In a recent blog post, we covered how to measure the efficiency of your salespeople. Knowing this information is critical to ensure you are adequately resourced to achieve your goals. In addition, knowing this data provides a framework for measuring the impact of your sales initiatives. By measuring the change in your sales efficiency ramps, you can calculate an expected monetary benefit and compare it to the investments you make in things like sales training, improved recruiting, reduced turnover, enhanced sales tools, or improved marketing qualified leads.
Impact of Improved Sales Efficiency
The goal of this article is to outline an example of the impact of an improved sales efficiency ramp has in terms of increased orders and revenue. To demonstrate this we have used the same model from our previous article which has two sales positions. The Large Enterprise Account Executive with a quota of $1.5M and an Enterprise Account Executive with a quota of $800K. In both cases, the quota is 100% subscription services and the revenue is realized over a 12 month period upon order receipt.
The original sales efficiency ramp in our model for each sales position is outlined in the table below. In this example, we assume that we can increase our sales performance in quarters two, three, and four by 10%. These increased sales efficiency ramps are designated in the table as “Revised”. For example, in the case of an Enterprise AE, if the goal in quarter two for a fully effective person is $150K, then we expect a $15K uplift from the Revised model: Original model $60K ($150K x 40%) in orders vs. $75K ($150K x 50%) in orders from the Revised model.
Using the Original and the Revised sales efficiency expectations we compare orders and sales expectations over a two-year period for each sales position. The following table outlines the expected order value and sales value for 2017 and 2018 for each sales position and sales efficiency assumption.
Large Enterprise AE
Assuming a start date of January 1st, 2017, and an improvement in sales efficiency of 10% in quarters two, three, and four, the total orders in 2017 increase by $120K (+21%). The orders in 2018 remain the same because the salesperson in both examples is at 90% for the full year. Based on the monthly amortization of orders, the increase in 2017 sales is $43K (+25%) and is $77K (+8%) in 2018. The increase in sales over both years is equal to the 2017 increased orders, $120K, because those orders fully amortize over the two-year period.
Assuming a start date of January 1st, 2017, and an improvement in sales efficiency of 10% in quarters two, three, and four, the total orders in 2017 increase by $64K (+15%). The orders in 2018 remain the same because the salesperson in both examples is at 90% for the full year. Based on the monthly amortization of orders, the increase in 2017 sales is $23K (+15%) and is $41K (+6%) in 2018. The increase in sales over both years is equal to the 2017 increased orders, $64K, those orders fully amortize over the two-year period.
What to Conclude from this Data?
- For a relatively small improvement in your sales efficiency, you can generate a significant improvement in first-year orders and realize a two-year benefit by increased sales.
- Targeting improvements in sales positions with the slowest sales efficiency ramps and largest order targets will produce the most benefit.
- The benefit of improving your sales efficiency is significant! As demonstrated in this example, you can realize $64K – $120K in first-year order benefit as well as a $23K to $43K increase in first-year sales. Additionally, you can realize a second-year sales benefit of $41K to $77K.
- You should consider investing up to the first-year sales increase in onboarding enhancements to improve sales efficiency. Possible areas to invest in are sales training, improved recruiting, reduced turnover, enhanced sales tools, or improved marketing qualified leads.
Tracking your salespeople’s sales efficiency ramps over time is critical to achieving your future order and revenue goals. It is also critical because it allows you to size your investment in improved onboarding methods and provides a foundation for comparison which ensures those investments produce the expected results. Lastly, as you evaluate sales automation platforms, you should consider their capability in automating these calculations. It should track sales efficiencies over all of your sales positions and should leverage optimization to implement your sales efficiencies as part of your most cost-effective plan
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With over a decade of experience with advanced technologies, Pete leads both the Sales and Marketing teams at ORM Technologies. Previously, as the VP of Engineering, he led the technical development of ORM's advanced analytics and optimization solutions.
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