Leading Indicators of Sales Performance You Can’t Afford Not To Track

The average lifespan of a Revenue Leader is less than two-years. Why? Most of the time the Leader’s departure is related to poor revenue performance or inadequate return on Sales & Marketing dollars. In the following article, we will outline key leading indicators to help you quickly identify areas of improved revenue performance or cost-reduction, thereby improving your Sales & Marketing ROI.

Download the Activity – Based Sizing Template to view an example of Activity-based Sizing for a Lead Development Rep (LDR) and to use Input cells to enter you estimated number of prospects, activities, and capacity information.

Assessing Your Company’s Sales & Marketing Efficiency

Let’s start at the top, in order to quickly assess your company’s Sales & Marketing Efficiency, we compare Selling General & Administrative Expense (SG&A) to 3-Year compound annual growth rate (CAGR). While using SG&A is not an exact science, it is the most readily available metric, and can be found on any public company’s annual report. Using publicly available data will help you determine your position relative to your peer-group.

Here’s an example of what the final analysis may look like:

Each quadrant represents a unique opportunity:

• “High-Growth”: Monitor to Ensure Continued Growth
• “Best in Class”: Consider Additional Investment
• “Low Growth, Low Cost”: Consider Reprioritizing SG&A spend
• “Distressed”: Identify root-cause through further analysis (focus of this article)

   

Now we will introduce specific performance indicators, to help you identify opportunities to improve your SG&A efficiency.

Sometimes predictors of performance hide in plain sight. In Hockey, nearly 20% of Power Play opportunities result in a goal scored on the disadvantaged team.  This is because any high-performing teams struggles when they are incomplete or down a player, which is why seller-fill-rate-percent is the number one indicator of team’s sales success.

Fill-Rates Should Be >97% and Consist of Following Components:

• Budgeted number of revenue-generating sales positions

   

  • In order to have the properly budgeted number of revenue-generating sales positions, you need to determine average productivity per individual.  This is generally done using a combination of historical averages, industry benchmarks, and activity-based methods (click here to download the attached activity-based sizing template).
  • The number of headcount multiplied by expected productivity should exceed company goals by 10-15%.
  • Our research indicates 80-90% of missing the number can be attributed to improper sales force sizing.  All other productivity initiatives typically generate marginal improvements.

     

• Number of Fully-Ramped sellers

   

  • Fully-ramped sellers simply means, they are achieving/exceed the productivity expectations for their role.  This generally takes at least six-months from date of hire.  Actual length to fully-ramped varies based on product & buyer complexities, sales cycle, onboarding programs, etc.
  • Your fully-ramped sellers to budgeted positions should be >80%

     

• Number of vacant territories

   

  • Vacant territories are a significant drain on company performance.  If just one territory is open in a region of eight, everyone will have to generate >10% more to contribute overall goals.
  • Additionally, once your CFO begins to see your sales expense is below budget (due to vacant territories), it is very likely you will see your budget decreased the following cycle; creating a vicious cycle.
  • Best-practice vacancy rates are below <5%

     

     

Additional Diagnostic Metrics:

• Compensation Cost of Sales (CCoS)

   

  • Two components drive CCoS: Total Actual Cash & Revenue Generated by the Sales Force.
    • Total Actual Cash is the sum of base salary & actual variable incentive paid (in other words, “W2 Earnings”.
  • Benchmarks vary greatly for CCoS, and are driven by many factors, including company’s stage of growth & industry.  Calculating your CCoS is a great diagnostic tool to highlight issues in rep productivity, sales compensation design, and sales talent.

     

• Cohort-based Sales Rep Productivity

   

  • Rep Productivity should be examined not only on an aggregate basis, but on a cohort basis.  For Rep productivity to be an actionable metric, it needs to be calculated within cohorts of reps, as different cohorts could be very different set of potential issues.  A few, less obvious ways of looking at rep productivity are:
    • Tenure: Similar to the retail concept of “same-store sales”, How does the productivity of your sales team vary between 0-1 years, 2-5 years, 5+ years of tenure? Using these buckets can help you appropriately set targets for individual reps & determine headcount needs to make your number.
    • New Hire Performance: Double-clicking into the new hire population (e.g. 0-3, 3-6, 6-9, & 9-12 months) can help you quickly identify improvement opportunities in onboarding, hiring profile.

       

It is often said, If you are measuring everything, then you are tracking nothing.  Sales performance metrics are no different, with hundreds of available metrics, if often becomes difficult to see the forest through the trees.  In order to identify and quickly remove issues preventing you from making your number, it is critical to define, calculate, and track metrics most relevant to your business.

Download the Activity – Based Sizing Template to view an example of Activity-based Sizing for a Lead Development Rep (LDR) and to use Input cells to enter you estimated number of prospects, activities, and capacity information.

Download the SBI App for all SBI Content, on the go.