important role in business management. Currently, there are many ways to calculate KPIs for sales applied in businesses. But determining which KPI calculation method is most effective is a challenge. Through the article below, 1C Vietnam will help answer questions about how to calculate KPI in the most detailed way!

1. How to calculate KPI for sales based on basic indicators

KPI (Key Performance Indicators) plays an important role in encouraging employees to complete work quickly and effectively. Calculating KPIs for sales is also an important process to help evaluate performance and set specific goals. Below are some basic indicators for the sales department to support KPI assessment for sales staff:

1.1. Average profit margin

Average profit margin is an important factor when building KPIs for sales staff. Today, many businesses have applied this criterion to evaluate the performance of the sales department. Sales staff can evaluate the profit margin on the entire product portfolio that the business offers, and this KPI calculation is suitable for businesses with a variety of products as well as flexible prices to attract customers. client. Average profit margin represents the average profitability for total revenue with the formula for calculating average profit margin as follows:

Average profit margin = (Net income / Revenue) x 100

1.2. KPI on number of orders and monthly closing rate

This index is determined based on the number of closed orders or number of contracts signed monthly by sales staff. Normally, sales staff will receive commissions from these orders, so calculating KPI by number of orders plays an important role in directly motivating sales staff to actively seek and take care of customers.

1.3. Successful closing rate

This is the ratio between the number of successfully paid orders. This KPI plays an important role in assessing the time needed for each sales employee or the entire department to pursue a specific sales opportunity.

A low close rate indicates that there are too few successful deals compared to the number of quotes sent. This helps managers identify problems and make necessary adjustments in the business department's workflow.

1.4. Ratio of winning chances to number of leads

Another way to calculate KPI for sales is based on the ratio of the number of winning opportunities compared to the total number of potential customers of the business. This KPI helps the sales department identify important jobs that are likely to develop well in the future. sales department.

Through this index, businesses can change their business strategies, reach customers more effectively and increase their chances of successfully closing contracts in the future.

1.5. KPI on order return/cancellation rate

The order cancellation or return rate indicates the number of products that customers decided to cancel or return to the company compared to the total number of orders that sales staff sold in a month. This rate directly affects sales department KPIs including revenue, number of orders and closing rate.

Managers can use this ratio to identify customers with a high likelihood of canceling orders, as well as to research the causes of cancellations or returns, helping to find weaknesses in products or strategies. sales to take timely corrective measures.

1.6. Monthly sales

One of the effective ways to calculate KPI for sales is based on monthly sales index. Monthly sales KPI measures the growth or decline in a business's sales during that month.

Tracking monthly sales growth helps managers monitor the actual sales situation as it happens instead of just relying on reflective reports. This process not only boosts motivation but also creates a clear goal and guidance and incentives for employees to maintain performance.

1.7. Average conversion time for orders

The conversion time of a product from the moment it reaches the first customer to the moment it generates sales is a way to calculate KPI for sales staff . This index assists administrators in evaluating sales productivity for businesses, thereby suggesting improvement measures if the average order conversion time is too long.

1.8. KPI based on monthly calls (emails).

One of the ways to calculate KPIs for sales staff that businesses need to focus on is KPIs based on the number of monthly calls or emails for each business. For external sales teams, this KPI provides an overview of the calls (or emails) each business makes to reach potential customers.

This KPI for sales depends on the following criteria:

• Percentage of calls answered or emails opened
• Time per call
• Degree of concern for the whole
• Number of leads per call/email

1.9. Customer lifecycle metrics

One way to calculate KPI used by many businesses is to calculate it based on the customer life cycle. This index represents the total amount of money that a customer expects to pay to the business during the period of interaction or maintaining a relationship with the business, helping to enhance the assessment of the sales staff's ability to support the business. Support and maintain relationships with loyal customers of the business.

1.10. Index measuring customer satisfaction

Based on the customer satisfaction index is also a way to calculate KPI for sales staff , expressing customers' expectations for the products or services that businesses provide.

Through this measurement, sales staff can better understand the actual needs of customers, thereby creating appropriate solutions to retain customers and optimize sales performance.

1.11. KPIs are based on the sales performance of each product

Product performance-based KPIs are a way to calculate sales KPIs that help the sales department identify differences in revenue between products. In particular, businesses need to consider important factors such as: sales, competitors, feedback from customers, etc. From there, the sales department can determine effective and efficient strategies. Adjust your marketing strategy to maximize the performance of each product.

2. Note when building KPI calculations for sales staff

To build an effective way to calculate KPIs for sales , businesses need to pay attention to the following:

• Set KPIs based on the number of people impacted: Identify KPIs based on the number of people impacted by the metric, helping to create a measurement system that not only measures employee performance, but also reflects objects that the business affects.
• Objective evaluation and measurement: Always maintain objectivity when evaluating and measuring to avoid subjectivity and ensure that indicators are determined based on objective information data and do not depend on personal opinions. .
• Originate and always follow the business strategy: KPIs need to reflect the entire business strategy and must be closely related to improvement, helping sales staff clearly understand specific goals.
• Clear, simple and easy to understand: Choose KPIs that are clear, simple and easy to understand so employees can grasp and track performance effectively.
• Directly related to the goal: Each KPI needs to be specific and directly related to a specific business goal.
• Consistency to maintain and improve: KPIs need to be consistent to be easy to maintain and improve in the future so as not to create confusion or inconsistency in performance evaluation.
• Suitable for business practice: Each KPI must reflect the reality of the business, ensuring high feasibility and practicality.
• Provide timely and accurate feedback: KPI systems need to provide timely and accurate feedback so employees can clearly understand performance and make quick adjustments if needed.
• Accurately reflect business processes: accurately reflect the enterprise's business processes to ensure that the entire process is evaluated comprehensively.
• Align with company culture: Each KPI needs to reflect company culture and help create a positive work environment.

Through the above article, 1C Vietnam has provided basic information about how to calculate KPIs for sales along with notes when building in businesses. If you have any questions or concerns, do not hesitate to contact 1C Vietnam for advice and support!