Growing Your Sales Team: Analyze These 4 Areas To Maximize Revenue and Profitability
Learn how analysis of your sales team growth metrics can help you maximize revenue and profitability as you scale your business.
Growing your sales team is a major undertaking for any company, as it comes with a major financial risk that can make or break the future of your organization. Any mistakes as you grow your organization can impact your ability to hit your revenue goals, raise future capital and achieve profitability.
With such a large investment in people, you need to make sure that you hire the right candidates, onboard them effectively and put them in the best position to perform. Currently, most high-growth companies only rely on metrics as a way to track progress of this business objective as they scale. However, metrics can only go so far. What really makes a difference is in-depth analysis of your metrics that provide you insights to drive better financial outcomes for your organization.
To put this into perspective, just a 5% improvement in efficiency from analysis of sales growth metrics for a company that brings in $10 million in ARR will net an organization an extra $500,000 in revenue per/year.
Below, we share the 4 key areas for analysis of sales team growth metrics and a few examples that we include as part of our sales team growth analytics solution.
One area where we see opportunities to optimize your sales team growth metrics is within the hiring process. Analysis is very helpful during the hiring process because it provides you insight into your hiring strategy that can help you get quality talent in the most efficient way possible. Without analysis of your hiring metrics, organizations are unable to strike the right balance between hiring speed and costs that make sense for their particular sales growth objective. This can lead to missing long-term financial goals because the organization is unable to hire the right amount of sales rep necessary within a certain amount of time.
Analysis Example: Optimal Cost Per Hire (OCPH)
One example of analysis that we do around hiring metrics is what we call optimal OCPH (Optimal Cost Per Hire). With OCPH, we are looking for the optimal amount of hiring spend per sales rep while factoring in the speed at which you need to be hiring sales reps to hit your revenue goals. In Figure 1, we provide an example of what an optimal CPH analysis looks like. For this organization, their goal was to optimize their hiring speed and cost so that it is at its most optimal point that makes sense for their sales team growth objectives.
By analyzing both their average cost per hire vs. their fill rate cost, we were able to determine that 52 days would be the optimal time to fill rate benchmark with an average cost of $4,000 ($1,000 higher than what they had originally budgeted for). What this means in terms of financial value for the organization is if they are able to hire quality sales reps at an average of 52 days, then it would provide them an additional $5,000 in revenue for every sales rep within the first 3 months that was hired even after factoring in a $1,000 budget increase per sales rep.
Figure 1. Optimal Cost Per Hire (OCPH)
Another area where we see opportunities for optimization is with onboarding new sales reps. A lot of organizations either do not track onboarding metrics or if they do, they focus on metrics that do not have a financial impact (like how much content a sales rep interacts with, as an example). By putting financials around your onboarding procedures, you can start to see how onboarding can be a driver of revenue and profitability. The faster and more effective your organization can onboard and train sales reps, the more likely they will provide a higher ROI for your organization.
Analysis Example: Time Until First Deal vs. Sales Rep ROI
One example of analysis that we do for onboarding metrics is comparing time to complete first deal vs. sales rep ROI. Every day that a sales rep is hired who is not producing revenue for your company is a cost to your organization. In Figure 2, you can see how speeding up the ramp time and quality of your onboarding process can help you reach your long term financial goals. In 2018, you can see that sales reps with a less structured onboarding process were getting their first deal 15 days later than 2019 sales reps. This difference in 15 days ended up providing the company an additional $6,500 in additional ROI per sales rep that they hired within the first 3 months compared to 2019.
Figure 2. Time Until First Deal vs. Sales Rep ROI (2018 vs. 2019)
Another area where there is great opportunity for optimization is by analyzing the development metrics of your sales reps. Analyzing the development of your sales reps, quarter over quarter, can provide a lot of financial value to your organization. This is especially important in the first 3 quarters of when a sales rep is hired, as it provides opportunity for the most improvement of new reps. By putting financials around the development of your sales reps, you can uncover opportunities to optimize for revenue as it relates to your sales funnel.
Analysis Example: Sales Funnel % Improvement
One example of the type of analysis we do around development is by looking at Sales Funnel % Improvement. Any optimization around your sales funnel will have a direct correlation to your financial results. What we do in each part of this analysis is look at the % improvement of the sales reps sales funnel (outreach, proposals, won opportunities) from quarter to quarter. In Figure 3, we provide an example of sales rep improvement for Q2 to Q3 for the quarter they were hired. For this organization, their Q4 hires were underperforming in opportunities won, which we noticed was due to a lower than expected demo to close rate costing the organization $47,569 for that quarter.
Figure 3. Sales Funnel % Improvement (By Quarter Hired)
The last area of analysis that provides an opportunity for optimization is performance. This can include analysis of sales reps quota attainment, promotion rates, cost of turnover and any other trends that contribute to sales rep performance. When we analyze performance metrics, we want to look at the overall performance of your sales reps from the time they are hired until they leave your organization. Since performance and revenue generated for each sales rep are directly correlated, our goal is to enhance the drivers of better performance and eliminate the causes of weaker performance to improve future revenue outcomes.
Analysis Example: Cost of Turnover
One example of analysis we do around performance is cost of turnover. Understanding the cost of turnover and whether it’s due to performance or other factors is critical to building your sales team. In Figure 4, you can see the cost of turnover as it relates to each sales rep. For this organization, the cost of turnover is an average of $34,889 per sales rep and a total of $136,445 for 2018. Once you know your cost of turnover, you can then dig deeper to see what the causes of turnover are and how it impacts your financial performance. For this organization, just a 20% decrease in turnover YoY for future hires would add $27,289 to their bottom line per/hire. By knowing the exact cost of turnover, you can now address this issue and implement changes that help increase retention rates.
Figure 4. Cost of Turnover (2018)
The Analytics Difference
In conclusion, above are just some examples of analysis of sales team growth metrics that we do as part of our proprietary method called The CFA Method. Whether you are just starting to build your sales team or have already begun hiring new sales reps, analyzing your sales growth metrics for the purpose of optimizing your business can help you as you scale. It will provide you unique opportunities and insights that can help you maximize revenue and profitability for your business.