Sales in the present age is a different science altogether. N number of metrics to measure, processes to streamline, and numerable calibrations along the way to attain a set goal of sales productivity, efficiency, and effectiveness.
Ahh! too many terms there!
If sales becoming more complex day by day wasn’t enough already, we have these terms adding up to the confusion and making our jobs more difficult.
What to measure first?
What comes first?
How to prioritize and de-prioritize?
Questions like these can make any sales team frustrated.
The first step to reducing confusion is defining sales productivity, efficiency, and effectiveness.
So let’s have a more granular understanding of these terms and the things that follow.
What is sales productivity?
In simple terms sales productivity refers to the number of deals your sales reps close for the number of hours invested in selling. Alternatively, it can also be in the terms of revenue hitting your account.
However, a sales rep is not always selling. They are doing numerous other activities simultaneously throughout their workday. Further, output differs from rep to rep.
It is here that sales efficiency and sales effectiveness come into the picture.
As mentioned above, a sales rep is doing numerous tasks other than selling. These can be, entering data in the CRM, creating meeting repositories, updating lead status, and other admin tasks.
How a rep prioritizes these tasks to spend the least time on low-impact tasks is termed sales efficiency.
Sales effectiveness, on the other hand, is not about time and task allocation but is all about how excellently a rep utilizes the available resources to accomplish the set goals. It is dependent on reps’ strengths and varies among reps.
Now, as we know the nuances of the meanings, we can see that sales productivity depends on sales efficiency and effectiveness.
The relationship between the three can be better understood via the illustration below.
Why measure sales productivity?
It is a no-brainer!
To improve anything, one must first identify and measure the lack.
Therefore if you want to improve the productivity of your sales teams, it is essential to first measure existing sales productivity.
Only then can you calibrate and optimize your sales processes.
Further, measuring sales productivity is essential to coaching your teams the right way.
Highly productive sales reps bring the most revenue. They close more deals, make long-lasting relationships, and drive the majority of the sales teams.
But why only a handful of reps are the most productive?
What about others?
And is your business’s maximum sales productivity contributed by high performers?
Then is your sales productivity measurement truly correct?
Most sales teams consist of a few high performers, and poor performers or outliers. The majority of reps are average performers. A bell curve safely describes the composition of most of the sales teams.
Identifying and measuring average performers is tricky but equally essential to measuring actual sales productivity.
High performers’ performance has to be isolated and replicated throughout the team to increase overall sales productivity.
How to measure sales productivity?
There cannot be a ‘one size fits all’ approach to measure sales productivity. Sales goals differ and so do sales team structures. But there can be some basic areas that one can take as a start to measure sales productivity.
Chart out sales processes
Sales processes differ from company to company. They depend on the nature of your business and the type of audience you interact with.
Largely following stages make up the journey from lead identification to signing of the contract
- Lead Prospecting
- Lead Qualification
- Product Demo
- Nurturing and Relationship Building
- Proposal and Negotiations
- Closing Deals
- Customer Onboarding
It is essential to chart out your sales process and analyze each segment. Evaluate time spent on each stage and the output received after investing time.
Is the output justified for reps’ efforts?
Once you answer the above question for each stage, you will be able to identify loopholes and leakages that give way to reduced sales productivity.
Also, it can help you know how much time is actually spent in selling. Are they spending adequate time in selling activities or doing other tasks? Astonishingly, only a fraction of a day’s time is spent in selling.
Various sources have also cited in the past that only 37% of time is spent in selling.
Identify high, poor, and average performers
Sales teams comprise of reps and all reps’ combined productivity largely translates to sales productivity overall
Therefore, another way to measure productivity is how many reps are high performers and how many are poor performers.
However high performers and low performers are outliers and can be identified with the available data.
But what about average performers?
It is equally essential to identify average performers and do the needful to increase productivity of each rep in order to augment the overall sales productivity.
Evaluate meeting quality
No doubt we all want our sales reps to spend most of the time taking calls but it is essential to measure meeting quality as well.
How many meetings are going well?
How many meetings have a high chance of conversion?
Do particular reps convert maximum meetings?
Answering questions like these can provide you with crucial insights. If only a few meetings convert despite high meetings taking place then this outlines issues with prospecting.
Similarly, if only particular reps convert maximum meetings every time then this can mean that your other team members need more training and coaching to increase sales efficiency and effectiveness.
How to pick the right sales productivity metrics?
As we mentioned above, sales processes differ from company to company, so it’s essential to map out your sales processes first and then zero in on the metrics most important to you.
But also, there are a few metrics that companies usually track. The no. of meetings held, clients converted, and quota achieved.
These metrics worked when sales processes were straightforward but as sales become more complex, these metrics fall short when showcasing the right picture. Also, usually, companies look up to CRM data when measuring productivity.
CRM data can be useful in measuring metrics however CRMs cannot help improve your sales productivity.
Therefore, measuring metrics is anyhow the first step toward optimizing sales productivity but resting all your hopes on CRM alone might not be a good idea. You might need other tools that could help you do that. Explore how Goodmeetings can help you improve your sales productivity
Coming back to metrics for now, here is a listicle of 10 metrics that you could measure and analyze to gauge your overall sales productivity.
10 sales productivity metrics you must measure
Conversion rate can be a great first start that provides you with a larger picture.
How many leads of the total generated leads converted that month or quarter?
It can be even more beneficial if you calculate it for each stage of your sales funnel. This can help you isolate sales stage performance and optimize accordingly.
Evaluating conversion rate stage-wise can also help you gauge the lead quality for each individual stage.
For eg., if you generate 100 leads via cold calling but only 3 show up for the demo then that might mean a problem with lead quality.
So maybe you must revisit the type of leads your calling team is targeting.
Measuring total generated revenue is again a good start towards measuring sales productivity.
It helps you evaluate your ROI for the investment done in your sales teams.
Companies usually measure Annual Recurring Revenue (ARR) and Monthly Recurring Revenue(MRR).
ARR is also a great metric to get an insight into your reps’ sustainable performance.
Average Revenue Per Account
ARPA is a key metric you must measure to optimize your sales processes.
ARPA is all about how much revenue a company can make via a single user or account.
It is an intelligent way to identify which customers are bringing in the most revenue and where to focus maximum relationship building.
For eg., if insurance service providers are with the highest ARPA, then you may want to strategize on how to retain them for longer.
How many deals were won over a given period of time? That is the win rate.
It can be a helpful metric to measure your sales teams’ performance collectively.
Usually, industry metrics define winning 1 deal out of 3 as a significant success. If you are less than that, maybe it’s time to revisit your sales processes.
It can be a helpful metric to measure your sales teams’ performance collectively.
It refers to the average time usually taken by leads to move from opportunity to the closed stage.
Simply, the amount of time it took to close the deal.
Sales length can also help you evaluate sales teams’ efficiency to a certain degree. If sales cycles are longer than usual, you can isolate the reps with the longest sales length and analyze them minutely.
Ramp up time
Comparatively new to the metrics listicle, but it makes sense to have this metric.
Ramp-up time is the time a salesperson takes to attain a 100 percent quota.
For example, if your sales rep takes 6 months to attain 100 percent quota attainment, then your company’s ramp-up time is 6 months.
Many CRMs report this metric, however, getting to an absolute formula can be a little tedious.
Quota attainment is subjective. Some may attain sooner, some may take longer than anticipated. A large contributing factor is the experience of the salesperson.
Gladly, Kim Cotzias in this leveleleven article defines a formula that takes into account a salesperson’s experience.
Here, the training period refers to days spent on training. Experience is calculated based on the prior experience a new hire is bringing.
If your new hire has significant experience in years before, only 14 to 21 days can be added, but if the new hire is a newbie in the field, a more realistic number like 60 days can be added.
Many companies do not have a rigorous training module and framework. However, it is essential to have one to increase the overall productivity of your sales team. So this might be the cue to have a framework in place and get started with this useful metric.
Year over year growth
This metric helps evaluate year-wise growth. It is a good metric to gauge your performance over the years. Many companies calculate quarter-over-quarter growth as well, and it depends on your individual needs.
If you are an early-stage company, then going for the quarter over quarter makes sense as you need to scale up rapidly.
A simple formula to calculate YOY
The same formula applies for quarter-over-quarter and month-over-month growth.
The rate at which your company is growing becomes more relevant when you compare with other similar companies. Further, how good your growth rate depends largely on revenue.
Percentage of revenue from new accounts vs. existing accounts
Percentage of revenue from new accounts vs. existing accounts
- How much revenue did new accounts contribute?
- Are existing accounts growing in ticket size?
This metric can help answer such questions.
This metric can also provide you with a cue on your team’s performance and judge which efforts are bearing the most fruits.
For eg., if new accounts are adding most of the revenue, then your sales team is doing a great job. Similarly, if the metric outlines that revenue share from existing clients is stagnant or decreasing, you may want to take a closer look at your customer success and account management teams.
Low shares from existing clients might highlight gaps in upselling and relationship-building efforts.
The lifetime value of a customer (LTV)
This metric outlines the total revenue a customer is expected to bring in throughout their total contract.
If your ACV is more or less the same as LTV, then there might be something a miss.
Further, to increase LTV either increase contract value or retention years. Increasing retention years across customers also provide you stability and slowly builds credibility in the market.
It is an important metric as it also outlines sales efficiency to some extent. Any company would want to know how many reps are attaining their quotas. If the number is significantly low, then this might highlight gaps in training, coaching, and hiring.
When we talk about quota attainment it is also important to be aware of the quota time
frame. Should the quota be monthly or quarterly?
Generally it is advised to keep quota period >= sales cycle.
For ex., if your sales cycle length is 90 days, keep the quota time frame greater than a quarter.
Identify before measuring and create a winning team
Sales productivity metrics can differ from company to company. Though measuring metrics is one of the essential steps you must take, however, the issue comes when you track too many of them without first identifying the ones most crucial to you and your business.
The metrics listed above are a few to help you get started and can help you get a more minute look.
When you identify the metrics most useful to you and your business, you must also look at ways of improving your sales team’s efficiency and effectiveness collectively.
Sales productivity, after all, as highlighted in the very beginning is dependent on these, and your sales teams are the growth engine.
Therefore tracking sales team performance is equally essential for sales productivity.
A few metrics or numbers that can outline sales performance.
- Time spent on selling
- Time spent on administrative tasks
- Actions did during call/client meetings
- Demo quality
- Follow-ups scheduled
And many more.
There are no definite formulas that can help measure the above however capturing customer interaction data and analyzing it can give you great insights.
The Goodmeetings platform allows you to capture all the actions done during a meeting. It comes in handy when you want to know the avg time a rep spends selling during the call.
To know more, book a no strings attached demo!
Having a productive sales team is essential, and it starts with identifying, prioritizing, and deprioritizing.
So choose a strategy that works the best for you!
Frequently Asked Questions
Should you measure sales performance weekly, monthly or year on year?
It depends largely on you and your company’s needs. If you have just started, monthly makes sense as you can identify loopholes fast and optimize your training accordingly. Moving to quarterly from monthly eventually makes a lot of sense in the initial years.
Why are sales metrics important
They help you measure and gauge sales performance and productivity. It is only when you start measuring that you can optimize your sales processes to achieve a higher output.
How do I monitor daily sales?
Measuring sales daily can be a good way to optimize your sales processes in the longer run. It can also help you know exactly how much time is spent across stages. To calculate daily sales make sure you have an aligned CRM as part of your sales stack.
What metrics do you track daily?
Following metrics can be measured to track daily sales?
- Total meetings held
- Total opportunities created
- Top lead sources
- Deals closed
- Number of leads at different stages of the pipeline
How do you measure sales efficiency?
Sales efficiency can be calculated by measuring the ROI received for every dollar spent on sales and marketing.
How do you measure sales effectiveness?
Sales effectiveness is largely dependent on individual sales reps. Therefore sales effectiveness can be calculated by measuring the avg output for every sales rep.
What are revenue metrics?
Revenue metrics help you keep a tab on your overall business health. They also serve great when you want to check your ROI for the resources invested in selling.
The following can be the revenue metrics to start with
- Total revenue
- Average Revenue Per Account (ARPA)
- Percentage of revenue new vs. existing clients
- The lifetime value of a customer
- Year over Year growth (YoY)
Why is productivity important in sales
Sales productivity is essential to meet your revenue goals. It is largely dependent on efficiency and effectiveness. Increasing the efficiency of your sales teams is the easiest way to increase overall sales productivity.
How can I improve my sales performance?
Sales performance improves over time, however, the following tips can come in handy.
- Spend more time selling and less on admin tasks
- Automate tasks wherever possible
- Choose the right tool with a minimum learning curve
- Invest in sales enablement
- Make data-driven decisions
- Prioritize tasks
- Focus on customer experience
How is sales performance measured?
Metrics can come in handy when measuring sales performance. The following metrics are largely used by companies to assess sales performance.
- Time spent on selling
- Conversion rate
- Winning rate
- Meetings scheduled
- Demonstrations done
- Tools used