Sales Analysis Basics

Sales Analysis Basics for Small Businesses

By Danny Wong

A small business, especially one just out of the startup phase, may not have much more than a simple graph to show sales over time. Of course, as the organization matures, comprehensive sales analysis becomes increasingly important. 

This report can help owners and sales managers determine more than just a company’s progression or decline in sales. In addition, it will show how a thorough sales analysis can surface easy opportunities to acquire new customers, improve sales among existing clients, and curb attrition. When leaders use sales analysis reports to discover the strengths and weaknesses of their outreach and acquisition campaigns, they can take a more strategic approach to growing their business.

In this article, we explore the sales analysis metrics small businesses should pay attention to, the different types of sales analysis companies can employ, and the components of a strong sales analysis report. 

Which sales analysis metrics are vital to SMBs?

At different stages of a company’s growth and size, different metrics matter. 

When a business begins to scale its revenue, the key sales analysis metrics it should focus on include: 

  • Lead volume: The total number of clients or customers who enter the sales funnel by demonstrating an interest in the company’s products and services. 

  • Opportunities won: The overall number of sales closed. In the early days of an organization, this should be measured both monthly and quarterly.

  • Lead-to-sales ratio: The end-to-end conversion rate to determine the effectiveness of the sales funnel.

  • Days to close: The duration of time from an open opportunity to a closed, won opportunity. Some buyers take months before making a positive purchasing decision. Others only need a few days or weeks. Consider the average time needed to convert leads to paying customers. 

  • Average deal size: The average contract value, to be compared against customer acquisition costs and product or service margins. 

Armed with these basic data points, small and midsize businesses (SMBs) can have a better sense of what their overall funnel looks like and how that impacts their revenues and bottom line.

As a company grows, so will its need for additional sales analysis metrics. The following nine metrics provide larger sales teams with smart insights to help them optimize most aspects of their marketing and sales processes. 

  • Lead source: It’s important to identify how customers discover a business and at which point they enter the sales funnel. It may be that certain channels drive more volume and higher-quality prospects than others. 

  • Touchpoints required to close: Sales cycles are sometimes lengthy and may require numerous touchpoints to close. Track the type and number of customer interactions sales reps need to build rapport, educate buyers, and win the sale. 

  • Overdue opportunities: Automatically flag open opportunities that are in the sales pipeline longer than the average length of time to close. Prioritize these prospects to determine new ways to move them along the sales funnel. 

  • Performance per rep: Each salesperson is responsible for hitting their own quotas. To keep them accountable to monthly, quarterly, and annual goals, frequently calculate current-period sales and compare those against their individual performance. This may help identify reps who need additional tools or training to hit their key performance indicators(KPIs), as well as who may possess winning strategies for engaging leads and converting prospects. 

  • Product performance and demand: Segment sales by product and identify which ones are most popular with customers. Focus sales efforts on best sellers and carefully listen to clients to see what else they may need. This will help inform product and development teams about other potential solutions to offer.

  • Actual and forecasted sales: Take a big-picture look at how well teams perform against their forecasted sales. As needed, provide resources to bridge the gap between actual and forecasted sales — or have the leadership team re-evaluate its revenue expectations. 

  • Cross-sell and upsell rate: Increase customer lifetime value by educating existing clients on premium add-ons and other products or services that can address their particular business needs. Work diligently to increase this metric and generate more sales from the current customer base. 

  • Customer retention and churn rate: Clients are sometimes fickle. Measure the number of customers who decline to renew or who terminate agreements and investigate why they no longer need the company product or service.

  • Company size among prospects: Larger companies often have bigger budgets, but longer sales cycles. Similarly, small and midsize businesses sign smaller deal sizes, but often turn around decisions faster. Segment leads and sales by company size to understand which type aligns best with a business’ current sales process. 

When a small business starts to scale into a larger organization, advanced sales analysis metrics come into play. Some examples include: 

  • Discounts applied: In B2B sales, the right negotiation tactics help close deals faster. Of course, it’s important to be mindful about how certain discounts may impact overall margins. 

  • Deal complexity: Customization can be costly. Carefully monitor the concessions sales reps offer to balance high conversion rates against additional resources required to fulfill certain contracts. 

What are the different types of sales analysis?

A structured approach to business intelligence can inform better decisions and directions both for management and the sales team. 

Four valuable types of sales analysis include: 

  1. Causal: Understand how an increase or decrease in one variable impacts others. Once it’s clear which variables govern certain results, a business can optimize its resources to capitalize on those insights. 

  2. Diagnostic: When there are leaks in the sales funnel, identify where leads drop off and the inputs or absence of resources that contribute to the loss. Afterward, determine a resolution to correct such sales funnel challenges. 

  3. Exploratory: Without clear and obvious correlations, investigate new ways to dissect and read sales analysis data. 

  4. Predictive: Use past behavior to forecast future results. Determine which trends apply, and take advantage of ones that will help achieve more business goals. 

Apply these different types of sales analysis to figure out what works within a sales strategy and what needs more fine-tuning.

What is a good sales analysis report?

Four characteristics of a good sales analysis report are: 

  • It is accurate and comprehensive

  • It provides actionable and useful ideas 

  • It easily surfaces data that informs strong decision-making

  • It saves leaders and managers time 

To create an effective sales analysis report from scratch, use customer relationship management (CRM) technology to collect, analyze, and cross-reference actions from customers and inputs from your salespeople. Then visualize the data using charts, graphs, and summaries. Within your report, aim to compare key data points to find interesting correlations and trends. Whenever possible, evaluate your KPIs against competitors or industry benchmarks as well. 

As a sales manager, ask your peers and the department leaders above you about the metrics that matter most to them and incorporate those, too. Ultimately, you should choose the sales analysis metrics that matter most for your business, allowing you to customize the way you leverage data to generate meaningful conclusions. 

Always create an initial sales analysis report example or template for your team to emulate. Over time, work with your direct employees and supervisors to further adjust the way data is presented and synthesized to improve the report’s utility for everyone who uses it. 

Once you master these sales analysis basics as a small business, you can then turn the data you collect and analyze into actionable insights to improve your lead acquisition campaigns, your lead nurturing strategy, and your customer retention approach. As a result, you’ll sustainably grow your sales and maximize your bottom line. 

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