Asset Turnover Ratio

Category: Sales.

This metric helps you learn more about the productivity of your sales team – this is done by, obviously, analyzing the total average value of sales that are achieved by agents.
When talking about Sales Value Productivity, we also have to take into account the Sale Efficiency and Sale Effectiveness, as the latter are considered the two factors that directly influence productivity – we’ll soon see why.

Most people consider productivity, efficiency, and effectiveness as meaning one and the same thing. However, this is not the case when it comes to our topic of discussion – namely, sales.

The Basics of Sales Value Productivity

The basic formula to calculate the Sales Value Productivity is to divide the total sales revenue by the total number of sales agents. This will round up the total average value of sales.

But, we also have a formula that states that productivity is equal to efficiency times effectiveness – the three terms we have used earlier in our article. Naturally, in this case, the total Sales Value Productivity is calculated.

And it does make sense – we can easily identify the efficiency as the total sales revenue from the first formula, because having more revenue means that the sales agents are efficient; we can also identify effectiveness as the total number of sales agents – because having more sales agents usually means that a business is more effective at selling its products/ services.

Sales Productivity

Productivity is basically the result of the efficiency and effectiveness of the sales team – if you, as a business owner, work towards the improvement of the last two mentioned variables, you will indirectly work towards increasing your business’ productivity.

Moreover, sales productivity is usually measured with the help of metrics such as the percentage of reps above quota or revenue per rep – basically, the sales team is what determines the productivity of a business.

Sales Efficiency

The proper allocation of sales resources contributes to sales efficiency. Naturally, one would first think at the budget a business can put into its sales team. However, that’s not entirely true.

More important than the budget is the time your sales team actually spends selling your products/ services. Therefore, your sale reps should only be employed in activities that return a high value for the business.
Sales Efficiency can be measured with the help of two other metrics – namely, the frequency of customer contact or number of sales calls per rep.

Sales Effectiveness

Sales Effectiveness can be measured with the percentage of successful sales calls or the deal win rate metric. It basically refers to how efficient your sales team is at converting potential customers into paying customers.

Of course, this calls for effective members of the sales team – you could add more hours to their schedule in a day, therefore increasing their efficiency, but in order to increase their effectiveness, you have to make sure that they are trained well, so to say, and are able to convert potential customers.

The Bottom Line

Basically, if you desire productivity, then you must take care of efficiency and effectiveness.
The Sales Value Productivity might be just a metric that pops up in your KPI dashboard, but you and your management team are in charge of ensuring the efficiency and effectiveness of your sales team.

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