The top-3 sales efficiency metrics include:
- Sales Quota Achievement: this measures how sales people are performing against quota
- Calculation: total quota-retiring sales over the measurement period (usually trailing twelve months to account for seasonality) divided by the total current quota pool. Make the sure the quota pool reflects the actual quotas carried by reps, especially reps who are new to the role and may have a lower, ‘ramp period’ sales quota.
- Benchmark: 80-90% is a good range.
- Sales & Marketing Payback Period: how long does it take for profits from a new customer to cover their acquisition costs
- Calculation: The shorthand calc is total Sales & Marketing expenses divided by the change in Gross Profit from recurring revenue (use ARR * recurring revenue gross margin). For example, the 2021 payback period = 2021 S&M expense/(2021 ARR gross profit minus 2020 ARR gross profit).
- Benchmark: 1-2 year payback range is generally good on a blended basis.
- Sales & Marketing Spend as % of Revenue: total spend for sales and marketing as a percentage of total revenue
- Calculation: total S&M spend divided by total Revenue (or use Recurring Revenue instead of Total Revenue if the business is not investing in S&M to drive services or non-recurring revenue). You can also substitute ACV Bookings for Revenue.
- Benchmark: This is more effective as an internal metric to view progress over time within the same company.
Learn more about sales efficiency metrics: