It’s Monday morning – you wake up, make yourself a cup of coffee, and check the paper. You’re an Aquarius, so the horoscope says you should “Not feel like you have to make any great strides right now.” It also says your reps should make 8%-12% commission, on-target-earnings should be $1 million per rep…
Too often in sales, we navigate by rules of thumb. But VPs and Sales Managers who want to outperform know those rules can be dangerous. Data is king, but data context is the kingdom.
To manage well, look beyond the war stories to the data that is specific to your industry, and draw your own insights.
So, how do you do that?
Sales Pipeline Benchmarks To The Rescue
I’ll share a 2-step approach to benchmarking and diagnosing your own sales machine.
Then, we’ll run through an illustration of this approach with 10 SaaS companies that are leaders in their spaces, from HCM to Collaboration, Workday to Box, and figure out who is killing it and why.
From that data, we’ll also pull out tips for SaaS sales leaders that you can use to level up your sales organization today
Step 1: Ask “Am I bad?” and “Who is the best?”
Imagine you’re playing sports: Find Tom Brady (for your industry). Study him. See how you stack up.
“Show me the money”
Tom Brady in sales equals rainmaker, so let’s see whose hunters are bringing in the most bacon per rep. To do this, I’m using data from Kimono Metrics, a Harvard-incubated research startup that provides sales benchmarks for any public company (Disclosure: I’m a founder of Kimono).
This is a ranking of 10 public SaaS companies by net new revenue per sales rep – basically how much net revenue increased year over year per outbound sales employee (i.e. account execs, SDRs, sales managers, etc).
Ultimate Software and Workday are crushing it, with more than 3x the net new revenue per rep of Jive and twice Infor and Netsuite.
Step 2: Ask, “Why are they the best?”
Of course, we need to go deeper to figure out why Ultimate and Workday outperform. Is it just that HCM is a great space? Probably not. Infor sells HCM too and it isn’t looking good for them.
I’ve selected a few sales pipeline metrics to help us go deeper – it’s not an exhaustive list of everything we could look at, but gets the job done in terms of painting the general picture.
When we look under the hood, what’s common in the pipeline metrics for Ultimate and Workday?
- Low ratio of customer accounts to sales employees
- High annual spend per customer
- Low annual churn
…all of which drives sky-high customer lifetime value.
These are classic high-touch, high value sales models. Notably, they’re not the only way to win – Atlassian performs extremely well with the opposite model. But, for those who are more akin to Ultimate and Workday, there are great lessons here:
Insight #1: Invest in your farmers and customer success managers. Yes, even if it costs you a lot of money in the short-run. Retention rules.
Resourcing for sales teams is a perpetual battle of “sales guys” versus “bean counters,” but it needn’t be that way.
Focus on Ultimate and Infor: two companies that compete in HCM (though Infor’s core is ERP).
Ultimate achieves more than 15x the customer lifetime value of Infor. Yet, annual customer spend explains only half of this variance at best, with 6.6x greater spend for Ultimate.
The rest comes from Ultimate’s superior churn management – clocking in at 3%, and probably driven by their low ratio of accounts to sales employees.
If Infor achieved a similar churn profile, it could triple customer lifetime value. That’s enough to pay for a lot of sales people.
Insight #2: You can probably raise prices.
Raising prices is scary. But you can probably do it. Talk to your best customers. Find out what they like about you. Ask them what features they would be willing to pay for. Build those features.
Creating small movements in spend per customer multiplies any benefits you get on churn – and it’s far cheaper than acquiring new customers. If you sell to the enterprise, there is almost certainly something you can charge for that you’re not charging for today. Add services. New modules. The sky’s the limit.
Bringing it together
The basic pipeline characteristics – spend per customer, churn, lifetime value – are driven by your sales resourcing choices, which have multiplicative effects on performance. Putting these metrics to paper, both for yourself and for competitors (or iconic companies in adjacent spaces), highlights where the gaps in your own sales machine might be.
It’s as simple as running through the two steps we just did together. Imagine if you were Infor – seeing these numbers paints a unique picture that can help you figure out exactly how to tune your own sales machine.
Get this right, and “Great strides” might indeed be in your future, Aquarius.