Every business owner wants to keep their pipeline full.
To keep sales flowing in, there’s a near constant push for better marketing, better salespeople, and better business processes. This is the momentum that all businesses need for consistent growth.
But generating more sales is only part of the equation.
While sales effectiveness does well to improve conversions, there’s another component that business owners often leave by the wayside: sales efficiency.
Sales efficiency is the key to not only generating more sales for your business but also streamlining your sales process so that you get more sales, faster.
In this guide, we’re covering what sales efficiency is, why it’s essential to your business, and 12 ways to make your sales process more efficient than ever.
What is Sales Efficiency?
So, what is “sales efficiency”? How is it different from “sales effectiveness”?
Let’s dive into the definitions.
Sales Efficiency vs. Sales Effectiveness
Sales Effectiveness refers to your sales team’s ability to convert prospects into leads, and eventually paying customers or clients, at each stage of your sales funnel. If your sales process is effective, you will experience more “wins” than losses every step of the way.
Sales Efficiency, on the other hand, refers to the speed of your sales operations. That is, how quickly you are able to convert users into leads/sales and while still generating the highest return on your investment. It is the revenue generated by your sales team relative to the cost.
A sales process that is both efficient and effective will be able to close sales in a reasonable time frame, at a sustainable cost, and on the right terms.
The Sales Efficiency Ratio
Sales efficiency is the “Magic Number” that’s calculated by “taking current quarter new revenue annualized, divided by prior quarter sales & marketing expenses” (Source):
Sales efficiency = (revenue / sales cost) x 100
For instance, if you spend $4 on sales in Q2 and generate $4 in revenue in Q3, your ratio would be 1. But if you spent $4 on sales in Q2 and instead only generated $2 in revenue in Q3, your sales efficiency ratio would be .5.
Your sales process is considered sufficient if you have a ratio of .5-1, indicating that your company is essentially breaking even. However, this is not sustainable for the long term.
With a sales efficiency ratio of 1 or greater, you can be confident that your business has strong sales efficiency. Just note that if your ratio is significantly higher than 1, it could mean that you are under-investing in marketing or sales.
Why Sales Efficiency & Effectiveness Should Be Your #1 Priority
Sales inefficiency is a huge issue that many businesses are facing, but few take the time to run the numbers on before it is too late. Your sales team closing the majority of new prospects isn’t always an indication of success.
The reality is that sales quotas have risen by over 33% since 2007, but the percentage of sales reps actually hitting their quota has fallen by 25%. Sales inefficiency is such a pervasive issue that 65% of B2B businesses listed it as their #1 business challenge.
Calculating your sales efficiency ratio is the best way to determine whether your business is on track.
If there’s room for improvement – a major comeback – you will need both sales efficiency and sales effectiveness in order to move the revenue needle.
What does it mean to be inefficient or ineffective?
An inefficient and ineffective sales process can be quite costly to a business’s bottom line. A key area that can make or break a sales team’s efficiency and effectiveness comes to a head around content.
Adobe found that a sales rep’s searching to find relevant content takes an average of 18 minutes. This is a huge time waster and drain on efficiency.
Additionally, time spent searching for relevant content means that reps give up and end up sending irrelevant or unpersonalized content to prospects, resulting in an ineffective sales process.
And when 65% of B2B companies make decisions based on content they receive around how your product or service will solve their pan, you’re missing sales opportunities.
12 Ways to Improve Sales Efficiency
If your business is struggling with sales efficiency, just know that you are not alone. Many business owners are making sales efficiency their #1 priority, and you can too.
Here are 12 ways to improve sales efficiency in your business.
1. Set Business Goals and KPIs
The first step in laying out your sales efficiency game plan is to get super clear about what your goals are and how you will measure success.
Are your sales reps expected to close a set # of sales per month? A certain amount per sale? Make sure those expectations are set from the beginning.
We highly recommend using the SMART goals method to set goals that are measurable and realistic.
For example, the Measurable acronym could be: increase sales by 17% by the end of the next quarter.
Once you are clear on what your goals are, and what key performance indicators (KPIs) will be used to measure success, make sure you track sales activity closely. Identify any bottlenecks and fix problems in a timely manner to avoid further inefficiency.
2. Identify Your Ideal Customer
50% of sales time is wasted on unproductive prospecting.
Creating a profile of your ideal customer will improve your close rate significantly. That’s because the best way to move a prospect to buy is by addressing every one of their needs and wants.
You can use sales intelligence tools like Spotio’s Lead Machine to pull data from 200+ data points to make sure you’re going after the right prospects who are ready and excited to learn about your offering.
Building your ideal customer avatar consists of three main components:
- WHO they are (demographics)
- WHERE they are (location)
- WHAT they want (pain points and needs)
Lockdown this information and you can pinpoint exactly what features and benefits of your product would appeal to them most.
Then your sales team can focus on pitching exactly what your potential customers want to hear without wasting breath on specs that won’t be of interest to them.
3. Create a Repeatable Sales Process
If you want your sales team to be efficient, then you must train outline a repeatable, consistent sales process. Having a go-to guide for qualifying leads, selling at the right moment, collaborating with the team, and other important sales tasks will only help them work better and faster.
The key steps in a sales process are:
- Preparation & Research. Know the scope of your product, what your ideal customer wants and needs, and what your company’s unique selling point is.
- Prospecting. This includes the search for potential customers with the goal of moving them down your sales funnel. This is where the ideal customer data comes into play to help you identify promising prospects.
- Needs Assessment. This is a way for your sales team to dig deeper into what the prospect needs and what issue(s) they are trying to solve. That way, they can custom-tailor a solution for them.
- Pitch & Presentation. This is where your sales rep communicates the unique value of your product to the customer. It’s best that your rep establishes trust and hones in on what benefits your potential customer is looking for. Then they present your product as the ideal solution.
- Objection Handling. The customer may have questions or concerns that need to be addressed. This is another opportunity to establish trust and communicate how you are different from your competitors.
- Closing. This is when the sale is made or the proposal is sent. Reps should pay attention to the details here so that all the proper paperwork is taken care of.
- Follow-Up. Referrals are the highest converting lead source. It’s worth it to follow-up with customers to encourage referrals and repeat business.
Creating a sales process and tailoring for each prospect can be rather time consuming. But with Autoplays, you can create automate outreach sequences tailored to each prospect and funnel stage to ensure no lead falls through the cracks.
Not only will creating a clear sales process ensure that the same procedure is followed at every stage, but it will help you identify holes in the process. If leads are dropping off right before the close, you will be able to see this issue and address it quickly.
4. Define Daily, Weekly and Monthly Sales Activities
Sales activities are controllable steps that sales reps can do day in day out, week after week to keep new leads flowing into the pipeline. Some examples include:
- Contacting new prospects
- Engaging with customers
- Pitching your solution
- Creating awareness on what you have to offer
- Assigning territories
- Route planning
Having insight into your key sales activities gives full visibility into sales productivity and overall sales performance, allowing managers to create a more efficient and effective sales process.
5. Align Sales and Marketing Teams
65% of sales reps say they can’t find content to send to prospects.
Often there can be miscommunication between your marketing and sales teams that can cause inefficiency.
That’s because most businesses see the traditional sales process like this:
Marketing hands leads over to the sales team and the sales team closes the leads.
Unfortunately, this method can lead to some major issues.
For example, a sales rep may pitch a product that was never marketed to the prospect. Or they may try to sell to someone who isn’t primed to buy.
In fact, only 35% of salespeople think that the marketing team knows what content they need, and only ⅓ of sales and marketing teams talk on a regular basis.
By aligning both teams, you improve communication and collaboration between teams, increasing your rate of conversions and reducing drop-offs in your sales funnel.
6. Train Your Sales Reps Effectively
82% of B2B decision-makers think sales reps are unprepared.
If your sales team isn’t trained properly, they will likely be inefficient. Some issues that can arise are sales reps wasting time and resources on approaches that don’t work, pitching to a customer before they are ready, or drawing out the sales process.
New hires should all go through in-depth training that instructs them on effective prospecting and selling. It should address any common questions that sales reps may have during the process, as well as tips on how to handle objections from customers.
Providing ongoing training will also help your team stay sharp and up-to-date on the latest selling techniques.
7. Assign Sales Territories Strategically
Image: screenshot of the SPOTIO territory management interface.
Strategic rep assignment is a method for avoiding redundancies in your sales process. That is, it ensures that no sales reps are selling to the same areas/leads at the same time.
We recommend assigning your top reps to the most lucrative territories to ensure a better close rate on those high-ticket offers. Check out our guide on Sales Territory Management for tips on how to create your own efficient rep assignment strategy.
8. Reduce Windshield Time
Driving from meeting to meeting is a huge factor on how efficient a rep will (or will not) be each day. Being able to plan and map routes ensures that reps are maximizing the amount of time they spend selling and reduce time spent on the road.
Route planning software is the answer to reducing the time it takes to plan routes and driving to each appointment.
- Cutdown windshield time
- Easily find the most efficient route to one or multiple meetings
- Map and plan your day in a single tap
9. Sell to Customer Needs
The research you conducted around your ideal client persona will tell you what issues your potential customers are struggling with, what they need, and what they want.
Understanding their needs and articulating how your product is the best solution to their needs is the surest way to win them over.
While your competitors are hitting on all the features of their products, you will be speaking directly to your target customer’s strongest pain points. If you are able to drive home the benefits, it will be a no-brainer buy for them and a straightforward sale for you.
10. Manage and Nurture Leads Effectively
Nurtured leads produce, on average, a 20% increase in sales opportunities versus non-nurtured leads. (DemandGen Report)
It’s always easier to sell to a “warm” lead – someone who is familiar with your brand and has been primed for the sale – than a “cold” one. That’s why it’s essential to have a lead nurturing process to warm up your prospects.
The best system for doing this is to use a centralized CRM or lead management system. This is software that allows your sales team to see where prospects are at in the sales cycle so that they can follow up with them in the right way at the right time.
A CRM tool will increase sales efficiency by:
- Letting your team know the best time to follow up
- Helping your team tailor communications to where prospects are at in the sales cycles
- Assigning priority to prospects that are further down the sales funnel
11. Work on the Basics
Sometimes the easiest and fastest way to improve sales efficiency is to simply brush up on the basics. No matter how long you have been in business or how precise your processes are, there is always room for improvement.
Consider new ways to find prospects, presents sales pitches, and extend follow-ups to fine-tune your sales process at every step. Don’t be afraid to look at your existing system from a different perspective.
12. Maximize Rep Productivity
A recent study found that sales reps spend less than 36% of their time on selling. That means that the rest of the time is spent on non-selling tasks like traveling, attending meetings, or checking email.
There are many handy tools that you and your team can use to maximize your time and efficiency. For example, this route planning software helps your team determine the most direct route to their destination.
Look at your task or project management system to identify areas where your team can be more efficient, allowing them more time to focus on selling.
5 Sales Efficiency Metrics To Start Tracking
1. Customer Acquisition Cost & Customer Lifetime Value
CAC = Total Spent on Marketing / # of New Customers During a Period
Cost of acquisition, or CAC, is an essential metric for understanding efficiency as it lets you know if your resources are being allocated in the best way.
Next, you’ll want to compare your CAC to your LTV. The closer these two numbers are, the more unsustainable your sales process is. It also goes without saying that your CAC shouldn’t exceed your LTV.
A good LTV:CAC ratio benchmark is 3:1
LTV = Avg. Value of Sales x # of Sales x Contract Length
CLV = LTV x Profit Margin
Tracking your average customer acquisition cost over time also helps your company make smart decisions. For example, you may be able to gain more budget for sales activities or new hires if you’re able to show your CFO the positive financial impact of the team.
2. Lead Response Time
How long does it take for sales reps to respond to new leads? Efficient follow-up can be crucial to a sale, and it’s critical to make sure your sales team is prioritizing responses.
If you find that certain sales reps are falling behind in response time, it may be time for retraining. A lead response time that gets longer over time can also be a signal that the workload per sales rep is too much, and you may need to hire additional help.
3. Number of Sales Calls Per Rep
While analyzing sales efficiency on a team-wide basis is useful, it only tells a partial story. Tracking sales metrics such as the number of sales calls or visits per week per team member is critical.
Taking into account pre-call research, the actual call, and post-call CRM updates, you should allow an average of 7.5 minutes for each cold call.
60 minutes / 7.5 minutes per call = 8 cold calls per hour.
This helps you not only assess performance, but it also helps identify team member strengths and weaknesses.
4. Frequency of Customer Contact
Building trust with the prospect is an important aspect of an optimized sales process. By tracking the rate of client outreach, you can make sure your team is putting in the right amount of time to create a long-lasting relationship.
You can also use this data to understand what sales tactics work best with your customers.You may find that more touch points convert better for certain customer personas.
5. Sales Efficiency “Magic Number”
(Current Quarter’s Revenue – Previous Quarter’s Revenue) x 4 / Previous Quarter’s Sales Spend
Did we save the best metric for last? Maybe.
A calculation referred to as a “magic number” is certainly worth investigating. This calculation shows you how much revenue growth you have in a year compared to resource inputs. Whereas the CAC equation gives you a dollar amount spent for each new customer, this “magic number” tells you how fast you recoup sales costs.
If your “magic number” is below 0.5, you don’t have a sustainable sales process. On the other hand, a ratio higher than one could suggest you aren’t investing enough in sales. While some of the other metrics on the list can be calculated less frequently, you can refer to this magic number month over month.
A very low “magic number” indicates that your sales team is operating efficiently, and you can turn your attention to improving effectiveness. However, if you have a high “magic number” you’ll want to assess sales team performance on individual efficiency metrics, such as number of sales calls per rep.
Boost Your Sales Efficiency
Sales efficiency is the #1 priority for businesses that want to close more sales and get the best ROI for their sales investment.
Close rate alone is not an accurate measure of sales success; there are many metrics to track and steps to take along the way to ensure that your sales productivity is at it’s highest.
Is your sales team efficient?
See how SPOTIO can work with your sales team to increase efficiency, productivity, and more by requesting a demo today.
SPOTIO is the #1 field sales engagement and performance management software that will increase revenue, maximize profitability, and boost sales productivity.
Want to see a product demonstration? Click here to see how SPOTIO can take your sales game to the next level.