9 Key Sales Pipeline Metrics for Businesses in 2022
Your pipeline is a clear view into the lifeblood of your business. But tracking it isn't as simple as just measuring one high-level metric. Find out how you can optimize pipeline measurement and analysis with these critical sales pipeline metrics.
Your sales pipeline tracks your potential prospects as they travel through each new stage in the buyer’s journey. An advanced CRM setup makes it easier than ever to track the exact action that moves a prospect to the next stage of the pipeline.
Yet with a surplus of data, meaningful insights can be harder than ever to extract. Because your sales pipeline is the lifeline of your business, if you don’t have a solid understanding of how each piece fits together, it can be impossible to grow your company.
Though which metrics you track ultimately depend on the specifics of your business, these nine sales pipeline metrics are a great place to start.
Why Sales Pipeline Metrics Matter
The goal of a fast-growing SaaS startup or well-established service business is typically the same: increase revenue through sales.
While some get lucky and encounter steady explosive growth with no finessing, the best way to ensure continual growth is to understand the foundation of your business through sales pipeline metrics.
Sales pipeline analysis enables you to predict revenue more accurately. By understanding each lead’s conversion and potential value, you can make plans for your business in advance rather than constantly being in reactive mode.
Sales pipeline management also empowers you to use your time and resources more efficiently. Rather than trying to improve every step in your sales funnel all at once, you can see which stage of your sales process is the weakest link.
Pipeline metrics also provide insight into how efficiently your sales team is functioning and can make it easier to effectively train and manage your people where they need it most.
Sales Pipeline Metrics
To optimize your sales pipeline, you’ll need to get a full picture of how each aspect functions. With this knowledge, you can strategically improve your sales pipeline and increase your overall revenue.
1. Customer Acquisition Cost
Customer acquisition cost (CAC) measures how much you spend to acquire a new customer. Most people see new customers and think of new revenue. But you need to factor in the costs associated with attracting and nurturing each new customer.
Calculating your CAC can be a bit complicated since there are so many expenses to factor in. These include:
- Marketing spend
- Advertising spend
- Salaries (in sales and marketing and potentially for founders as well)
- Sales commissions
To find your CAC, take the overall spend on sales and marketing in a given period of time, and divide that by the number of new customers.
Customer acquisition cost formula
A good CAC will depend a lot on your industry and the price of your product. For reference, here are CAC averages across a few industries:
Customer acquisition cost by industry (from FirstPageSeen)
A low customer acquisition cost indicates a desirable product and efficient sales pipeline, so it should be your goal to find ways to lower your overall CAC.
To improve your CAC, you must track the efficiency of your marketing team and advertising campaigns. Track when you introduce new messaging or strategies against the number of customers you acquire, repeat the processes that are most efficient, and determine how much you should spend on ads and other activations.
You can also seek to improve your lead qualification process, so your team only devotes time to the prospects that are most likely to convert.
2. CAC Payback Period
Once you know your company’s CAC, you can also calculate how long it takes to recoup the cost of acquiring that customer.
Measuring your CAC payback is a critical sales pipeline metric because it helps you establish a baseline for profitability and ensures your income is consistent and predictable. You need to be able to forecast when each customer will begin to earn your business a profit, which is part of understanding their customer lifetime value (LTV).
A lower CAC payback period means your company requires less working capital and grows more quickly.
To calculate your CAC payback, divide your customer acquisition costs by your monthly recurring revenue, less your average cost of service.
CAC payback period formula
For SaaS companies, you usually want to see a CAC payback that is around 12 months long, but it’s definitely acceptable to go shorter. Here’s a look at average CAC payback periods across ARR segments:
Whether your CAC payback falls within an acceptable range also depends somewhat on your customer retention rates. If you have high retention, then you can afford for the payback period to be longer.
If you realize your payback period is too long, you should aim to lower your customer acquisition cost. Alternatively, if your payback period is relatively short, this is a sign you should increase CAC to capture more of the market.
CAC payback period will also provide insight on how you’re monetizing your customers. If your payback period is lengthy, this could indicate you should change your SaaS pricing strategy, such as by switching frequency or to a new tactic like the value-based method.
3. Opportunity Cohorts
Opportunity cohorts measure how often a potential customer converts at each stage of your sales pipeline. Knowing which stage sees the largest dropoff can help you drill down into its weak points.
To track these, you’ll need software that tracks leads and sales opportunities across time. Many advanced platforms are able to use automation to calculate the conversion rate at each stage.
Opportunity cohorts in Mosaic
If you’re doing this sales pipeline metric’s calculations by hand, the formula at any given step in the pipeline is to divide the number of conversions by the total number of leads. Multiplying by 100 will give you the answer as a percentage.
Sales pipeline conversion rate formula
Each cohort is usually defined by the time they enter your sales pipeline. This means a cohort analysis can also help you identify the effectiveness of marketing campaigns during specific periods of time.
If a particular cohort has a high conversion rate, you can gather that those specific marketing efforts were more successful and use that information to improve your marketing strategy overall.
How can you tell if your conversion rates are good or not?
Each business’s opportunity cohorts will convert at a different rate based on a number of factors:
- The type of business
- Where you define each stage
- How much effort you expend in each pipeline stage
However, you can use averages as a benchmark for your own sales pipeline analysis.
4. Opportunity Win Rate
The opportunity win rate focuses on the percentage of total opportunities that eventually become closed-won. Compared to tracking your conversion rates at each stage of the pipeline, this is a broader view of your overall pipeline success.
To calculate your win rate, you first need to know the number of total closed deals across a given time period. This includes both won, lost, and disqualified opportunities. Then, you take the number of win-closed opportunities divided by the total number of opportunities.
Sales win rate formula
Tracking this number over time can give you important insight into larger trends in your business. According to research by the RAIN Group, the average close rate is 47%.
Ideally, you would see your win rate increase slowly over time as your marketing and sales teams become more efficient. But factors like market saturation or increasing competition can also negatively impact your win rate.
If your CRM setup includes required fields for closed-lost reasons, you can see the most common reasons sales qualified leads (SQL) fail to get over the finish line. Whether that’s cost, timing, or competition, your team can then work to solve those issues in the future.
The more attributes you can add to this key metric — product line, sales reps, lead source, etc. — the easier it is to understand where you can improve.
5. Average Sales Cycle
Understanding the typical time it takes for a lead in your sales pipeline to close enables you to project revenue based on the leads in your pipeline. On a broad scale, knowing when to expect each deal to close helps you make informed decisions about your sales strategy.
To calculate the average length of your sales cycle, take the total number of days each lead took to close in a specific time period and divide that by the number of deals.
Average sales cycle formula
Average sales cycle lengths vary widely depending on your industry, product, and price. Broadly speaking, the average length of the sales cycle in a SaaS industry is 84 days.
To shorten your sales cycle, consider reducing your free trial period if you offer one. You can also accelerate the decision-making process by building out a robust knowledge base and crafting marketing content that efficiently conveys the value proposition of your service for each customer segment.
It’s also useful to break down the length of time each prospect spends in each stage of your sales pipeline to identify where they encounter the most roadblocks. Then you can target those bottlenecks specifically.
6. Pipeline Amount by Stage
It’s important to know the total potential value of prospects in your pipeline so you can predict your future revenue and ensure you have enough lead generation to sustain your business.
Calculate your pipeline value by multiplying the number of potential customers in your pipeline by the average deal size.
Pipeline value formula
With Mosaic, seeing your pipeline value at each stage over time is as easy as clicking a few buttons:
Pipeline value tracking by stage in Mosaic
Once you know how much value is tied up in your pipeline, you can use your average conversion rates to project exactly how much revenue you can expect to close on. Along with your sales cycle length, this sales metric gives you a full picture for forecasting income.
If you notice a dip in pipeline value, you can focus your efforts on increasing new leads and upselling current contracts to recoup lost revenue. An increase in pipeline value can reinforce your marketing and sales performance.
7. Bookings Up for Renewal
While one of the major focuses of your sales pipeline tracking is securing new revenue, retention is just as important — if not more so.
It costs much less to retain a customer than it does to secure a new one, so it’s critical to take measures to maintain a relationship with customers who are close to their contract renewal.
Not only does this help you focus your team’s efforts in the right areas, but it also helps anticipate potential variance by period.
An analysis of your contracts up for renewal can show you how much of your total revenue is up for renewal in a given time period and prepare appropriately.
For example, Mosaic’s bookings up for renewal charts show you in one convenient location how much revenue each deal brings in and your total bookings by quarter.
Bookings tracking in Mosaic
8. Bookings Velocity
The opportunity velocity is a measure of how quickly a prospect moves through your sales pipeline. Knowing how quickly a deal moves assists you in predicting future revenue. Generally speaking, a faster pipeline velocity indicates a healthier business and a more effective sales team.
To calculate your sales velocity, multiply the number of opportunities by the average deal value and win rate. Divide this number by the length of your sales cycle.
Sales velocity formula
To improve your sales velocity, focus on acquiring more high-quality leads so your team moves on quickly from prospects that won’t convert.
You can also focus on increasing your win rate by providing clear next steps for each stage of your sales pipeline. Alternatively, shortening your sales cycle also positively impacts this sales pipeline metric.
9. Pipeline by Sales Rep
Your sales pipeline’s effectiveness relies on many factors, but your sales representatives themselves are linchpins for your entire sales pipeline. That’s why tracking their effectiveness is important to your overall business success. This also helps with sales capacity planning.
One way to quantify this is to track pipeline by sales rep.
This is a measure of the value each salesperson has won or is in negotiation to win.
To measure a sales rep’s performance, calculate their conversion rate at each stage and compare this to your company’s averages.
Pipeline by sales rep and stage in Mosaic
Then, you can identify your most successful sales reps and underperforming reps to provide additional training and education. If a particular rep is blowing the rest of the team out of the water, you can use their insights to provide actionable insights to improve your other reps.
Or, if you see that a representative struggles to find enough qualified prospects, they may be being too selective in their process. This also helps track that a new hire’s sales rep ramp is in line with your company’s targets.
Simplify Your Sales Pipeline Metrics Tracking with Mosaic
With the sheer volume of data and how quickly information changes, aggregating the numbers and repeatedly calculating this information can become a full-time job. For most organizations, dedicating that kind of time isn’t feasible.
Mosaic solves that problem by automating all of these calculations so you can get a real-time view of these sales pipeline metrics easily. We collect the data, extract meaningful insights, and present the information visually so even non-subject matter experts can get something out of the data.
Because of the scale and specificity of the data we collect, you can actually analyze these important metrics at a more granular level. From your conversion rates to the SaaS magic number, you can look at your pipeline from every angle to get the most complete picture.
Mosaic makes it easy to manipulate the data and understand the “why” behind your numbers. So you aren’t just reporting numbers in a spreadsheet — you’re providing the kind of details that can lead to more strategic decisions.
To learn exactly how Mosaic can improve your sales pipeline management, request a personalized demo.
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