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Sales & Marketing
Bill Binch  |  August 17, 2022
Eight Leading Sales Metrics to Watch in Tough Market Conditions

Every sales leader has her “desert-island dashboard” — core metrics she watches religiously to measure business health.

In my role at Battery, I often get asked which best-practice metrics an enterprise software company should watch. Many variables make this question hard to answer: Do you sell SMB or enterprise, low annual contract value (ACV) versus bigger ACVs, through a PLG motion or sales-led, etc. Below I’ll offer key metrics that apply universally across these scenarios. These are leading sales indicators that help you predict where your business is going. Especially during challenging economic times, “hearing the tone of the engine” is critical.

Inbound Demo Requests (IDRs) by week

Tracking the number of inbound demos generated per week tells you how your demand-gen efforts are performing. If you can track this metric more granularly by segment, vertical, or geography, that’s even better. This will give you more details on where your demand-gen is performing well versus under-performing.

Here’s why this metric is important. If you’re a $3M annual recurring revenue (ARR) company growing to $6M ARR this year, chances are your demand-gen efforts are critical to getting you there. You need to see weekly growth of your best- performing call to action. If you started watching this metric on January 1st, and you’re creating the same number of weekly IDRs by April 1, you’re probably not going to achieve your bookings plan this year.

In a PLG world, the analogy would be the number of downloads for the week.

Demos delivered each week

If IDRs represent the input, the actual number of demos given is the output. A demo is your highest-intent sales event. It’s difficult to progress into later stages of the deal cycle like value calls, pricing calls, and negotiations without delivering the demo(s). Therefore tracking demos delivered per week is critical to seeing the future.

For PLG companies, this would equate to your activations each week.

Similar to IDRs, if your sales team isn’t ramping up number of demos, then you’re not getting more looks at deals . Best-in-class companies set a goal for the week ahead of how many demos should be delivered which gets to our next metric, the Monday Morning Rule.

Monday Morning Meeting Rule

This metric measures how many scheduled meetings each AE has on Monday morning. This includes any type of meeting – discovery, demo, value calls, pricing calls, negotiations, etc. The reality is that meetings multiply, so if you start with 3 discovery meetings, it’s likely you’ll grow to 2-3 demos. Demos grow into value and pricing calls, and so forth.

This metric lets you drop down from org-level health to the individual account executive (AE)-level health.

As you scale the number of AEs, measuring their activity level is a useful health check. If an individual’s weekly meetings are decreasing, that rep may struggle in the coming months.

Tracking this metric has another benefit too. At my former employer Marketo*, sales candidates would ask what set the best reps apart. I often heard answers like “they have grit, they’re competitors, they work hard.” Those were all true, but I wanted a more data-driven answer.

One metric held true for our best-performing AEs: When they started work on Monday, they had nine scheduled meetings on their calendar for the week ahead. We used this info to onboard our new AEs. We’d share that when you start and get your territory, you’ll have zero meetings on your schedule. Over the next 12 weeks, we built targets for how they’d grow from zero to the 10-meeting target. (Yes, we grew it from 9 to 10 meetings every Monday. I mean after all, I am a sales guy).

Note: The right number of meetings will depend on your ACV and average sales cycle, so your company’s specific target number could be different.

Mojo Metric

This is hands-down the most important metric I look at daily to predict my business. What I call the “Mojo Metric” formula is a simple equation that reveals your net pipeline. It goes like this:

When I was in an operating role, I asked my sales ops team to create a dashboard that ran the Mojo Metric every day after midnight. I could wake up and see each of these categories (meaning I’d view the specific amounts for each specific metric). Importantly, I’d measure this not only by pipeline dollars, but by number of opportunities too.

There’s value in looking at the Mojo Metric granularly, too. Let’s say a single AE pushed one deal to a future quarter for $1M in value. My opps count may only show one deal pushing out, but my deals pushed in dollars would show a whopping $1M. Contrast this to another scenario: If I saw ten $100K-deals pushing out, my reaction with my team would differ significantly.

Tracking the actual number of opportunities created also reveals the intersection of where marketing and sales truly connect. Returning to our $3 to $6M in ARR growth example above, you can drive that growth by either selling more deals or by increasing your ACV. Most companies don’t “auto-magically” increase their ACV, so that means you need to increase deal volume. To win more closed deals, you need opps. Measuring opps bring into sharper focus what marketing is doing, in tandem with what sales is creating.

Cost Per Opp

Let’s use that example of a $3M ARR company aiming for $6M ARR. If you closed $3M in ARR last year, you likely created $8-9M in pipeline to achieve that. Moving up to $6M this year means you’re going to create $15-18M of pipeline. That’s a net increase of $12M in new pipeline added.

There is no doubt you’re going to spend more sales and marketing dollars to fuel that increase in pipeline. The question is how efficiently are you going to do it?

My advice is to track your cost per opp on a monthly basis. Regardless of the opportunity source, measure how much each one costs you to generate. If your per-opp cost is increasing during the year, this may signal that your growth is stalling. This metric, combined with the Mojo Metric, is a powerful one-two punch. What do you do if the number of opps is flatlining and your cost to generate each one is rising? You break down your lead sources, deduce which ones are causing the issue, and start to de-bug the reasons.

For PLG, there are a number of metrics that could be tracked here, but I think cost per activation is the best proxy. Activated customers are your most likely to convert to paying customers, so the same tenets above hold true.

Average Sales Cycle (ASC)

Everyone tracks their Average Contract Value (ACV) or Average Sales Price (ASP). But not enough people pay attention to the velocity of the cycle.

When macroeconomic tides turn and become more difficult, one of the first indicators is an extension in the average sales cycle. Buyers pause or become more cautious on their tech purchases, and this metric is where you see that hesitation. ASC gives you data-driven evidence there could be challenges ahead.

I suggest all companies track their ASC monthly. As with weekly IDRs, it pays to get granular with ASC. Watch this metric by segment, by geo, and by industry.

An ASC of 36 days going to 44 doesn’t seem bad – it’s only 8 more days. But remember this is an average across a range of deals. While 8 days doesn’t seem bad, this is a 22% increase in actual time. If you see this kind of increase and it doesn’t snap back closer to the original ASC in the following month, you may be trending for fewer closes, and therefore fewer, bookings for the next period.

ASC is a critical metric for product-led growth (PLG), too. Small improvements in your funnel stages can have a profound impact on your conversion rates. Paying attention to download-to-activation timing, activation-to-minimum usage metrics, and usage-to-conversion to paid are good metrics to watch.

In-Quarter (or month) Create and Close (IQCC)

This metric does not apply to every company. If your average ASC is 90+ days, then creating and closing business within the same quarter may not matter to you.

But if you’re a company with an ASC of less than 90 days, you should be tracking in-quarter create and close. These are deals that are born and closed within the same 90-day period. This metric is critical for future forecasting: If you close 20-30% of your quarterly business with IQCC, when you forecast on day one of a new quarter, you can’t solely convert off the pipeline to determine a forecast.

Having this metric from prior quarters allows plus your current pipeline will help you more accurately forecast where you land. Furthermore, your IQCC will be influenced by the other sales metrics described above. If your IDRs are down, your demos delivered are down, and your opps are less than expected, it’s likely that your IQCC will follow a similar trend.

ARR Per Employee

Measuring how much ARR you generate per company employee is an important metric for the whole company. Critical note: I am NOT referring to how much revenue you generate per quota-carrying employee. This metric applies across all employees. I’d recommend viewing this indicator on a quarterly basis.

Measuring customer acquisition cost (CAC) or the magic number is fine, but these indicators are hard for a sales leader to influence. Calculating the percentage of sales and marketing (S&M) expense to revenue is worthwhile, but that metric doesn’t encapsulate how the company is trending on efficiency.

If you’re growing from $3M ARR to $6M, you’re likely trying to improve your S&M spend on a percentage of revenue basis. That’s helpful, but I want a metric that tells me how the entire company is working together. If you plan to improve your ARR per employee and start missing against that plan, you can adjust hiring accordingly.

On hiring, a few additional thoughts in light of the challenging market we may be headed towards. First, never stop hiring quota-bearing AE’s. If you are going to grow at all next year, you need to keep hiring to achieve that.

There could be some catastrophic reason for not hiring those AEs, but missing plan is not one of those reasons. Don’t confuse a missed plan with the expectation that you’ll need to grow next quarter and next year. That growth simply cannot happen without sales reps on board.

Second, it may not feel good, but if market conditions demand it, you can push out hiring for non-quota roles like SEs, SDRs, managers, sales ops, and sales training roles. It sucks to do it, but if your ARR per employee is going backwards, then you need to think about areas where you can improve efficiency. The same goes for other functions – is that next accountant, marketer, or CS person critical to you making your ARR or NRR targets? If not, reconsider that hire.

Looking Ahead

You may have noticed I didn’t include any bookings elements. My focus here was on metrics and measurements that will give you an indicator of what will happen, not what has happened. That said, all of these indicators lead up to your bookings number, so it truly is the final bus stop. Include your bookings as the last data point.

You may have also noted that some of these metrics are worth tracking daily, some monthly, and some quarterly. Being as precise and granular as possible benefits you, but the ideal frequency may depend on the role of the person viewing that metric. Take the Mojo Metric for example. As a CRO I looked at this number daily. I wanted to see daily movements and be able to act quickly if needed. But my exec team looked at this on a weekly basis.

Most of these metrics work together. Most companies measure their customer journey and their marketing-to-sales waterfall. Keep up this practice, including not just the conversion rate between stages, but also the time element. As mentioned above in the ASC section, I think most companies underestimate the time element and its importance.

Final thought for those who are facing their first market downturn: you can do this. An early lookout via some key metrics will help you course-correct before you’re wildly off-track.

Happy predictions!

Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor makes its services available to the public or other advisory clients. For more information about Battery Ventures’ potential financing capabilities for prospective portfolio companies, please refer to our website.

*Denotes a past or present Battery portfolio company. For a full list of all Battery investments, please click here. No assumptions should be made that any investments identified above were or will be profitable. It should not be assumed that recommendations in the future will be profitable or equal the performance of the companies identified above.

Content obtained from third-party sources, although believed to be reliable, has not been independently verified as to its accuracy or completeness and cannot be guaranteed. Battery Ventures has no obligation to update, modify or amend the content of this post nor notify its readers in the event that any information, opinion, projection, forecast or estimate included, changes or subsequently becomes inaccurate.

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