In this article, we’re going to cover precisely how you can optimize your sales effectiveness and efficiency to create the ultimate sales machine.
Sales effectiveness and sales efficiency…
They’re words that get thrown around fairly often in the world of sales.
But oftentimes, they end up misused or misunderstood by the top decision-makers and end up hurting profit.
Unfortunately for those people, not optimizing your process for these metrics can seriously hurt your bottom line. Which is why I’d love to help you get on the right track.
So let’s get to it.
- What is sales effectiveness?
- What is sales efficiency?
- How to measure sales effectiveness and efficiency
- How to optimize your sales team, process, strategies, and tactics
- The easiest way to improve sales efficiency and effectiveness at the same time
What is Sales Effectiveness?
Sales effectiveness is a measurement of how capable a sales process or rep is at increasing a business’s bottom line while maximizing the satisfaction of a customer.
However, the first thing to note is that sales effectiveness does not equal sales efficiency.
While an effective team requires efficiency, you can have an extremely efficient team that isn’t effective at all.
Let me illustrate how this might happen:
Let’s create two imaginary sales teams for the sake of this example. Sales Team A and Sales Team B.
When you look into the efficiency of both, Sales Team A vastly outperforms Sales Team B; they get 170% more tasks done per week on average.
However, Sales Team B is actually much more effective than A.
Because Sales Team B drives 200% more profit.
See, effectiveness is the measure of the output of a certain asset, to be more specific, output of a desired product. And in this case, the desired output is revenue.
So if sales effectiveness equals the amount of desired output, what is efficiency?
What is Sales Efficiency?
Sales efficiency is a measure of the speed of your sales and marketing efforts. It’s usually measured within a specific timeframe, usually by quarter. Sales efficiency shows the speed of your customer acquisition – i.e. how quickly your sales rep converts a prospect into a lead, and lead into a customer.
Here’s how to calculate sales efficiency: divide the gross revenue generated by the cost the team incurs while generating it. Your sales-related expenses can be anything from salaries, benefits, and training to office space.
So for example, if a sales team generated $10 million in revenue at a cost of $5, the company’s sales efficiency would be 3, or 300%.
In short, sales efficiency is a measurement of how many sales-related tasks a salesperson can accomplish in a given amount of time and resources.
The efficiency of any given team is important, but only if it’s in the right direction.
Because sales efficiency means how much a particular team gets done with their given resources. (Whether those resources are time, capital, etc.)
In the previous example, Sales Team A got much more done, but didn’t drive as much profit.
So they were far more efficient, but far less effective.
Now, that’s not to say efficiency isn’t important, again, it is.
But efficiency isn’t very valuable if a team doesn’t have the right direction or leadership.
Why Does Sales Efficiency And Effectiveness Matter To Your Business?
The reason these metrics are so critical is how they tie into the profit of your business.
Think about it this way:
Without being efficient, your team is wasting valuable resources on tasks that could be done with less. Every dollar you spend, every minute of your team’s time, and every asset you invest in them isn’t going to be used to its full potential if you aren’t maximizing efficiency.
And without effectiveness, it’s highly likely that your sales teams might not even be driving profit.
And I think I can safely say that’s the last thing any of us want for our companies.
But here’s the next issue:
We’ve talked about what effectiveness and efficiency are.
We’ve talked about why they’re so important for any sales team that’s serious about driving a major profit.
But how do we work to actually improve them?
To improve your sales team’s efficiency and effectiveness, the first step is to measure where these metrics are at in the first place. Without any measurements, how can you reliably benchmark and improve them?
So let’s get right into that.
How To Measure Sales Effectiveness
Measuring sales effectiveness is fairly straightforward. However, you can dive deeper and do some more in-depth measurements to get even more insights into your sales team’s operations.
To figure out how effective a sales team is, simply measure the results they output and divide those results amongst the members for a given time period.
For instance, if a small team of 5 generates $1,000,000 in revenue during a quarter, the team has an average output (in revenue) of $200,000.
The important thing to remember is that this output doesn’t have to be revenue.
Revenue is usually the most important, sure, but it’s not the only important metric.
Effectiveness is about measuring desired outputs for a sales team.
For instance, perhaps you’d like to measure the amount of discovery calls the team puts out in a given month.
If that same team of five makes 500 discovery calls in a month, that’s an average output of 100 calls per member.
Whether these numbers are good or bad is up to you, but what’s important is having a measurement so you know where you’re coming from.
Without measuring your effectiveness over time, there’s no way to know whether you’re improving or not.
And measuring your team’s effectiveness is especially useful when paired with knowing its efficiency. So let’s get into that side too.
How To Measure Sales Efficiency
As explained before, sales efficiency is a bit more different than effectiveness because it’s not a measurement of pure output, but rather what a team is able to do with their given resources.
If a team can turn a small amount of resources into a large amount of revenue, they’re extremely efficient.
And while effectiveness is vital, efficiency is the key to maximizing profit.
The way to measure efficiency is simple:
To find a team’s efficiency, take the amount of revenue your team makes from new customers in a given time period and divide it by the amount of money you spent on marketing and sales in that same period.
The goal here is to get a positive number.
The higher your efficiency is above 1, the better.
And if your team’s efficiency is lower than 1, you’re operating at a loss and effectively throwing money away.
Here’s an example:
Sales Team A generates $60,000 from new customers that haven’t worked with them before.
In that same time period, they’ve spent $30,000 on sales and marketing.
So our equation to find sales efficiency would be:
$60,000 / $30,000 — which comes out to 2.
Or in other words, Sales Team A is making $2 for every $1 invested in their sales and marketing.
What this means is that you could safely increase their budget and expect to see more profit to come in (assuming you have the right sales systems in place).
If their efficiency was below 1, then increasing the budget wouldn’t do anything besides waste money, since they’d be losing out on every dollar spent in sales and marketing.
How Can You Work To Improve Them?
We’ll look at these separately, because the reasons your sales processes and reps aren’t efficient will often differ from the reasons they aren’t effective.
First, we’ll look at effectiveness.
There can be a few reasons a team isn’t operating effectively.
So the first question to ask is:
Is the team even steering in the right direction of closing more deals?
Because, again, a team can be efficient without being effective if it’s putting all of its effort into the wrong things.
If the problem is closing deals, then you’ll want to start auditing your sales management, team, long-term strategy, and short-term tactics.
If closing deals with prospects is going well, that’s where your team’s efficiency might be the problem, because it means that the ROI isn’t high enough.
So if efficiency is the problem, how do you fix it?
There are a few ways to do this, some of which we’ll dive deeper into below.
But to give a shorter explanation, you can start by finding where resources are getting wasted throughout the sales operation.
Are your reps wasting too much of their time with menial tasks like data entry?
Are you investing too much capital into endeavors that aren’t yielding enough results?
This is where it’s important to really dive deep and see where things are coming to a halt.
Once you find the bottlenecks, you can start removing them to increase profit.
Some good next steps may be streamlining your processes to save time, effort and money, removing unnecessary steps during the sales process, and focusing on the things that yield the most profit.
A 6-Step Action Plan To Improve Efficiency & Effectiveness Of Your Sales Process
To give you a more in-depth idea of how to fix these issues, let’s make an action plan to give you a more concrete direction.
Starting with the most important rule of them all:
1. The #1 Rule: Solve Prospects’ Problems
Before you try and fully optimize every tiny aspect of your sales process, ask yourself one thing:
“Are we actually solving prospects’ problems and providing value?”
Oftentimes when we see sales teams struggling to pinpoint their problem, the answer is hiding right in plain sight.
Before you can worry about the tiny details, you need a handle on the bigger picture. So step number one is to ensure your prospects’ problems get solved when they work with you.
Because if the product you’re offering can solve 95% of your prospect’s pain points, then the product will sell itself.
Once you’ve got rule #1 covered, then it’s time to move on to the next steps in optimizing your sales process.
2. Define & Set SMART Goals To Increase Sales Efficiency
When you’re looking to improve sales efficiency, it’s important to define and clarify your goals before planning out your sales and marketing efforts.
Clarifying goals helps in 2 ways:
- Your reps will know what exactly you’re expecting them to reach. Are they expected to close a certain amount of leads each month? Do they have to meet an individual revenue target? etc.
- You’ll be able to calculate your sales productivity and plan sales and marketing efforts accordingly.
But setting a simple goal of “increasing revenue” won’t get you far.
What you need to improve your sales efficiency is to set SMART goals – specific, measurable, achievable, relevant, and time-bound.
|S||Specific||What do you want to achieve?|
|M||Measurable||Is it measurable?|
|A||Achievable||Is your goal realistic?|
|R||Relevant||Is the goal relevant to your sales team?|
|T||Time-bound||When will you be able to achieve it?|
Here’s an example of a SMART goal: “I want to increase my company’s sales efficiency by 1% by January 1st 2022.” or “I want to close 30 leads each month.”
3. Leverage Automation For More Sales Efficiency
As I mentioned before, the key to maximizing efficiency is getting the most out of the resources on hand.
The more value you get out of each resource, the more efficient you’ll be.
And one of the most valuable resources for your sales reps (or anyone for that matter)?
As many as 65% of sales managers say they don’t have enough time in the day to close as many sales as they’d like.
Just think of all the simple or menial tasks each of your reps handles during the day. (Data entry comes to mind here.)
But whether it’s data entry, organizing messy call schedules, or any other similar tasks, they need to get done; there’s no way around it.
But that doesn’t mean a human has to do it all.
Because your team can get more out of their time with the help of automation.
Automating simple processes and tasks is a surefire way to optimize efficiency and effectiveness because it saves tons of time.
And one of the best ways to automate various sections of your sales operation is via a CRM software (more on those later).
4. Keep Sales And Marketing Interactions Personalized — Be Efficient But Not a Robot
Now, this point may seem a bit odd coming right after the last one.
Automate the sales process, but also keep it personal?
Here’s the thing:
Automating the sales process is a great thing, but there are certain areas that need human touch to be effective.
After all, sales is a very personal process, you’re earning the trust of a prospect that you can deliver on your promises.
So even though we recommend automating the process, keep it personal where it matters.
Don’t give generic solutions to anyone, make sure it’s personalized for the prospect, and make sure they know it. This is especially crucial in any B2B sales process.
5. Hire Sales Superstars for Your Team
Hiring the right sales leaders and reps will be the key to success for any team’s effectiveness and efficiency.
So what’s the secret to hiring superstars for your sales team?
It all starts with hiring people with the right personality.
Sales tactics, strategies, and skills can all be trained into your salespeople.
Sales isn’t for the faint-hearted. If you have a sales rep that gives up after the first rejection — they’ll never break through push backs, objections, and other barriers.
Your salespeople need to have dominant personalities that can take rejection without batting an eye.
A way to vet for this through the hiring process is to give your hiree a rejection or pushback about why they might not be the right fit for the job.
“I’m sorry, it seems like you just don’t have what it takes to join my sales team.”
If they fold and say:
“Okay, thank you. Goodbye.”
Then they’re not the right type of person you want on your sales team.
But if they respond by digging deeper into your rejection, or start to sell themselves, then you have a possible superstar there.
A superstar might say things like:
“At X Company, I was able to increase revenue by 30% in just 6 months.”
“How exactly am I not the right fit?”
6. Train Your Team To Be More Efficient & Effective
Your system and the team you hire aren’t the only things that affect your output and efficiency; after all, without your team you wouldn’t have any sales.
Which is why it’s so critical to train your sales reps in being more efficient and effective in their daily tasks and interactions with leads.
A big part of that is training them to utilize the aforementioned automation to its fullest. Once you’ve automated parts of the sales process, things won’t go completely smoothly immediately; there’s going to be a learning curve for everyone involved.
Another big part of training your reps is to find their problem areas and hone them out.
Is your team tripping up and wasting lots of time in a particular area? Is one rep a star on discovery sales calls, but can’t close a qualified lead?
Look into how you can improve their training or the system itself to smooth out any kinks.
Your schedule is probably already busy as it is, but scheduling team training sessions will oil-up your ultimate sales machine.
Is One Metric More Important Than The Other?
Here’s the thing:
Effectiveness and efficiency are vital to maximizing your profit. But as I mentioned before, it’s entirely possible to be efficient without being effective.
And if you aren’t effective, you aren’t profiting.
Does that mean efficiency is less important?
You could look at it that way, but it’s probably more accurate to say that efficiency matters just as much as long as your team has proper direction.
Efficiency on its own isn’t enough, but without it, you still won’t be generating much revenue.
Common Mistakes That Reduce These Metrics
Now that we’ve covered a list of the things you should do, it’s time to cover some of the should-nots.
One of the best ways to ruin your efficiency, and thus your effectiveness, is with a convoluted sales process. Overcomplicating your system with loads of unnecessary pieces is only going to get in sales reps’ ways.
Another huge mistake is over automating the sales process. Again, automation is good, but too much of it is just as much of a bad thing as none at all.
Another few mistakes? Failing to measure these metrics consistently, or overemphasising efficiency without considering if your team is even being efficient with the right actions.
But one of the absolute worst things a sales team could do is spending too much time on the wrong leads (i.e. leads with smaller budgets, unqualified leads).
Using CRMs To Improve Both
So up until now we’ve had lots of talk about automating, but none on how to automate.
And there’s a perfect solution for this.
CRM software, or Customer Relationship Management software. This post has gone on for a while, so I’ll keep this brief:
A CRM platform (like VipeCloud) allows you to streamline, automate, and consolidate some of the most vital parts of your sales and marketing processes.
We’ve even written a guide on how you can utilize a CRM to take your sales process to the next step.
The Easiest Step Toward Increasing Sales Efficiency & Effectiveness
Here’s the thing:
We’re firm believers that actions speak louder than words. So instead of talking about how great CRMs are, how about we let you see the results for yourself?
Request a free demo of VipeCloud today and get started on your sales automation journey. (we’ll even help you migrate your current systems quickly and smoothly!)