Categories Articles, Sales and Marketing
0

Sales leaders are more in the spotlight than ever. As belts tighten across companies, every department is expected to find efficiencies, and sales is no exception. Investors and board members will be expecting their Sales VPs to bring in more revenue with less in the coming months, combining growth with improving unit economics.

As entrepreneur and partner at Kapor Capital Mitch Kapor puts it, it’s time for the Watney Rule, after Mark Watney from The Martian, to go into effect: “Survival depends on achieving self-sufficiency.” In other words, survive with what you have.

Survival depends on achieving self-sufficiency.

Mitch Kapor, Kapor Capital.

Increased cash flows and an emphasis on strong unit economics are coming to the fore where growth has ruled for the last few years.

For sales leaders this means optimization—making their team more efficient, getting more revenue out of each process, each rep, and each deal. To do this, their focus has to go beyond the headline numbers like total revenue and total bookings, and drill down into their team’s specific KPIs. This way they can:

  1. Set the right goals for their team to increase efficiency.
  2. Report to their investors and board about what exactly is happening at the granular level.

By setting goals linked to key sales metrics, sales leaders give their teams specific targets to hit and actionable advice on where to optimize. By giving investors and board members more than just headline numbers, they can show them exactly where the profitability is going to come from in the company, and how sales is turning their investments into 3x,4x, or 5x returns.

Here is how you can use specific sales KPIs to analyze how different areas of sales—the process, the people, the deals—are progressing and where you can optimize each to make them more efficient.

3 Ways To Get More With Less In Your Sales Process

1. Optimize Sales Cycle Length

By finding ways to reduce your sales cycle length you have the chance to make more revenue in less time, which is the epitome of efficiency.

However, you can’t optimize your cycle until you have a deep understanding of its constituent parts. Therefore, the starting point for any analysis of your sales cycle has to be breaking it down by stage and identifying bottlenecks. From this type of study, you can easily see where you’re being held up.

For instance, it could be that you’re spending most of your time in the evaluation stage with prospects, where they are considering their options and you’re trying to show them that your product is the fit.

If so, then identifying ways you can move them through this stage quicker can drastically shorten your sales cycle. This might be something as simple as organizing demos quicker or improving your talk track around competitors.

If it’s more difficult to identify where these bottlenecks are occurring, you can also split your sales cycle down further by rep and look for where individuals are spending most of their time. Different reps are likely to have unique issues at each stage, and knowing what they are means you can coach each one on their problem areas. One might have trouble moving qualified leads to evaluation, whereas another might struggle when dealing with buyers in the procurement phase.

Each rep is different, and the more you drill down into what’s holding them up, the easier it is to find the marginal gains that really help increase efficiency within an organization.

Setting a goal of shortening the sales cycle just a few days can have big effects. If we look at the longest sales cycles in the chart below, we see what a difference a few days can make. In July 2015 the sales cycle was 52 days long, whereas in May 2015 it was just 22 days long. Therefore, you were moving ~2.5 more prospects through the cycle in May as 2 months later. But the difference isn’t always so stark. Even cutting a week off the longest cycle in July would be a 14% efficiency gain.

Sales Cycle

Sales Cycle (1)

Over the course of a year this would mean you could fit one extra cycle in per sales rep. For 10 reps and an average deal size of $100,000, this would be an extra $1 million just for cutting a few days from your sales cycle.

2. Optimize Sales Rep Win Rates

As the atomic unit of your department, finding ways to increase efficiency per sales rep is paramount to increasing efficiency across the board. The first avenue you should look at for this is rep’s individual win rates. This is how many deals they closed-won over how many they closed in total (closed-won plus closed-lost).

Win Rate by Rep

employee win rate

This chart allows you to easily see how efficient your sales reps are at closing their deals, and increasing this rate will ultimately get you more revenue per employee. It has 2 additional efficiency benefits:

  • Lower customer acquisition costs (CAC): By closing more deals for the same CAC spend, you’re effectively reducing this investment and getting more for your money.
  • Reduced overhead: Depending on your compensation package and how you handle accelerators, increasing the win rate of individual sales rep might significantly reduce the cost of each extra sale by that rep.

When you tell them to increase their win rate, most sales reps will look to try and increase the number of deals they are closing at the bottom of the funnel. Though this is ultimately where they will increase their win rate, they actually should focus on finding whatever the leakiest part of their funnel is in order to optimize their win rates.

Conversion Rates by Stage

Activity_salesfunnel (1)

In this example, the overall win rate is 22%, but the reps are already remarkably efficient in the later stages of the funnel. They convert 79% of all prospects from “Buying Procurement” to “Fulfill”, and 88% from “Fulfill” to “Deal.” Because this part of the funnel is already optimized, and because the numbers included are low, a 10 percentage point increase in this last conversion only leads to a 2.5% increase in overall win rate.

It is in those earlier stages that they are floundering. If we set a goal to increase the conversion from “Qualified” to “Evaluating” by the same 10 percentage points, we see a 4% increase in win rate. Additionally, increasing conversions earlier in the funnel is likely more economical than moving them that final step.

3. Optimize Bookings Per Sales Rep

Increasing deal efficiency means bringing in more revenue for every deal a sales rep closes. Optimizing this number means increasing the individual productivity of your reps.

In this case, optimizing for this could mean reducing your efficiency elsewhere. For instance, larger deals could take longer to close, which would increase your sales cycle, and be more difficult to close, which would decrease your win rate. But closing fewer, larger deals can overcome these issues and increase both bookings per rep and overall efficiency.

Win Rate by Rep

employees booked

Here, Joe Smith is far more efficient than Andrea Matlin. Though Joe’s total value of closed deals is lower than Andrea’s, he has achieved this in far fewer deals. Joe’s bookings per deal is ~25k, whereas Andrea’s bookings per deal is ~5k, a 5x efficiency increase for Joe.

Choosing to go upmarket and attract larger deals requires a more overall change in strategy and goals in the entire company. Individual sales reps need to be looking for better qualified leads further down in the funnel and investing time in identifying the prospects who could turn into larger deals.

For a sales leader, this means being willing to give your reps the time to cultivate these deals, and setting their goals accordingly, looking for the maximum revenue over time for your reps.

 

Even if not driven by your board, these are the type of efficiency goals any good sales leader should be setting. They get more from your process and individuals for exactly the same investment, leading to a more productive team that is going to go on and make more and more money.

Efficiency is what SaaS is going to be about in 2016 and beyond, and sales should lead the way. By diving into your analytics, you can find these and more optimizations in your sales process and sales team, making you more revenue for less investment of both money and time.

Sales-Benchmarks-Interactive-CTA

Interactive

Sales Benchmarks

See how your company stacks up against others in your industry by exploring our filterable Sales Performance Benchmarks.

,
Andrew Tate
Andrew Tate is a UK-born, US-based writer. He spent 10 years working as a scientist in labs around the world and now specializes in using data to tell stories.
Recommended Posts

Start typing and press Enter to search