The Math of a Great Sales

Avatar for Martijn Hoogeveen

The math of a great sales is actually quite straightforward. As we built sales teams since 1999, in different phases of specialization, the key sales success metrics can be easily defined. Every now and then, a reality check against such rules of thumb for a great sales is relevant. The conclusions are always the same.

1 million euro in added value

The math is to develop at any given moment three times (33.3% chance) the sales target in serious leads, and roughly double (18% chance) that for the whole pipeline independent of stage. The chance is related to the probability of closing a deal during the following 12 months period. To calculate an annual sales target, we take as a rule of thumb three times the annual sales cost, and base it on the added value (gross margin) of the sales. So, if the average sales costs 60K euro, a total lead target of at least 1 million euro (in added value) is required (i.e., 60,000 *3 *3 *2).

We take this calculation (now 1M euro in leads) as a rule of thumb. Of course, it needs to be corrected for the seniority of a sales. Statistically, this will generate at least 180K euro per sales in new SaaS business during a year. The actual success rates per stage vary of course per product, market and sales. Naturally, it depends on decision making timelines, clients pulling projects or budgets, competition, and addressable needs in a market.

Rule of 100

There is another key metric from our B2B experience. If a sales has 100 serious leads – deals in the last stages of negotiation – then it results in an average deal flow of one per week. Especially, if average deal values are small, one needs higher numbers. I typically advice our sales to develop this quantity of serious opportunities. And, therefore, a total pipeline with 200 more or less promising contacts. It is perfectly reachable for an active sales person. Every time a sales reaches this number, it works out well. Every time a sales believes that there are excuses why it can’t be done, the new business targets are not met.

360 degrees

The best sales are 360 degrees in the sense that they do everything to win, keep and grow an account. They write client stories and press releases, develop leads, hold small conferences, do sales conversations and manage existing accounts. Although some sales or entrepreneurs have or develop all the necessary competences to be successful, not everyone has this drive. Some sales specialize according to their personality or preferences. Some are a reactive account manager (farmers). Others love the kill of landing a new client but don’t like the after-care (hunters).

Avoid acronyms

Nowadays there’s an army of acronym-carriers. Most notably, BDRs or BDMs (business development representatives or managers for outbound leads), SDRs or SDMs (sales development representatives or managers for inbound leads), also called ISR (inbound sales rep), LGSs (lead generation specialists), LDR (lead development rep), LRR (lead response rep), MQR (marketing qualification rep) or MRR (market response rep, not to be confused with monthly recurring revenues). And this is just the start. There are AEs, CAMs, GAMs, NAMs, etc etc. The danger of this Dilbert-like management lingo is that in the end, no one knows what they are doing or what they are accountable for. The best advice is to keep it simple and recognizable.

Sales-focused marketing

It’s easy for marketing professionals to loose focus. Websites, advertizing, PR, leaflets, conferences, logo design, company parties and outings, and exhibition stands all need their share of attention. But, not all activities are equally productive in generating (marketing qualified) leads. A major reason, is when the synchronization between a sales campaign and a marketing campaign are absent. The chances of success increase when marketing and individual sales are closely working together to convince prospects, target businesses that a sales is working on, and creates highly relevant content in large quantities with a SEO mindset.

No-nonsense math for great sales

The above is my no-nonsense view of how to measure the sales processes on an individual level. The metrics can be easily extrapolated to a team or organization. One can tune them to the numbers and formulas reflecting the actual realities of a specific business. But, in most cases my observation is that sufficiently ambitious targets are too often lacking in sales organizations, as targets are based on an all too organic past, i.e., the comfort zones of individual sales employees.

However, with clear numerical objectives for the total sales pipeline, and outstanding offers, we help a sales to realistically achieve the person’s business targets. Which benefits all. It avoids a sales getting cramped over not scoring deals yet in an early stage of his career in a company, or provides guidelines how to revitalize the person’s pipeline during a slump. Sales development is never going in a straight line. In that sense it is more like sports. Therefore, it is important to relentlessly coach both motivated and demotivated sales on maintaining the Math of a Great Sales. Everyone deserves greatness.

Avatar for Martijn Hoogeveen

Founder and CEO of Icecat NV. Investor. Ph.D.

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