“My team is effectively executing sales.” It is the desire and ambition of every sales leader that all of their sales team members are executing the sales process as expected. However, sales performance studies reflect a different reality. Sales inefficiency is a major issue and our study shows more than 50% of all sales representatives are under performing.
More than half of sales representatives are not meeting quota. Of the representatives that meet their numbers, only a fraction of them are top performers. We conducted a sales performance study with some Harvard Business students and found that top software sales reps were closing, on average, $2 million in new software sales, compared to $900,000 closed by the average sales rep. The numbers might vary based on the average transaction size of the deals and the assigned territories; however, the study was designed to normalize these factors as much as possible. The majority of the companies that participated were enterprise software companies with larger sales organizations, so the comparisons were made across sales teams selling similar solutions.
When you attempt to increase performance, you may unintentionally take a misguided approach. Take note of this advice: increasing sales capacity of an already inefficient system will not work. For example, if the automobile mechanic’s process for repairing a car is inefficient and he attempts to increase his capacity regardless, the results will be more detrimental than beneficial. The same is applicable to the sales rep. If the process is inefficient, the results will be too.
Maybe you’re wondering if this applies to you. Let’s see how you measure up by simply examining your Yield on Sales. By definition, this is your actual sales vs. your sales capacity, i.e. if capacity is $10M and your sales organization only produces $5M, it is producing 50% yield. If you have above 50% yield, rest assured; that is just above average. Those with above 70% yield should be proud to call themselves the best-in-class. For those who are below 50% yield, the only option is to become proactive. Produce answers instead of excuses as to why you aren’t meeting numbers and it will be much more beneficial to you in the long run. Improving yield on sales happens when you start considering a few key levers such as time spent selling, close rates, sales cycle time, and average order size. Investing in fixing the inefficiency goes a long way. If you don’t believe me, keep an eye on your revenue growth!
Still think you’re in the clear? You may be the one who should be most concerned. There is a common phenomenon in terms of sales and business development called apathy. A “why fix what isn’t broken” mentality towards sales. The problem is, what is “broken” depends on how your company defines things. Is there a difference between merely operating and actually performing? Let’s revisit our automobile example. What kind of driver are you? Do you wonder why anyone would adjust a vehicle that is operating fine, something that gets sufficiently from point A to point B? Or do you strive for optimal performance from your automobile and accept nothing less than the most efficient trip possible from point A to point B? There is a difference between the settlers and the go-getters. If you are the latter, we are here for you. If not, we will be on speed dial when your car breaks down in the middle of the highway.