The sales department is probably one of the most departments within your business – after all, without it, you wouldn’t be able to sell products/ services and, therefore, have any profit.
So, by measuring everything that’s related to your sales department in relation to the total value of your sales, you can determine its effectiveness. Moreover, having an efficient sales department means that all of the other teams that are in charge of your business will be just as efficient.
This is where the Sales Force Effectiveness comes in handy – this metric is used to determine the performance of individual salespeople and of a certain sales force. Then, the data provided by this metric is used to increase the business’ revenue via increased product or service sales, customer acquisition, or cross-selling/ up-selling additional services or products.
Naturally, the Sales Force Effectiveness improves if the revenue-per-cap has increased or currently increasing – this is more relevant when analyzing a certain sales force/ team, rather than when analyzing an individual salesperson.
Sales Personnel Effectiveness
Of course, a business owner will most likely be interested in the efficiency of the entire sales force – after all, if that force is doing its job, why would he or she bother with anything else? However, even an efficient sales force may hide untrained or unfit personnel.
Therefore, it is recommended that once in a while, the management team of a certain business takes its time and analyzes each individual that’s part of the sales force. For example, a sales force might be very effective, but it might also have two or three people that are not particularly good at what they’re doing.
If the management team identifies those parts of the personnel, then they can train and specialize them in terms of sales, and therefore, make the sales force even more efficient.
Four Ratios to Analyze the Sales Personnel
When analyzing the sales personnel, four different ratios will have to be used in order to determine the effectiveness of each salesperson. These are the value of sales divided by the number of contacts with clients, the value of sales divided by the number of potential accounts, the value of sales divided the number of active accounts, and the number of sales divided by the value of the buying power.
If each of the previously mentioned ratios is applied when analyzing a certain salesperson, the business owner will be shown a specific report of that salesperson’s status in the sales force.
The Bottom Line
In order to come up with the Sales Force Effectiveness metric, you have to divide the total value of the business’ sales by the total number of active accounts, leads, sales, and contacts of the sales team.
Basically, via this metric, the sales manager and the management team of your business will determine if the sales team is actually doing its job – as mentioned, it is also important that each member of the sales force does its job as well.
Analyzing the Sales Force Effectiveness and taking measures to keep it as high as possible will also motivate healthy competition between the members of the sales department – and this is always a good thing within a company/ business!