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<\/a><\/figure>\n\n\n\nDiscover timely insights on processes and more in our 21 Pro Tips for Sales Ops e-book<\/a>.<\/b><\/p>\n\n\n\n While topline figures are still important for mapping short-term forecasts, those that measure longer-term value are increasingly top of mind for sales managers. The most important ones are recurring revenue, customer lifetime value, customer retention, early warning signs, and employee retention.<\/p>\n\n\n\n Here\u2019s the \u201cwhat\u201d and the \u201cwhy\u201d of these sales metrics in detail:<\/p>\n\n\n\n What is it?<\/b> The most common type of recurring revenue is a subscription. Using this model, companies charge customers for access to features of a product or levels of service for a set period of time, typically monthly or yearly.<\/p>\n\n\n\n Other recurring revenue models include leases, affiliate sales, and ad-based revenue.<\/p>\n\n\n\n How is it measured? <\/b>Different measures track different models, but all depend on a simple formula:<\/p>\n\n\n\n [Recurring revenue = Active accounts in a period X Cost of good\/service]<\/p>\n\n\n\n Annual recurring revenue (ARR) and monthly recurring revenue (MRR) are perhaps the most common measures, but others like annual order value (AOV) and annual contract value (ACV) are also used.<\/p>\n\n\n\n Why does it matter?<\/b> First, recurring revenue is easily managed digitally, which aligns with the shift to widespread digital adoption of both buyers and sellers. Second, it attracts buyers with lower-cost, incremental spend. Lastly, it generates predictable revenue for sellers \u2014 and makes accurate forecasting easier.<\/p>\n\n\n\n Even better, recurring revenue refocuses on customer success over the long term. \u201cCompanies are looking at how their services can ultimately create better long-term outcomes for customers,\u201d explained Salesforce Senior Director of Growth Strategy Heather Unruh. \u201cThat means a shift from one-off sales to subscriptions and complementary products that deliver an upgraded experience.\u201d<\/p>\n\n\n\n What is it? <\/b>Instead of prioritising one-off transactional sales, customer lifetime value<\/a> accounts for all likely customer purchases from a single company based on past purchase behavior.<\/p>\n\n\n\n How is it measured? <\/b>The basic equation is:<\/p>\n\n\n\n [Customer lifetime value = Average order amount X Average purchases\/year X Average retention time in years]<\/p>\n\n\n\n This can change based on shifts in product offerings, like one-off sales to subscription products. Ultimately, however, you should account for all likely revenue from each customer over the course of their relationship with your company.<\/p>\n\n\n\n For example, instead of focusing only on revenue per available room, a hotel chain would likely look at the buying behaviour of customers in their loyalty<\/a> program. They could calculate lifetime value based on reservations and purchase patterns on property, like drinks at the hotel bar or trips to the spa.<\/p>\n\n\n\n Why does it matter?<\/b> For sellers, the appeal of maximising customer lifetime value is business resilience, fueled by steady revenue. While prospecting and one-off sales will never go away, a bottom line dependent on the consistent purchase behavior of loyal customers means predictable revenue and more accurate forecasting<\/a>.<\/p>\n\n\n\n What is it?<\/b> Customer retention is the percentage of customers that remain active buyers. Customer churn is the opposite \u2014 the rate at which customers stop doing business with you. Both can be used to track the length of a customer\u2019s relationship with a company.<\/p>\n\n\n\n How is it measured?<\/b> There\u2019s one set of calculations that provides both retention and churn rates. These are typically run monthly or quarterly, but can be run yearly as well. Here are the basic equations:<\/p>\n\n\n\n [Customer churn = (Customer total at end of churn period \u2013 Customer total at start of churn period) \/ Customer total at the start of the churn period X 100)]<\/p>\n\n\n\n [Customer retention = 100 \u2013 Customer churn] <\/p>\n\n\n\n Let\u2019s say you have 100 customers at the start of the first quarter and only 90 customers at the end. Here\u2019s how you would calculate churn and retention:<\/p>\n\n\n\n 100-90 = 10<\/p>\n\n\n\n 10\/100 = .1<\/p>\n\n\n\n .1 X 100 = 10% customer churn rate<\/p>\n\n\n\n 100-10 = 90% customer retention rate<\/p>\n\n\n\n The ultimate goal for any business is negative churn or positive growth in your customer base.<\/p>\n\n\n\n Why does it matter? <\/b>Given the fresh emphasis on customer lifetime value, customer retention is key. This replaces transactional customer satisfaction with a renewed focus on long-term relationship-building. As noted above, lifetime value allows for predictable growth and business resilience.<\/p>\n\n\n\nNew sales metrics take the spotlight<\/h2>\n\n\n\n
1. Recurring revenue<\/h3>\n\n\n\n
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With customer lifetime value top of mind, revenue is more predictable \u2014 compared to one-off sales<\/b><\/p>\n\n\n\n2. Customer lifetime value<\/h3>\n\n\n\n
3. Customer retention\/churn<\/h3>\n\n\n\n
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