Every sales operation has its own preferred KPIs. But for those that don’t currently track sales efficiency, you ought to think about doing so.
Efficiency is the ideal in just about every business and practical scenario. You want to ensure your reps are making meaningful use of the time and resources they have to drive deals and client engagement.
Sales efficiency is a valuable metric because it provides insight into team and individual performance in the context of actual revenue created. And depending on your number, consulting the sales efficiency metric may expose your operations as inefficient — which in turn underscore opportunities for deploying a sales enablement strategy to boost sales efficiency.
Let’s take a closer look at what sales efficiency is, how to measure it and what steps you can take to improve.
What is sales efficiency?
Sales efficiency is a metric that allows managers to understand the direct revenue impact of each dollar spent on expenses or investment.
To calculate sales efficiency, simply add together your sales and marketing costs for a given time period. Then divide the amount of new business revenue generated in that same time period by the costs.
Say a sales operation generates $100,000 in a quarter after spending $85,000 on sales and marketing: 100,000 / 85,000 is equal to roughly 1.2. If your sales efficiency number is above 1, that’s a positive sign and means your sales team is creating more revenue with each dollar spent. On the other hand, if the score is below 1, that indicates your team is having trouble selling efficiently with the resources and support at hand.
You can use this formula to gauge performance at a team-wide level, as well as for each individual. While it might be harder to parse out expenses per rep, doing so could provide even greater insight into sales efficiency.
Why is sales efficiency important to track?
Sales efficiency is as straightforward a metric as they come. Plus, it provides real transparency into the direct relationship between sales performance and revenue generated. It’s not an overly complex KPI, and thus has great value as a starting point for further analysis of your sales operation — particularly your sales enablement efforts.
Enablement is all about maximizing efficiency, so your sales efficiency score will give you a good idea of how successful your program is. The less time that a rep spends on manual tasks, the more time they have to drive the sales cycle, engage leads, nurture relationships, foster high-quality experiences and create revenue.
An investment in sales enablement can help push that sales efficiency metric up. When a sales enablement program is humming along, reps are consistently given all the resources they need upfront. This lets them focus on selling. Comparably, without a sales enablement strategy, various inefficiencies may crop up in your sales operation, from lack of updated content to marketing misalignment and inefficient onboarding that leaves skills gaps in the sales team.
However, sales efficiency is not a perfect metric. While it’s incredibly useful, it has some blind spots. For instance, a low sales efficiency number might not be a red flag for a burgeoning business. After all, you need to spend money to make money, and companies regularly operate at a loss during growth stages, which would drag down sales efficiency.
Additionally, sales efficiency captures new revenue, not revenue from old sources. So, if your team is prolific at upselling and cross-selling, that effectiveness may not be accurately reflected in a basic sales efficiency metric.
4 ways to improve sales efficiency
Calculated your sales efficiency and not satisfied? Consider some of these tips for boosting your number:
- Prioritize sales enablement: Efficiency and enablement go hand-in-hand. If you ramp up your sales enablement efforts, sales efficiency will climb.
- Lay the groundwork in onboarding: Effective salespeople are born, but efficient reps are made. Make sure to place a focus on efficiency in your training and onboarding processes. You can bring in top performers to share their best, most efficient practices with new hires, or have trainees complete self-directed learning on sales efficiency.
- Deploy personalized coaching: It’s likely you have some reps who are more efficient than others. That’s a fixable problem. The solution is to deliver personalized coaching to individual reps. Say one salesperson isn’t so good with time management, while the other doesn’t collaborate with marketing enough. A blanket coaching approach won’t solve your efficiency issue, but a strategy born of enablement will succeed.
- Conduct an audit of your content library: Content is fundamental to the sales process, but too often reps waste time looking for the best assets at the right times. An audit of your content library may turn up duplicates, missing assets or other inefficiencies that tend to fly under the radar. An optimized content library will support better sales efficiency.
How Showpad can help maximize your sales efficiency
There is no modern, efficient sales operation that doesn’t rely on technology. However, a cobbled-together network of different sales enablement tools may be actively damaging your inefficiency. If your solutions can’t work together, how can you expect sales and marketing to do the same?
Showpad is an all-in-one enablement platform that you can leverage throughout the entirety of your sales operations, from content to coaching and training. Showpad unifies your sales enablement efforts and prepares your reps with the skills and content they need to sell efficiently.
Contact us today to learn more or to request a product demo.