The Golden 3 Sales KPIs

If you don't know these KPIs, do you really have a good grasp of how your GTM is doing?

There are three data points that would be very helpful for me to understand where your GTM is.

I said this to the CEO of a series a software company I had just been introduced to. This cofounder had some early success with founder led sales through referrals and other connections. They wanted to start growing sales by hiring an AE and they hired a good, hungry AE who they were very pleased with. He was doing what they expected but they were not seeing the results that they had hoped for, and he was not hitting his quota in his first few quarters.

I’d like to see how many first meetings you had with prospects last month, the percentage of first meetings that ultimately turn into closed, one opportunities, and your ASP.

These are the golden three sales KPIs.

First meetings

This is the best proxy for pipeline generation. Are you consistently generating new opportunities that can turn into customers? You could be winning every POC and think you have a home run but if you don’t have enough at bats, you’re not going to win the game.

To achieve GTM fit, you need at least one channel of consistent new opportunities that your sales team can work.

What about SQOs?

Some people use Sales Qualified Opportunities (SQOs) to measure their pipeline generation. This is an important metric and one you should be measuring but I start with first meetings. SQOs are usually subjective, especially as an early stage company where first meetings are a very objective metric. It’s also helpful because you might have an issue on the execution side with those first meetings or you might not be targeting the right type of prospects and this helps uncover that.

What about Leads?

Similar situation with Leads, but they are earlier. There are so many different types of leads - maybe they were people who signed up for a white paper or who put their name in to win a prize at a conference. These also need to be tracked for other reasons but you really want to start tracking at a point when a person is willing to go through the effort of having a meeting with someone.

First meetings to customer conversion rate

Conversion rates show how well you are executing on the opportunities that you’ve identified. Again, we could look at conversion from opportunities to customers, but I prefer going back to first meetings because I think it’s much cleaner and helpful to identifying other potential issues like bad targeting of prospects.

As subsequent steps to this, you’ll need to dig into the steps from first meeting to becoming a customer but this gives you a starting point to see how well your Sales team is executing.

For early stage companies, I think 10% is a pretty good number to start with. If you’re below that you probably need to better understand why and if you’re above that you’re going in the right direction.

This number is also going to vary based on how the new opportunities are first meetings came in.

Average Sale Price (ASP)

This number doesn’t tell you as much about how well you’re generating pipeline or how well the sales team is executing, but it is a key part in understanding how much revenue you’re producing with the prospects you’ve identified.

What about Average Sales Cycle?

This is a very important metric as well. There’s a big difference in your business if your sales cycles take 18 months versus 18 days. However, it’s usually correlated with the ASP, so as long as we know that we can make an estimation for what the sales cycle length is.

• <$25K ASP: ~2 months

• $25K - $75K ASP: ~4 months

• >$75k: ~8 months

But what about…?

• Expansions - a similar concept could be applied to expansions, but this is for new logos, which is the primary focus for many early stage companies

• PLG - even if you are a PLG company with self service revenue, you can use this for the SLG portion of your business. First meetings is still a good proxy for potential interest in growing their plan. If you’re 100% PLG, there’s different metrics you should use.

• Your numbers vary A LOT - rarely are you ever going to see consistent numbers month over month. Maybe you did a conference or had a webinar. It’s just noisy for early stage companies. Using a three month average or something similar is a pretty effective approach. If you’re seeing consistent growth like 10% a month, you can use that when doing your basic projections.

• Different sized customers - I think it’s simpler to use one number and just average that out, but there’s no reason you couldn’t break this down into two or more sets of numbers. If someone asks me this, I might ask them how well they have defined their ICP

Now What?

The first thing I do with these numbers is get a sense on how much revenue is going to be generated this year. For example:

• First meetings per month: 20

• First meeting to customer conversion rate: 10%

• ASP: $50K

This company is going to generate New Logo revenue of about $1.2M a year at this rate. The actual number is going to be dependent on amount in the pipeline currently, average sales cycle, and net retention.

If you have one or more AEs, this gives you a sense of what the quota should be. If this company had 2 AEs, each with $1.2M of quota, they aren’t being set up for success.

Most importantly, it gives you a sense of what you should be working on. It’s rarely going to be the case that any one of these numbers is perfect and couldn’t be improved. But the key to figure out which one needs the most work at this point. Often times that will be the number of first meetings generated. That might be the long pole in the tent until you hire additional AE.

If you’re looking for further guidance, let’s talk. Fill out this GTM Assessment and then we can set up some time to chat.