In a perfect world, your sales team could close more valuable deals in less time. While a highly productive field sales team is possible to achieve, there are a few variables you need to track and improve to reach this goal.
What is Sales Efficiency?
Sales Efficiency is all about using your resources, including your sales team’s time, in the most impactful way. On the other hand, sales effectiveness is measuring how well those efforts convert. It may help to think about sales efficiency output in terms of quantity and sales effectiveness as an output of quality.
5 Sales Efficiency Metrics to Start Tracking
The goal of a sales team is to be selling for as many hours in their working day as possible. With the metrics below you can learn just how efficient your current sales process is.
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.
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.
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.
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.
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.
If your current sales efficiency is not where you’d like it to be, don’t worry. There are ways to improve efficiency, including cutting down on time spent on administrative work. After all, less time spent on non-selling tasks frees up space in the daily schedule for high-value activities.
Want to learn more? Check out our guide to boosting sales efficiency.
Questions or comments? Contact SPOTIO at firstname.lastname@example.org or comment below.
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