The best way to sell your products or services is to understand why people buy from you instead of someone else. Use this list of 14 B2B sales metrics to learn how to differentiate yourself from competitors.
In a competitive sales environment, winning B2B customers is not just about the right price or the right products – it’s also about understanding why your product or service is better than your competitors’.
In order to understand why your customers buy from you (and not your competitors), you need to look at sales metrics that matter.
The following 14 B2B sales metrics will help you understand how you stack up against your competition:
1. Win Rate B2B sales metric
Your win rate is a B2B sales metric that calculates the percentage of opportunities closed. A win rate of 50% means that half of the deals you started closed and half did not. A win rate of 75% means three-quarters of the deals you started closed and one-quarter did not.
A win rate of 50% is not a bad number, but a win rate of 75% means you are better than the average salesperson in your industry. According to InsideSales.com, the median win rate for b2B salespeople is 53%.
The bottom line: To improve your win rate, you need to improve at the three sales stages that determine whether deals close or fail: qualification, opportunity management, and follow-up.
Your win rate is the percentage of opportunities closed. A win rate of 50% means that half of the deals you started closed and half did not. A win rate of 75% means three-quarters of the deals you started closed and one-quarter did not. A win rate of 50% is not a bad number, but a win rate of 75% means you are better than the average salesperson in your industry. According to InsideSales.com, the median win rate for B2B salespeople is 53%. To improve your win rate, you need to get better at the three sales stages that determine whether deals close or fail: qualification, opportunity management, and follow-up.
2. Average Revenue Per Account
Your average revenue per account is the B2B sales metric that calculates the total revenue generated by all of your accounts divided by the number of accounts. For example, if you have 100 customers and $10 million in annual revenue, your average revenue per account is $100,000.
This number describes how healthy your businessis. A company with 1,000 customers and $60 million in annual revenue has an average revenue per account of $60 (1,000 x $60 = $60,000,000 / 1,000).
The bottom line: To improve your average revenue per account, increase your win rate by focusing on revenue-generating activities rather than on lead generation.
3. Customer Lifetime Value (LTV) B2B sales metric
What is customer lifetime value? Customer lifetime value (LTV) is the B2B sales metric that calculates the estimated profit that you will make from a customer over their entire lifetime. The lifetime of a customer is calculated by adding the number of months they have been a customer to the number of months they will continue to be a customer.
LTV is an important B2B sales metric because it helps you determine whether customers will continue buying from you. It also tells you how much money you need to spend to acquire new customers.
The formula for customer lifetime value is:
Customer Lifetime Value = Average Revenue Per User (ARPU) x Customer Retention Rate.
The ARPU is the average money a customer spends over time. The retention rate is the percentage of customers that come back or purchase from you again. The customer lifetime value is, therefore, the average revenue per user multiplied by the percentage of customers that will be retained.
Let’s say your company earns $10,000 in revenue from each customer, and they buy from you every year. This means your customer lifetime value is $10,000 x 100% = $10,000. If you have a 20% retention rate, this means that 80% of your customers will not come back. This means your customer lifetime value is $10 x 20% = $2.
The 2-year customer lifetime value of this company is $12,000. But what if the retention rate was 40%? In this case, only 60% of customers would not come back, so the customer lifetime value would be $12,000 x 60% = $7,200, which is less than the first example.
The higher the retention rate, the longer your customers will stay loyal to your business.
Customer Lifetime Value and Customer Acquisition Cost
Customer lifetime value is a good measure of how valuable your customers are, but it doesn’t tell you how much it costs to acquire new customers.
To determine your customer acquisition cost, you subtract the customer lifetime value from the customer acquisition cost. The customer acquisition cost is the money spent to attract new customers.
The formula for customer acquisition cost is:
Customer Acquisition Cost = Customer Lifetime Value (CLV) – Customer Acquisition Cost.
So, if you spend $500 per customer and your customer lifetime value is $12 (as seen in the previous example), your customer acquisition cost would be $500 – $12 = $488.
How to Calculate CLTV by Segmenting Customers
You can also calculate customer lifetime value by segmenting your customers into different groups and then figuring out the CLTV for each group. This allows you to compare which groups are more profitable for your company.
The first step is to segment your customers based on the time period in which they purchase from you. For example, one group might include people who bought from you within the past month, and another group might include people who purchased from you more than a year ago. You can then calculate each group’s CLTV.
Let’s say you have 1,000 customers, and you break them down into 3 segments: 1) customers who bought from you in the past month (333 customers), 2) customers who bought from you 1-6 months ago (500 customers), and 3) customers who bought more than 6 months ago (166 customers). This means that your average customer lifetime value is 333 x $10 = $3,333, 500 x $9 = $4,500, and 166 x $6 = $1,332.
The next step is to compare the CLTV of the different segments. If you want to know which group of customers is most profitable for your company, you can calculate the cumulative CLTV. This tells you the total amount that your customers will spend over the course of their relationship with your company.
The formula for cumulative customer lifetime value is:
- Cumulative CLTV = (Segment 1 CLTV) + (Segment 2 CLTV) + (Segment 3 CLTV).
- Let’s say segment 1 had a CLTV of $3,333, segment 2 had a CLTV of $4,500, and segment 3 had a CLTV of $1. The cumulative CLTV would therefore be:
- Cumulative CLTV = (CLTV of segment 1) + (CLTV of segment 2) + (CLTV of segment 3).
- Cumulative CLTV = ($3,333 x 333 customers) + ($4,500 x 500 customers) + ($1 x 166 customers).
- Cumulative CLTV = $3,333 + $9,000 + $166.
- Cumulative CLTV = $12,499.
Cumulative CLTV tells you how much money the average customer will spend on their relationship with your company. In this example, the average customer will spend $12 over their lifetime with your company.
The next step is to compare the cumulative CLTV of each different segment. You can then determine which segment is most profitable for your company.
How to Calculate CLTV by Segmenting Customers Based on a Time Period
You can also segment your customers based on how much time has passed since they purchased from you. For example, one segment might include people who bought from you within the past 2 months, and another segment might include people who purchased from you more than 6 months ago.
Let’s say you have 1,000 customers, and you break them down into 3 segments:
- customers who bought from you in the past 2 months (333 customers)
- customers who bought from you 3-6 months ago (500 customers)
- customers who bought more than 6 months ago (166 customers).
This means that your average customer lifetime value is 333 x $10 = $3,333, 500 x $9 = $4,500, and 166 x $6 = $1,
The next step is to compare the CLTV of the different segments. You can then determine which segment is most profitable for your company.
Let’s say that our original CLTV of $6 is still accurate.
333 x $6 = $2,998
500 x $6 = $3,500
166 x $6 = $1,332
In this example, customers who bought from you 3-6 months ago are the most profitable group. The reason is that they are the most loyal customers. They purchased from you a long time ago, so you know that you have to treat them well because they have been with you for a very long time. In other words, it is a good idea to keep them happy because they will probably remain loyal customers for a long time.
Customers who bought from you 2 months ago are a close second, and the reason is that they are very loyal customers. They have been with you for a while, but they haven’t purchased from you as long as your 3-6 month customers.
The customers who bought from you 1 month ago are in third place. They are still loyal customers, but they have only been with you for a short time, so you don’t know as much about them.
Customers who bought from you 1 week ago are in last place. They are not as loyal because they just purchased from you, so you don’t know much about them.
This is how to calculate the CLTV of different customer segments. You can put this into a spreadsheet or just keep it in your head.
- Step 1: Calculate the CLTV for each segment.
- Step 2: Calculate the CLTV for your total customer base, which is all of your customers. In this example, it would be 6 months x $0.60 + 4 months x $0.30 + 3 months x $0.25 + 2 months x $0.20 + 1 month x $0.15 + 1 week x $0.10 = $3,600
- Step 3: Calculate the profit per customer by dividing the revenue by the CLTV. In this example, it would be 6 months x $0.60 / 6 months = $1.00
- Step 4: Calculate the profit per customer by multiplying the CLTV by the profit per customer. In this example, it would be 6 months x $60 x 6 months = $720
- Step 5: Calculate the profit per customer by multiplying the CLTV by the profit per customer. In this example, it would be 4 months x $30 x 4 months = $120
- Step 6: Calculate the profit per customer by multiplying the CLTV by the profit per customer. In this example, it would be 3 months x $25 x 3 months = $75
- Step 7: Calculate the profit per customer by multiplying the CLTV by the profit per customer. In this example, it would be 2 months x $20 x 2 months = $40
- Step 8: Calculate the profit per customer by multiplying the CLTV by the profit per customer. In this example, it would be 1 month x $15 x 1 month = $15
- Step 9: Calculate the profit per customer by multiplying the CLTV by the profit per customer. In this example, it would be 1 week x $10 x 1 week = $10
- Step 10: Calculate the total profit by adding together the profit per customer from all of your segments. In this example, it would be $720 + $120 + $75 + $40 + $15 + $10 = $1,265
4. Average Order Value (AOV)
Average Order Value (AOV) is the B2B sales metric that calculates the average amount spent by a customer during one product purchase. For example, if a customer buys two products with an AOV of $30 and $20, respectively, then their total AOV is $50. Your AOV tells you how much money you can make from each customer. If a customer has a low AOV, then you need to find out why.
An AOV of $50 means that one unit sale can bring you $50 profit. If a customer’s AOV is $500, then you can earn $500 x 2 = $1,000 from each sale.
Average Order Value (AOV) tells you whether your business is doing well or not. If your AOV is low, then your products are not competitive. If your AOV is high, then your products are competitive, and people are willing to buy them.
You can use the same formula as that used for LTV to calculate your AOV:
AOV = Total number of products sold x Average price of each product
Let’s say you sell 100 products with an average price of $10 each. Your AOV is $1,000. If you sell 200 products with an average price of $7 each, then your total AOV is $1400.
By calculating your AOV and LTV, you will be able to work out how much a customer is worth to your business. Once you know this figure, you can add more value to the customer by finding out their pain points and how your products can solve them.
To sum up, LTV tells you how much profit you can make from one customer, while AOV tells you how much profit you can make from one sale.
5. Revenue per Employee
The LTV is the B2B sales metric that is calculated by dividing the total revenue generated by the number of customers. This means that the higher the LTV, the better. However, there are other B2B sales metrics that should also be considered when calculating the LTV. These include the average order size, the average order frequency, and the average order duration.
6. CAC Ratio
The CAC ratio is the B2B sales metric that calculates the cost of acquiring a new customer divided by their lifetime value. Ideally, this should be 1 or lower. This means that, for every dollar spent on acquiring a new customer, they bring in one dollar or more in revenue. If the CAC is higher than 1, then the business has to work harder to acquire customers and keep them.
7. Gross Profit Margin
The gross profit margin is the B2B sales metric calculated as total revenue minus total variable costs divided by total revenue. This is also referred to as the operating margin. The higher this percentage is, the better. This means that the company can make more money with each sale compared to its competitors.
8. ROCE
Return on capital employed (ROCE) is the B2B sales metric that is defined as net income divided by average capital employed. ROCE is a performance measure used to evaluate the efficiency of utilizing capital. It is also called “return on invested capital” or ROIC. This ratio measures how much profit a company makes for each dollar of capital it has invested into the business.
9. COGS / SG&A Ratios
COGS stands for the cost of goods sold, which is the cost of producing the product. SG&A stands for selling, general and administrative, which covers all of a company’s business expenses that are not directly related to manufacturing the product. Ideally, COGS should be lower than SG&A because a higher
COGS to SG&A ratio means that the company needs to spend more on overhead than it needs to make in profit.
10. Financial Ratios
There are many different financial ratios that are used when evaluating a company’s financial health. The most common ratios are; debt to equity, debt ratio, current ratio, price to earnings ratio, price to book value ratio, and dividend yield. These ratios are calculated based on the company’s financial statements and can be found online or in a financial calculator.
Use of Financial Ratios
The use of financial ratios is mostly limited to small businesses and investors because larger companies have enough revenue to cover their operating costs. Small businesses and investors use financial ratios to calculate the risk of investing in a company. For example, if a company has a high debt ratio, it may be more likely to go bankrupt because of the risk involved with having a lot of debt. This means that an investor may not want to invest in the company.
There are many different financial ratios that are used when evaluating a company’s financial health. The most common ratios are:
- Debt to equity
- Debt ratio
- Current ratio
- Price-to-earnings ratio
- Price to book value ratio
- Dividend yield
These ratios are calculated based on the company’s financial statements and can be found online or in a financial calculator.
11. Net Promoter Score
NPS is an effective method of measuring customer loyalty. It was developed by Fred Reichheld at Bain & Company in 2003. The NPS score ranges between -100 and 100. A score of 0 indicates no one would recommend the company to others, while a score of +100 indicates that everyone would recommend the company to friends and family.
The NPS score is calculated from the difference between the percentage of promoters (those who give a score of 9 or 10) and the percentage of detractors (those who give a score of 0 to 6). The NPS is a powerful predictor of growth, with an average increase in sales of 20% to 60% resulting from a one-point increase in NPS.
12. Return Rate
There are two main B2B sales metrics used to measure customer satisfaction; return rate and customer satisfaction score. Return rate measures the percentage of customers who come back after making a purchase. This is often measured as a percentage of total purchases made. A customer satisfaction score measures the level of positive feedback given by customers to a company. Typically, it is based on a scale of 1 to 10.
The return rate is a more useful B2B sales metric for determining customer satisfaction. It measures the percentage of the total sales made that are returned. This is an easy way to measure if customers are satisfied with their purchases. The higher the return rate, the less likely it is that they were satisfied with their purchase.
A customer satisfaction score is a good way to measure the overall satisfaction of customers. However, this can be misleading if there are many people who are dissatisfied with what you sell but do not return the product. This can happen if you sell something that requires professional installation or if it is difficult to use or set up. You cannot make a claim about your product until the customer actually tries and fails to use it.
The best way to track your return rate and customer satisfaction score is to use customer relationship management (CRM) software. This software allows you to keep track of your sales, customers, and their feedback. You can segment this information by product, branch location, and customer demographics.
13. Cost Per Acquisition
The CPA or Cost Per Acquisition is the B2B sales metric that calculates the amount of money that you pay for each conversion made through a specific channel or source. It’s hard to estimate because it usually varies from one channel to another and from one source to the other. For example, your CPA through Google AdWords will be way higher than your CPA through email marketing.
CPA is a common term used to describe the cost per acquisition of a lead. CPL is similar, except it focuses more on the cost per lead rather than the cost per acquisition.
While some may not consider CPL to be as important as CPA, it is still very useful for getting a better understanding of your marketing ROI. As you might expect, CPL is calculated by dividing the total cost of a lead by the number of leads generated.
The formula is as follows:
CPL = Total Cost of Lead / Number of Leads Generated
A CPL of $10 means that you spent $10 to generate each lead, a CPL of $5 means you paid $5 for each lead, and so on.
14. Churn Rate
A churn rate is the B2B sales metric that shows the percentage of customers who leave your company within a certain period of time. This number is calculated by dividing the number of customers who left your company during a given period by the total number of customers at the beginning of that period.
For example, if you have 100 customers at the beginning of a month and 40 of them leave by the end of the month, your churn rate is 40%.
Why Should You Calculate Your Churn Rate?
Churn rate is an important B2B sales metric to measure because it tells you how well your business retains customers. In some industries, such as finance and telecom, companies are expected to have very low churn rates. In other industries, such as retail and travel, companies are expected to have higher rates.
The exact number at which you should be concerned about your churn rate depends on your industry. However, if you’re in an industry where high churn rates are considered normal, then any increase from last year’s rate could be a problem.
How to Calculate Your Churn Rate
The churn rate is calculated by dividing the number of customers who left your company by the total number of customers at the beginning of the period.
If you want to continue with our example above, then you would divide 40 (the number of customers who left) by 100 (the number of customers at the beginning of the month) to get a churn rate of 0.40 or 40%.
Churn Rate = (Number of Customers Who Left Your Company) / (Total Number of Customers at the Beginning of the Period)
Many businesses use a one-year period, such as January 1 to December 31. However, you can use any period that you want. For example, you could use October 1 to September 30 or May 1 to April 30.
How to Calculate Your Churn Rate in Microsoft Excel
If you would like to calculate your churn rate in Excel, then your formula would look like the following:
=C2/B2
Where C2 is the number of customers who left your company within the period and B2 is the total number of customers at the beginning of that period.
For example, if you have 100 customers at the beginning of a month and 40 of them leave by the end of the month, then your churn rate is 40.
How to Calculate Your Churn Rate in Google Sheets
If you use Google Sheets, then your formula would look like the following:
=D2/B2
Where D2 is the number of customers who left your company within the period and B2 is the total number of customers at the beginning of that period.
For example, if you have 100 customers at the beginning of a month and 40 of them leave by the end of the month, then your churn rate is 40.
If you use Microsoft Excel or Google Sheets, then you can also use our Churn Rate Calculator template to calculate your churn rate.
How to Calculate Your Net Churn Rate
Your net churn rate is the difference between your gross churn rate and your churn rate. It tells you how much of your customer base left every month due to new acquisitions, as opposed to those who left due to losing customers.
If you have a high net churn rate, then it means that you’re losing more customers than you’re gaining. Although it’s normal for a small number of customers to leave due to new acquisitions, if you have a high net churn rate, then this could be a problem.
It’s important to remember that your net churn rate is not the same as your net revenue. For example, if you have 100 customers at the beginning of a month and 50 of them leave because of new acquisitions, and you also acquire 50 new customers during the same month, then your net churn rate is 25%. However, your net revenue would be 50%.
Conclusion
Business organizations that are directly dealing with the clients by using in-house resources are required to come up with different B2B sales metrics to monitor their leads and process. This will help them understand the business process and optimize it using basic analytics.