How much is your sales team’s time worth? Measure sales motions with one simple metric

I once sat in a sales manager’s office when he received his plan number for the next year.  That’s the amount of new business the leaders of the organization were expecting his team to produce over the next twelve months.  He looked at the number, looked at me, and said, “I have no idea if that’s a fair number or not.”  

This is not an uncommon problem in sales organizations, though most sales leaders don’t want to admit it.  The process of setting an organization’s sales goals is often an intricate dance, where the higher ups tack on a percentage of growth to last year’s number and call it the new goal.  Sales leaders protest – especially when the team did not hit the last goal - and the haggling begins in earnest.   A few months later, usually, a final number is arrived at, and sales quotas get handed out to reps. 

But the question remains – is that a fair number?  Since “fair” can mean a lot of things, let’s ask instead, is that an achievable number?  Can your sales organization make that number?  It is tempting to look at an increased sales goal and say, “Well, we will only need to win a few more deals to make that happen.”  Or, “If we land just one more big deal this year, we can make that goal.”  But optimism will not make more opportunities appear or create more time in the day to source pipeline.  So how can one determine if a number is achievable? 

Fair warning, we are going to get into the weeds on some numbers at this point.  It’s an intelligence article – deal with it. 

There is a simple metric – that I call the “value of an activity” (but likely has a fancier name somewhere else) that can help with this question.   Here’s how it works:  When you work in a sales organization, you know precisely how much your actions were worth to the company at the end of the year.  Whatever amount of revenue or new business the team produced – that’s how much your sales motions were worth.  Which means that if you’re tracking your sale motions effectively, you can back into how much each sales motion is worth to the company. 

Let’s break it down with an example.   Let’s say a rep makes $1 million in new business in a year.  She won 10 deals and lost 30 deals throughout the year.  That means it took 40 completed selling attempts to make the rep’s goal, which means that every prospect (win or loss) was worth $25,000 to the company.  That’s $1,000,000 in revenue divided by the total number of completed attempts (40).  If that rep’s goal gets increased 10%, to $1.1 million next year, the rep will, on average, need to engage with four more active prospects throughout the year to achieve the new goal.  Does the rep have the capacity for four more active prospects?  That’s how you determine if a number is going to be achievable.  Remember, your salespeople only have so many hours in a day.

This metric – total actions taken / total revenue generated (over a set period of time) can be applied to all your sales motions.  How many first contact meetings did your reps log last year?  Take your total revenue, divide it by the number of meetings, and determine a proxy for how much each meeting is worth.  That’s what I did with the sales leader at the top of the article.  We looked at his new number, applied this metric, and realized that he was going to need 811 new opportunities in his pipeline for the next year to make his new goal.  That represented a nearly 25% increase in activity demands on his team – without new staff additions or new efficiency tools.  Armed with that information, he successfully went back to the higher ups and negotiated not only an achievable number – but one that was lower than the year before.  

The value of an activity metric is simple, but very powerful in helping unwind the question – how much is that action worth on average?  Emails, cold outreaches, meetings, webinars – all of your sales motions can be measured this way, with a few tweaks and assumptions along the way.  Which means the next time the new plan number comes down from on high, sales and revenue operations leaders can be armed with the knowledge of what it will take to hit that number – and plan accordingly.