The following measurements can help you to know exactly where you stand and what you need to do to increase your sales productivity.
Measuring sales productivity can be a tricky business. There’s not one single formula that all businesses use to measure their sales productivity, and a lot of factors can come into play. For instance, markets change, and competitors enter and exit the fray, and this factor alone can have a huge impact on the way your company measures its sales productivity.
Even though it can be difficult, it’s important to your company, your sales reps, and the morale and success of your team that you develop a way to measure your sales productivity. The following measurements can help you to know exactly where you stand and what you need to do to increase your sales productivity.
One important measurement that helps you to see the overall success of your productivity is your conversion rate: how many prospects your sales reps convert into customers. Your overall conversion rate can help you to make decisions about marketing, which products or services to highlight, and areas of improvement. You can also look at the personal conversion rates of individual sales reps to find out which reps are having the most success. By identifying successful strategies in individual sales reps, you improve you training and strengthen your entire sales team.
Another measure of sales productivity is the cost incurred during customer acquisition. If you see from this measurement that you’re spending an excessive amount of money in gaining certain kinds of customers, you might determine to focus on a different market. Determine your cost by adding up how much you spent in acquiring a customer. If you find that you’re spending $1,000 to acquire sales worth just $2,000, you might determine that such a sale isn’t profitable in the long run, even though you’re bringing in business.
One problem area for measuring sales productivity is changing market conditions. If you’re experiencing a highly competitive and fast-growing market, you’ll need your sales team to bring in more profit (raise their conversion rates) while spending less money (lower customer acquisition costs). Another step you can take is to allow your sales team to spend more time in the field because they’ll need to meet with customers to negotiate and re-negotiate terms and agreements so you can keep more of your existing customers.
A great way to measure the sales productivity of your team is to add up all costs, including salaries, benefits, commissions, and perks. Next, calculate the revenue brought in by that sales force. Divide the revenue by the sales costs to get a ratio of revenue to cost. Your ratio should look something like 2-to-1 or 3-to-1. This ratio gives you a pretty good idea of your team’s sales productivity. After you have the big picture, you can calculate each sales rep’s revenue and expenses to find out which reps are the most profitable.
Not only are these measures helpful in guiding your future plans and strategies, but they also give you concrete numbers on which to base goals. When you have measurable goals to give to your sales team and individual sales reps, you are much more likely to improve your success. Concrete, measurable goals give your team something to work toward, and you can celebrate their success as they improve their performance.
Rhys is a tenacious, top performing Senior Sales Recruiter with 15+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and daughters, BBQing on a hot summer day and tropical vacations.