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How to Calculate Customer Lifetime Value (LTV)

GREGORY KESHIAN | Sep 18, 2018

Customer Lifetime Value (LTV) measures the total value that you are likely to capture from an average customer.  To measure LTV, you need to know your new business ASP, the average likelihood for a customer to upsell (attach rate), your upsell ASP, and your renewal rate.  The LTV calculation would then be to take (New Business ASP + (Attach Rate * Upsell ASP)) * (1 / (1 - Renewal Rate))

For example, let’s say you have the following metrics:

  • New Business ASP = $5,000

How to Calculate Pipeline Coverage

GREGORY KESHIAN | Sep 18, 2018

Pipeline coverage measures the amount of pipeline you have, relative to your quota for a given period of time.  To measure pipeline coverage, you take your total pipeline for a period, and divide by your quota for that same time period.

For example, if a rep has $500,000 of pipeline for Q2 and their quota for Q2 is $125,000, then their pipeline coverage is $500,000 / $125,000 = 4.0x.  This rep has a 4x pipeline coverage.

How to Calculate Dollar-Based Renewal Rate

GREGORY KESHIAN | Sep 18, 2018

Dollar-based renewal rate measures the percentage of renewal revenue won out of the total amount of revenue that was up for renewal in a period.  To measure dollar-based renewal rate, you take the total amount of renewal revenue won in a given period, and divide by the amount of revenue that expired in that same period.  

For example, if you had $140,000 of renewal bookings in Q2, and $150,000 of revenue that was up for renewal in Q2, then your dollar-based renewal rate would be $140,000 / $150,000 = 93%.

How to Calculate Deal-Based Renewal Rate on a Cohort Basis

GREGORY KESHIAN | Sep 18, 2018

Deal-based renewal rate, calculated on a cohort basis, measures the percentage of opportunities renewed out of the total number that were up for renewal in a period.  To measure deal-based renewal rate on a cohort basis, you take your total number of expiring subscriptions in a period, and measure how many of them got renewed, and divide the number of renewals by the number of expirations.  

How to Calculate Deal-Based Renewal Rate

GREGORY KESHIAN | Sep 18, 2018

Deal-based renewal rate measures the percentage of renewal deals won out of the total number that were up for renewal in a period.  To measure deal-based renewal rate, you take your total number of renewal deals in a given period, and divide by the number of deals that expired in that same period.  

For example, if you had 380 renewal deals in Q2, and 400 deals that were up for renewal in Q2, then your deal-based renewal rate would be 380 / 400 = 95%.

How to Calculate Sales Activity Per Opportunity

GREGORY KESHIAN | Sep 18, 2018

Sales activity per opportunity measures the average number of activities a sales rep needs to make in order to open one opportunity or deal.  To measure sales activity per opportunity, you take your total number of sales activities logged, and divide by the number of opps created.

For example, if a rep created 4,000 activities in a month and opened 16 opportunities, then their activities per opportunity ratio would be 4,000 / 16 = 250 activities per opp.

How to Calculate Calls per Opportunity

GREGORY KESHIAN | Sep 18, 2018

Calls per opportunity measures the average number of phone calls a sales rep needs to make in order to open one opportunity or deal.  To measure calls per opportunity, you take your total number of calls made, and divide by the number of opps created.

For example, if a rep made 2,000 calls in a month and opened 14 opportunities, then their calls per opportunity ratio would be 2,000 / 14 = 143 calls per opp.

How to Calculate Sales Velocity Per Opportunity

GREGORY KESHIAN | Sep 18, 2018

Sales velocity measures the expected output you would get from a sales rep or team in a given period of time.  Sales velocity on a per opportunity basis measures the expected output from a single opportunity or deal in a given period of time.  To calculate sales velocity per opportunity, you multiply your ASP and close rate, and then divide that by your sales cycle, measured over the same duration that you are measuring.