To generate sustainable revenue you need at least two things: a scalable lead-generation process and a system to monitor pipeline health.
Qualified leads are the nutrients your pipeline needs to grow.
Frequent check-ups with the right metrics are what it needs to stay healthy.
In this article, we’ll go over 7 of the most important metrics to measure and grow a predictable pipeline.
1. Number of qualified leads
When you think of a full pipeline the first thing that comes to mind is the number of qualified leads.
Pooling together all inbound and outbound leads is the first step to not only forecasting potential growth but creating it.
You can start by applying whichever sales qualification methodology best suits your selling model to filter out unqualified leads from entering the pipeline.
The framework you’ve chosen to qualify leads (BANT, ANUM, MEDDIC, etc) will determine the quality of your prospect pool.
A healthy sales pipeline begins with a robust selection of qualified leads.
You can’t create opportunities, much less generate revenue, without a pipeline that overflows with leads.
2. Lead Velocity Rate (LVR)
To measure the rate at which qualified leads enter the pipeline we use Lead Velocity Rate (LVR).
This metric considers both the pace of lead generation and the quality of those leads.
Below is a helpful equation CROs and Sales leaders use to benchmark overall pipeline development.
While not an indicator of actual revenue generated, maintaining a high LVR is preparing for growth.
Sales numbers are a reflection of the past that don’t account for how long ago a lead entered the pipeline.
Don’t evaluate LVR in a vacuum, however.
Use it within the context of other metrics like MQL to SQL conversion rate.
Otherwise, it risks becoming a vanity metric with no bearing on actual revenue generated.
Nevertheless, measuring the percentage of qualified leads over a period of time gives you more accurate data on buying trends and lead nurturing strategies.
LVR gives you an estimate of what growth can look like in the future as well as insight into your overall pipeline health.
3. MQL to SQL conversion rate
Measuring the MQL (Marketing Qualified Lead) to SQL (Sales Qualified Lead) conversion rate is the next logical step after assessing the total qualified lead count and LVR.
To convert from an MQL to an SQL a lead must meet certain criteria established by both departments.
This framework for qualification aligns with the company’s overall sales and business goals.
A conversion then often follows a lead scoring system where a lead moves from marketing to sales after reaching a score threshold by engaging with content.
Calculating your pipeline’s MQL to SQL conversation rate follows a simple formula.
As a primary indicator of sales pipeline health, MQL to SQL conversion rate is also a useful metric to measure how well marketing and sales teams see eye to eye.
If your MQLs aren’t converting to SQLs, you need to assess where the bottleneck is and why.
MQL to SQL conversion rate takes a holistic view of your pipeline, evaluating how cleanly the movement of leads flows from marketing to sales.
4. Customer Acquisition Cost
Customer Acquisition Cost (CAC) is one of the most valuable metrics a business can have to monitor the health of a sales pipeline.
Like all good businesses, you need to invest to earn.
CAC is a combination of all the expenses invested in the pursuit of a new customer. In other words, it’s how much a customer costs in marketing, sales, and advertising efforts.
The equation for determining CAC is straightforward.
A healthy sales pipeline is cost-effective.
The informed decisions that drive new business come from a clear understanding of the investment necessary to expand a customer base.
Tracking CAC allows organizations to efficiently allocate budgets toward a sustainable pipeline.
5. Win rate
One of the most common metrics used to measure the success of your pipeline is win rate.
Win rate is a closing deals measurement that looks at all the opportunities in a pipeline and calculates the rate at which they close.
It’s a simple but important metric to calculate.
There’s probably no clearer analysis of pipeline performance than win rate because at each stage it considers all possible opportunities.
Whether it’s lost opportunities (sales) or poor lead quality (sales development and marketing), assessing win rate reveals the key areas for improvement.
Measuring success in this way identifies the patterns and trends you need to keep building predictable pipelines in the future.
6. Average Deal Size
The average deal size is a metric that determines the value each sale brings to your organization.
It reflects the current health of your pipeline and how you’ll need to allocate resources to hit revenue goals in the future.
It divides total revenue from closed deals by the number of deals, as shown below.
For example, if a sales team is closing deals but not meeting revenue goals, you may need to invest more in acquiring high-value clients.
Understanding average deal size can help you set realistic revenue goals as well as the appropriate timetables for reaching them.
In addition to informing strategy, it can help you gauge the value of your solutions or a specific product launch.
The SaaS sales cycle is often long and comes with a high risk of failure. As such, these deals take greater investment to close.
Knowing how much revenue a pipeline produces on average is critical to its sustainability.
7. Time to Close
If the average deal size is the value of each closed deal, time to close is the lifecycle.
A key component of a healthy pipeline is responsiveness.
You don’t want bloat in terms of unqualified leads but neither do you want an endless cycle of bottlenecks before closing a deal.
Time to close (aka average sales cycle length) is an assessment of the speed of a deal as it progresses through the pipeline. It calculates the average number of days it takes to win a deal from the first touch to close.
The quicker the time to close the more likely it is your sales process is responsive and adept at converting early opportunities.
And converting opportunities through a swift, repeatable process is one of the best ways to keep a healthy pipeline.