6 Key Sales Pipeline Metrics for Businesses in 2022
Updated: Aug 1, 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.
6 Sales Pipeline Metrics That Are Important to Track
Your pipeline metrics are a subset of the broader sales performance metrics you track. 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:
Salaries (in sales and marketing and potentially for founders as well)
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.
Once you have your magic number (which you measure on a scale of zero to one), you can understand how efficient your marketing and sales efforts are and whether you need to invest more (if the number is greater than 0.75) or less (if the number is less than 0.5) into those efforts.
#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.
#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.
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.
#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.
#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.
#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.
The Summit Group automates 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.
The Summit Group's Outsourced CFO platform ensures real-time analysis of sales performance.
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