sales productivity metrics?

I know you are feeling a lot of pressure to produce sales, and sales growth, during these tough recessionary times.  And I know, at a few of my clients, board members are increasingly asking me to not only evaluate overall sales (e.g. by product, region and industry) but also sales performance by individuals.

To be fair, sales productivity is always a top priority but today’s climate certainly sharpens the focus.  When times are good people tend to enjoy the results but a down market really forces a critical eye on costs and performance.  Unfortunately, today you need to do more with fewer resources, optimize where you can and correct where things need improvement, quickly.  The only way to optimize and improve is to measure and manage productivity.  And when it comes to sales, who are usually the most highly paid employees (on target earnings) at a small company, there is even more pressure to justify “bang for buck”.

So, how do you prove sales productivity?

Well, first, what does sales productivity or performance really mean?  In my mind you are in essence trying to measure the effectiveness of your individual sales representatives, your team as a whole and the channels for which you sell through (as we consider partners an extension of the sales force).

Isn’t closing business the ultimate sales performance measurement?

Yes!  Definitely, but there are a lot of other metrics that we need to look at in order to measure effective contributions to the top line, as well as the bottom line, at an individual level, such as:

• new business by representative - for instance, in software this would be new license sales;
• average order value by rep - lends to hunting big or churning a lot of smaller deals - I do like to include the number of transactions to help put it in perspective;
• the cost of sales in aggregate and by rep (e.g. base plus commission divided by total bookings) - how much did it cost to bring in $1?
• sales cycle length - does it take one rep 3 months to close and another 12 months on average?
• close rate - of the opportunities created how many does the rep close?
• new rep ramp time - how long does it take from start date to “fully productive”?
• sales to support ratio - do your sales people need a lot of presales support or not? this lends to how well they know the inner workings of the product: a depth and breadth assessment.

Obviously these metrics are for an individual, and not necessarily mutually exclusive, so how do you know what is good, bad or fair?  That is when you start to compare to the other sales reps you have and begin developing some intelligence.

I’ve provided the above metrics because I think they are meaningful but I’ve known companies that also want to track sales productivity through process metrics such as:

• number of calls or initial email contacts per day (I’ve seen averages of 100-150/day for inside sales);
• number of appointments per day (2-3)
• number of demo’s per week (3-4)
• movement in your qualification process or sales methodology (e.g. how many B deals moved to an A deal in the week)

Although these process metrics are interesting, to me they are “big company” and require a white hot CRM system with a clear process to support it.  I’d stick to the original grouping.

In addition, you also need to measure the sales performance of your channel or partners which would include productivity metrics such as:

• sell through cost - e.g. the margin given up
• cost of sales to support the partners - programs, collateral, dedicated partner person internally, etc.
• training effectiveness - how much of your presales support goes to partners?
• revenue per partner - 80/20 rule needs to be applied here
• ramp up rate - e.g. how long does it take from time of partner signing to consistently contributing to your revenues?

I know what you are thinking:

who has time to prepare all this?  It is a recession and we need to be focused on closing, Closing, CLOSING!

But as I mentioned before: without measurement there can be no management.  And without management we can’t make sure that every rep has been given every opportunity to be successful in both good times and bad.  I would hate to see a sales rep let go because this information was not pulled together, reviewed, talked through with the rep.  Or, I would hate to see a few good reps carrying a lot of reps not performing - optimize where you can and set goals accordingly.

Given what you know now, what do you think of the performance of your sales folks?