How Do I Measure Sales?

You probably think this is easy, and it kind of is, but there are some details worth poking at. If you sell a product for $10, that's $10 in gross sales. If the product cost you $8 to make, then you have $2 in net sales. All done, right? Well, mostly. The purpose of collecting data is to drive action. So what action can you take with the data above? Not much, it turns out. Like other measures, sales should should be expressed in terms of your sales strategy.

The Devil is in The Details

We measure things to take action, so we measure sales to increase sales. This usually means getting at least one layer below total sales and look at what you sold, who made the sale, and who made the purchase.  At that point, taking action means having a strategy that will guide how much you weight one set of results over another.
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What you sell
In addition to increasing revenue, sales feed a strategy in which some products are more strategically important than others. So a company that sells coffee may develop a strategy to sell tea, meaning that tea sales become more strategically important than coffee for a while and therefore will be weighted more heavily. This is particularly important if (for example) the cost of the coffee beans you buy has made it difficult to compete and your expansion into tea is meant to offset that rising coffee cost.

Who you sell to
Selling to existing customers is great. They're usually cheaper to find than new customers and selling to them often reflects success in brand or product loyalty, or customer service. Selling to new customers is also great because it expands your overall customer base (assuming you keep the existing ones, too). You may also have a strategy to sell into a new customer segment, so sales to a new age group or geographic area can show the success of that strategy.

Who makes the sale
The largest part of your cost of good sold (COGS*) is probably the cost of labor to sell your products and services, including the payroll and other costs associated with your sales teams. One organization I worked for tried to move sales from the more expensive (in salary and bonuses) sales team to the less expensive customer service team. The logic seemed solid: there were more customer service agents, they were paid less than sales people, and if they made product recommendations during their regular customer service calls, that was a much lower cost of sales. In this organization's case it failed because the ability to recommend a product or service based on customer need was a specific skill that those customer service agents lacked. But as a way to lower the cost of goods sold, it had promise. 
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So how do we improve?
Improving sales results overall is all about margin. That is to say, increasing the gap between gross sales and the COGS. Reducing costs while maintaining revenue is a popular approach (same results, less effort). Key measures to track and reduce are lead quality, cycle time, and conversion rate . 

Lead conversion is the proportion of leads that become sales. Your marketing department is finding ways to find potential buyers who will become actual buyers. A higher quality lead is has been well matched to your company's products and services so is more likely to convert to a sale. The flip side of that is lower quality leads, which still cost money to collect, but have a much lower return on that investment. Improving lead conversion will lower your COGS and improve your margins.

Sales conversion (the proportion of sales attempts that succeed) is a subset of lead conversion, but is specifically a measure of the performance of your sales people. Within the range of conversion percentages, some sales people will get sales more frequently, allowing them to move on to another sale. Like lead conversion overall, this improves your margin by reducing COGS. Sales training, a solid sales methodology, and hiring experienced salespeople are all levers to pull in improving sales conversion.

Cycle time is the length of time it takes to complete a sale. If you're an online retailer, this time might be measured in minutes (while shoppers consider your product compared to others) and if you're an enterprise software company, the cycle time might be measured in months. In either case, the faster you can get a buyer from considering your product to buying your product, the better your margins. There are (at least) two reasons for this: 1) Your sales people can move on to another sale, wasting less of their time on actions that don't produce value and, 2) Your cash flow is improved. 

Sales - bringing revenue into your company - is the engine that drives your success. Having a strategy for what sales are more important and then spending less and less money on getting those sales is how to measure and improve your sales processes. 

*Cost of goods sold is the accounting term for adding the materials, labor, and allocated overhead for something your company sells. Let's assume first that you have already priced your product (or service) to include the cost of delivering it and have also added some margin to enable your company to both continue operating and make a profit.