Metrics to Measure in a Modern Sales Organization
If you are familiar with real estate, you might have heard the term highest and best use.This is an important concept in determining the value of real estate.The highest and best use of a property or building is the use that achieves maximum possible productivity and, therefore, profit. Sales Efficiency is the same idea applied to sales teams.
In order to create a truly efficient sales program, leadership must constantly ask: “Is this the highest and best use of my sales rep’s time and energy?” This approach to sales can mean the difference between a starving sales team and a revenue machine.
Your definition of efficient is based largely on your goals. No two teams will define Sales Efficiency exactly the same way. A sales program focused on a small number of high-value accounts (Account-based Sales Development [ABSD]) will define efficiency differently than a team fielding thousands of transactional inbound leads every month. However, there are a few elements of Sales Efficiency that transcend Go-to-Market (GTM) strategies.
A perfectly efficient sales org allows reps to spend their time on three activities:
- Choosing targets (companies or people)
- Talking to new prospects
- Nurturing old prospects
Although Sales Efficiency may feel like a nebulous concept, that’s only because most leaders have never been shown how to measure their sales funnel. In this chapter, we will teach you how to do it.
By the end of this chapter, you’ll know how to confidently answer the question that makes sales leaders nervous: “What resources do you need to deliver $X of new pipeline next quarter?” This will allow you to deliver more revenue and forecast more accurately as it compounds over time. Today, we’ll focus specifically on efficiency as it relates to outbound pipeline development programs with large Total Addressable Markets (TAMs), which describes most teams focused on Sales Engagement.
In order to do it justice (pun intended—you’ll see why), we brought in our longtime customer and friend Taft Love. Taft started his career as a police officer and detective before moving over to run Sales and Pipeline Development for multiple hyper-growth companies (maybe that explains why his teams are so good at prospecting). He previously led Sales Development at SmartRecruiters and is currently the VP of Pipeline and Marketing Operations at HouseCanary. Taft’s first step? Better understand your pipeline.
Read More: How to Build a World-Class B2B Sales Team
Taft’s Take: Understanding Your Pipeline
Achieving Pipeline Efficiency (an important component of Revenue Efficiency) begins with understanding your Sales Development funnel.
Ask any experienced VP of Sales about their Account Executives’ (AEs’) funnel, and they can rattle off all sorts of metrics. Close rate, win rate, average deal size, sales cycle length, etc. They know these metrics because it’s their job.
Companies understand why these metrics are so important. Sales organizations invest heavily in Operations teams that help them identify, track, and trust their funnel metrics. But few companies give much thought to understanding their Sales Development funnel.
Most Sales Development leaders aren’t expected to know their funnel metrics like the VP of Sales—yet. However, the landscape is shifting rapidly for Sales Development leaders, and knowing your funnel will not be rare within a year or two. Achieving Revenue Efficiency is simply not possible if you can manage—and therefore measure—only the top half of your funnel.
This section will focus on showing you exactly how to capture the metrics that Sales Development leaders need to understand their funnel like a VP of Sales would.
To be clear, knowing open and response rates of emails is not the same as understanding your funnel. Sales Development leaders often use these ratios in place of an actual funnel because they are easy to measure. Most email automation tools have shallow reporting capabilities that end at the activity level, but new, more robust technologies like SEPs can measure all the way to revenue attribution. It’s 2019—is anyone still investing in software solutions that don’t measure down to the dollar? Sales Development funnels are more difficult to measure than AE funnels for two reasons:
- 1. In most teams, no two SDRs prospect exactly the same way.
- 2. The AE funnel is tracked within a single object (opportunity), but the Sales Development funnel is spread across four (contact, account, task, opportunity).
This represents a huge problem for data-driven teams. If you don’t know your Sales Development funnel, you can’t accurately forecast the resources necessary to deliver pipeline.You can guess, and you may even get it right sometimes, but guessing gets harder as you grow.
In order to understand your funnel, there are two things you need to do:
- Reconcile your two Sales Development funnels: Activities and accounts.
- Build a system for measuring your funnel.
Standardizing Your Sales Development Funnel
I recently spoke with a Sales Development leader who knew she needed additional headcount to hit upcoming goals but had no idea how to justify it to her executive team. She knew instinctively that her current team of about a dozen SDRs wouldn’t be able to hit the next quarter’s pipeline goal, but she just couldn’t justify it using hard metrics.
Roughly a quarter of her SDRs conducted all their outbound prospecting via LinkedIn. Of the remaining reps, most relied primarily on email while a few hit the phones hard.This inconsistency led to a few reps crushing their goals with the rest struggling to keep up. She found it impossible to gauge the skill level of reps based on their performance when they all employed different strategies.That doesn’t scale.
This is a common story in SDR-land. Few teams have built the infrastructure necessary to connect effort to outcomes. Instead, they rely exclusively on metrics like email open and response rates that tell only part of the story.