Sales Efficiency – 5 Ways To Improve It
It’s safe to assume almost everyone has heard of the phrase “work smarter, not harder” before. As with most valuable lessons in life, this is easier said than done. The daily struggle to be as efficient as possible. In B2B sales, sales efficiency is crucial if you’re looking to stand out amongst other sales managers. Sales teams are under pressure to achieve targets, leading to panic and confusion on what sales process will bring in the most revenue.
The way “sales efficiency” is defined varies greatly depending on your industry, company size, and specific
A VP for a Saas lender will look at day-to-day sales efficiency differently than a regional manager working in steel manufacturing. The sales efficiency metrics are entirely different.
What is Sales Efficiency?
Sales efficiency is the ability of a sales team to maximize results with minimal resources. Look at your business through the lens of current processes of sales and marketing, metrics, and business costs. What are the indicators of profitability? How do you build a repeatable sales process focused on revenue and sales efficiency? In this blog post, we will explore five ways to increase sales efficiency in B2B sales operations. As we said, it’s easier said than done.
Formulas to help understand and calculate your sales efficiency:
- Take all of your marketing and sales expenses
- Sales leadership, reps, marketing, and sales software expenses, etc.
- Divide that cost by the total revenue generated
So, let’s hypothetically say your team generates $2M Of net-new and expansion revenue in 2023, but all costs for sales and marketing add up to $1.5M. Let’s calculate your sales efficiency number.
You then have a sales efficiency ratio of 1.3 ($2M/1.5M). Naturally, you want your ratio to be higher. If you run through this exercise and your ratio is under 1, there needs to be a gut check on which sales efficiency metrics need to be improved (cost of your team, bloated tech stack, poor marketing, etc.) The goal is to have a high sales efficiency ratio, and 3 or above is tremendous.
I. Prioritize and Qualify leads
Prioritizing and qualifying leads is one of the most effective ways to increase sales efficiency.
As businesses grow, so does their customer base. To ensure sales efficiency and effectiveness, as well as increased revenue, sales, and marketing departments must prioritize and qualify leads to ensure they are investing their resources in the most beneficial opportunities.
When we say prioritize, we essentially mean organizing every lead you get into a tier 1, 2, or 3. It seems simple, but it’s a sales best practice that many don’t, well, practice. Sales activities should correlate with the prioritization and the source of a lead.
The best way to tier leads is to understand the key characteristics of your ICP. Look at your closed-won opportunities for the past fiscal year. What roles were typically involved in the sales process? What specific industries make up these top deals? When you’re able to define your ICP, it becomes much easier to tier accounts and any leads that come through the door. Part of sales efficiency is understanding what leads will generate the most revenue. Real sales success begins with a strong foundation of converting as many leads as possible.
Generally, leads fall into three categories: best-fit, warm, and cold. This could also be defined as tier 1, 2, and 3.
A tier 1 lead is someone who fits your ICP and is willing to buy yesterday. These leads should have large up-sell potential as well, especially if you’re a Saas business. The most effective companies grow the most from their existing customer base via expansion. Sales enablement and product onboarding are crucial when tier 1 leads are closed-won. Increasing sales efficiency will lead to more closed-won tier 1 accounts. There’s a good chance these are direct referrals or people who raise their hands on your website. the sales cycle should be shorter, and your response time to set meetings for these leads needs to be within minutes ideally. These leads should fit the profile of companies that spend the most money with you, have the lowest CAC ratio (customer acquisition cost), and are most likely to grow and expand with you over time.
Tier 2 leads are leads that come in via gated content. This could include one-pagers, best practice videos, or recorded webinars. Leads in this category likely know they have a problem they need to solve but may not know what your company does. The number of sales calls, activity, and nurturing is going to increase.
Tier 3 leads shouldn’t be in your ICP. They may have visited your site a few times or signed up for a webinar you ran, but they likely aren’t interested in buying your product. There’s no harm in reaching out to lower-quality leads, but it’s likely a low percentage will want to start a conversation with you. For the sake of sales effectiveness, a conversation should be had about whether humans should reach out to these leads vs automation. Sales and marketing teams may team up on higher-potential accounts and use an account-based strategy to improve the customer acquisition cost for this tier.
Once the leads have been tiered, they can be qualified using a specific set of criteria. Commonly, companies look at factors such as lead age, budget, decision-making authority, and timeline. Companies can also use metrics like buyer behavior and engagement level to determine the quality of a lead. This tied directly into sales efficiency because even tier 1 leads can be false flags. Sellers will think they’re practicing sales efficiency when pursuing a large tier 1 account, but it takes skill to recognize when an opportunity should be shelved or abandoned.
To automate the process, many companies are implementing sales technology to track and score leads and prioritize their efforts. By utilizing predictive analytics, sales teams can be more strategic in their outreach and allocate resources more efficiently. By focusing on the most qualified leads and automating lead scoring and qualification processes, businesses can optimize their sales processes and maximize their revenue. Prioritizing and qualifying leads is essential to achieving long-term sales success.
Sales teams should focus on leads that are more likely to convert into customers. Assessing the lead’s fit with the company’s ideal customer profile can qualify leads. This ensures that the sales team is not wasting time on leads that are unlikely to result in a sale. Prioritizing can be done based on factors such as the lead’s budget, need for the product, and level of interest. This way, sales leaders can ensure that their sales team is targeting the right leads to improve their sales effectiveness.
II. Streamline the Sales Process
Streamlining the sales process is typically the responsibility of the sales operation team. The people who are in charge of the sales team tech stack. They are the grandmasters of improving sales efficiency.
A streamlined sales process means reducing unnecessary steps, automating routine tasks, and utilizing technology to improve communication and collaboration. This can be as simple as your company offering someone the availability to book your reps directly after they request to talk to your team, for example. Removing friction that makes it easier to purchase and understand how you can help them is the goal.
Adopting a CRM system can help reps keep track of their leads and their interactions with them, allowing them to make informed decisions. While using your CRM to boost sales effectiveness is a known best practice, it’s important to consider the costs of tools and add-ons for these sales efficiency tools.
We advise sales ops to define what needs to be changed within the tech stack to improve sales efficiency, and then do an audit of all your technology before pursuing anything new. Sales team efficiency isn’t 100% reliant on technology. It’s strong sales and marketing leadership that truly drive that.
Streamlining the sales process can help the sales team save time, and increase their productivity and sales efficiency.
III. Focus on Customer Needs
It goes without saying, but large customers are your biggest source of revenue, in more than one way…
Customer satisfaction is one of the most underrated aspects of maintaining a high level of sales efficiency in 2023. A satisfied customer is a non-churning customer, they are the ones keeping your lights on! Many different insights can track satisfaction.
Those include user adoption of your tool, standalone users willing to give a positive testimony of your product or a successful history of growing licenses within any said account.
Customers use your products to solve specific problems. Have an open dialogue with your tier 1 customers about why they chose your business and how your product helps them. Use this as messaging to break into new markets. A successful customer relationship involves marketers, sales, and ops to maximize sales effectiveness.
Questions to ask your customers:
- How did you hear about us? (Marketing)
- What problem is our product solving for? (Sales)
- What made you choose us over our competition? (Marketing)
- How are we helping your team hit internal goals? (Customer Success)
- Where would you like to improvements in our product or process? (Dev)
IV. Train and Coach the Team
Investing in training and coaching can improve the effectiveness and efficiency of the sales team. It is the responsibility of sales enablement and operations to train and ensure sellers are equipped with the technical skills to do their job. Set goals related to onboarding, time to value, and progress on plans.
Look at your past hire versus your onboarding process. What are the discrepancies noted by past employees? Is there a pattern you see in struggling performers as they are onboarded? Talk to them about how can this process be improved upon.
A sales manager should ensure that their teams take their technical knowledge and apply it in their daily selling motions. Additionally, ongoing coaching and feedback can help salespeople continuously improve their performance and achieve better results. Everybody has a slightly different way of selling. Encourage sellers to absorb your training and play to their strengths.
Look at training as a sales efficiency ratio; how much time must sellers onboard before they’re considered “dangerous” and ready to hit the field? Providing regular training sessions can help the sales team stay up-to-date with the latest sales techniques, and improve their sales effectiveness. It’s up to business unit leaders to craft the ideal sales efficiency formula.
V. Monitor and Measure Performance
Ways to Communicate as a Leader
Monitoring and measuring the performance of the sales team is essential to identify areas for improvement. This doesn’t mean you should be micro-managing your team, but instead, have an established cadence with each of your sellers. That could be weekly, bi-weekly, or monthly 1:1s. Slack, phone calls, and in-person chats throughout the day go a long way as well. Remember, positive conversations build productive sellers.
Sales leaders should set clear sales targets and track progress against them. Analyzing data can help identify patterns and trends that can inform decision-making and improve the efficiency of the sales process.
Sales teams can also use performance metrics such as lead conversion rate, average deal size, and customer lifetime value, to track their sales productivity and effectiveness.
To sum up, having a successful selling organization does need to require a perfect sales efficiency ratio or sales efficiency calculation. The most effective sales team understands the problem they solve, who they should be talking to, and how to use their tech stack to their advantage.
Improving sales efficiency is essential for B2B sales teams to achieve their sales targets. Prioritizing and qualifying leads, streamlining the sales process, focusing on customer needs, training and coaching the sales team, and monitoring and measuring performance are the five ways to help increase sales efficiency.
Sales leaders can implement these strategies to improve their sales operations and maximize their sales productivity. By implementing these practical sales efficiency tips, your sellers will be on the right path to working smarter, not harder.
If you’d like to learn more about how we keep our sales team as effective as possible, schedule some time with us to see if our account planning tool is right for you.
What are sales efficiency metrics?
One of the SaaS metrics that we keep an eye on is the payback period. Now, your business model will play a role here, but we look at this by annual cohort. In essence, this is the inverse of sales efficiency, it tells you how long it will take until you make money back on your customers. This gives you a chance to account for the growth of your current accounts in a cohort as well. Typically, a cohort is grouped by month, quarter, or year in the B2B space.
- Example: $2M in revenue, and $2.5M in total costs to generate that revenue. That means our payback period is 15 months or 1.25 years. (2.5/2)*12 if you’re calculating it for months.
Another sales efficiency metric we look at is LTV:CAC. This helps your team understand if you’re spending more to acquire new accounts than the revenue they will bring to your business throughout their partnership with you. Let’s say you sell field sales software, and it’s an annual subscription.
- ARR: $20,000
- Churn rate: 20%
- LTV: $20,000/.2 = $100,000
- CAC: $40,000
- LTV: CAC = 2.5:1 ratio, which is good! Any company would be happy with this.
How can sales efficiency be improved?
To improve sales efficiency in SaaS, you can take a few approaches. We’ll break down the 3-4 parts we consider the most important:
- True alignment and prioritization of your ideal customer, and therefore the best leads. If your team spends your time and resources attacking the leads and accounts most likely to spend money and grow with you, your efficiency will go up. Focus is HUGE.
- Consistent sales performance: This can mean a lot of things, but let’s assume your sales and marketing costs are going to stay flat. Identify what your best reps do, and make their process easy to follow. Who do they engage in sales cycles? How many people are they engaging? How much activity goes into each account to close a deal? Are they using phone, email, or social most? What information do they gather in discovery and throughout that helps?
- Documented account and opportunity plans. Lay out mutual action plans, roles and responsibilities, and milestones with the prospect or customer. Confirm you’re bringing the right people into the process and engaging anyone who will have input on the purchase decision.
- Sell as a team! People overlook this. One major benefit of multi-threading and stakeholder mapping is identifying pre-existing relationships, and leveraging your boss or executives to help engage their peers. The more collaborative the approach to winning a deal is, the higher likelihood you’re going to come out on top. Any efficient sales team is already doing this.
How do you calculate sales efficiency?
You would calculate a SaaS sales efficiency by adding up all of the revenue spent generated over some time and dividing that by all of your sales and marketing costs. This needs to include headcount, marketing spending (technology, advertising, events, agency costs, etc.), and any other costs that go into driving revenue. (Gross New Revenue/ Sales & Marketing Costs)
This would also be referred to as gross sales efficiency. Founders often have to grapple with how to continue to drive the business forward while doing it more efficiently to save cash. Net sales efficiency. Think of this as all of the new revenue you bring in, subtract any business you lose, and divide it by the costs. (Net New Revenue/Sales & Marketing spend). Both of these calculations are good indicators of the growth founders can expect.