In conversations with our customers, one thing has become apparent: sellers are increasingly expected to do more with less. Despite limited resources, sales teams are facing growing targets in a hyper-competitive B2B sales environment. This is forcing companies to double down on sales efficiency.
Read more as we dive into why sales efficiency is vital for B2B sales teams, how to calculate sales efficiency, and a few key ways you can make your sales cycle more efficient.
What is sales efficiency?
Sales efficiency is a metric that expresses how much revenue a company generates for every dollar spent to close a deal. Put simply, it defines how well sellers drive sales with the resources available to them.
Maximizing sales efficiency is critical for B2B companies, as it’s a direct indicator of sales performance and the revenue impact on the business. The more efficient your sales team is, the more revenue you can drive with the same—or fewer—amount of resources.
There are two ways to improve sales efficiency. The first is by scaling the amount of revenue you can generate with your existing resources. The second is by reducing the amount of resources you need to make the same amount of revenue.
What is a sales efficiency ratio?
An organization’s sales efficiency is typically calculated by measuring its overall revenue against sales and marketing expenses. This is known as a sales efficiency ratio—or SER—and provides a quantitative measure of sales efficiency within a given period.
- New revenue: All annual recurring revenue (ARR) within the given period.
- Sales and marketing costs: Any sales and marketing spend incurred to make those sales. This might include employee salaries, the cost of sales software, marketing material, and more.
In some instances, the sales efficiency calculation may also be expressed as a percentage.
For example, consider a company that drives $3M in ARR in one year and spends $1M on sales and marketing expenses that year. This company has a sales efficiency ratio of three, or 300% expressed as a percentage.
What is a good sales efficiency ratio?
The general consensus is that a good sales efficiency ratio ranges anywhere between one and three. A sales efficiency ratio exceeding three is a sign of an extremely healthy sales cycle. But a ratio that slips below one could be a sign of significant inefficiencies in the sales process or sales operations.
When establishing an efficiency target for your specific sales team, it’s important to consider historical data, other efficiency metrics, and sales efficiency ratios within your industry.
Why is sales efficiency important for all sales reps?
From research to contract negotiations, prioritizing sales efficiency helps individual sellers and sales teams become more productive throughout the sales cycle.
Here are a few reasons why sales efficiency is important for sales teams.
- Efficient sellers close more deals in less time: Efficient sales processes eliminate blockers and wasted resources. When sellers have streamlined workflows, they can focus on moving deals through the pipeline faster.
- Higher sales efficiency often lowers customer acquisition costs: The more time and resources you need to generate leads and close deals, the higher the cost of acquiring new customers. Efficient sellers can do more with fewer resources, lowering the average cost of acquiring new prospects.
- Increasing sales efficiency boosts profitability: When sales teams are able to efficiently acquire more new customers with the same amount of resources, companies benefit from higher revenue without the higher costs.
- Sales efficiency metrics can highlight areas of improvement: When sales managers double down on sales efficiency metrics, teams are more likely to identify if and where they’re experiencing low sales efficiency. This allows sellers to focus on specific areas of the sales process that need improvement, so they can make the most of their time and resources.
- Sales efficiency can boost sellers’ job satisfaction: When sellers aren’t bogged down by inefficient processes, they’re more likely to feel that they’re making a positive impact. This sense of purpose can increase employee engagement, morale, and job satisfaction—all of which are tied to employee productivity and performance. And where compensation is tied to sales performance, increased efficiency empowers sellers to unlock better rewards for their efforts.
Doubling down on key aspects of the sales cycle like relationship management can also drive disproportionate efficiency gains. Jake Reni, Chief Growth Officer at Revenue Reimagined notes that “Leveraging your network and [their broader connections] has a compound or exponential impact on the way we can move quickly with relationships that are warm and contacts and data we can trust.”
What metrics should you measure to track sales efficiency?
The sales efficiency ratio formula is just one way to measure the success of your sales team. When it comes to understanding your sales team’s performance, there are several similar metrics and KPIs you can—and should—look at.
However, when it comes to setting objectives and OKRs, Jake Reni, Chief Growth Officer at Revenue Reimagined, advises that less is more. He says, “I started capping my team’s at three [...] Before you know it, those three turn into all of the projects associated with all of the other outcomes tied to all your cross functional organization’s [goals].”
LTV: CAC ratio
LTV: CAC ratio stands for customer lifetime value to customer acquisition cost ratio. This metric represents the average total lifetime revenue you’ll earn from each customer relative to all the costs incurred to acquire a new customer.
Most B2B sales and marketing teams consider a 3:1 LTV: CAC ratio as a sign of sales efficiency.
Payback period
The CAC payback period is the time it takes for your company to recoup the costs you’ve spent acquiring a customer. For example, if your CAC is $1,000 and a customer pays you $100 a month in revenue, your payback period is 10 months.
Generally, the faster your costs are paid back, the more efficient your sales. Payback period benchmarks will vary depending on your business model. However, the median payback period for B2B SaaS companies in 2023 was 17 months.
Gross sales efficiency ratio
Gross sales efficiency is a more specific variation of the sales efficiency ratio. It considers gross new revenue and is used to measure the overall efficiency of your sales pipeline within a specific time frame.
Net sales efficiency
Net sales efficiency takes into account lost business by measuring net new ARR against sales and marketing expenses. This gives sales teams better insight into the impact of customer churn and customer retention.
For example, a low net sales efficiency ratio may suggest that you’re closing deals with unqualified prospects who end up being a poor product fit and do not renew their contracts.
Magic number
The magic number is a SaaS sales efficiency metric that trades annual recurring revenue for generally accepted accounting principles (GAAP) revenue.
As revenue can often be calculated differently, the magic number enables companies to measure sales efficiency using a standardized approach. The SaaS magic number is often used so companies can compare efficiency and establish accurate benchmarks for their sales teams.
Real-time data, real-time understanding: Metrics are only as valuable as the quality of data used to calculate them. In order to accurately assess current performance, sales teams need access to complete and up-to-date deal data. See how Affinity for Salesforce improves data availability with automated activity capture and enhanced Salesforce data.
How to improve sales efficiency
Let’s explore a few ways that B2B sales teams can improve sales efficiency.
Refine your buyer personas
Not every prospect is the right fit. Sellers can easily find themselves spending valuable time and resources targeting opportunities with a low probability to close. Clear buyer personas help sellers confidently qualify leads and focus their sales efforts on the right prospects.
A clear understanding of the challenges and priorities of prospective buyers also enables salespeople to draw on the right messaging and sales strategies to drive deals forward.
Define and adhere to your sales process
With many moving parts, getting complex deals across the finish line quickly is no easy feat. However, having a tried-and-true sales process can help sellers stay on track and focus on the tasks that drive your pipeline forward.
One of the biggest culprits of wasted resources is sellers spending time on tasks that are not related to selling activities.
For example, a recent Affinity survey found that 69% of sales leaders say their team spends over 4 hours a week updating their CRM.* While having updated data is critical to accelerating deal velocity, a defined sales process can identify when automations and other solutions should be implemented to ensure efficient use of time.
Not taking full advantage of customer data is another culprit. Jeff Poczatek, VP of Sales at Affinity, describes the importance of creating standard processes for analyzing and using customer data.
He says, “You’re sitting on a treasure chest of information within your CRM. But how do you make it work for you—versus [spending time on] a data entry validation exercise, which isn’t fully useful for the team typically? First and foremost is standardizing best practices for taking all of the [customer] information and making it actionable to do whatever motion you’re trying to accomplish.”
Invest in sales coaching and training for sales reps
Ongoing sales training and coaching can help sellers stay on top of best practices and maximize their performance. While investing in coaching and training might increase sales expenses in the short term, efficient sellers are more productive and drive more revenue—increasing sales efficiency in the long run.
That being said, sales managers need access to the right data in order to effectively target coaching and training strategies. Fortunately, from activity tracking to real-time deal data, these insights can be easily unlocked with the right sales tools.
Use the right sales tools
In a recent Affinity survey, we asked sales managers about the single biggest improvement they believed they could make in 2024. The top choice, selected by 41% of respondents, was a better use of existing technology.*
Jeff Poczatek, VP of Sales at Affinity, notes sellers can use tools to alleviate their workflows during more demanding periods: “As teams have gotten leaner, more has been put on individuals—whether it’s full cycle or they're contributing more of their own pipeline. [This is where sellers can use] solutions, tools, and processes that can help automate some of the workflow for the rep to focus on revenue-facing activities.”
Sales productivity tools such as Affinity for Salesforce use AI and automations to eliminate manual data entry and surface insights that sellers can use to make informed deal decisions and close deals faster. Access to enriched CRM data and relationship intelligence can help sellers stand out from the competition and close more high-quality deals.
Access to the right technology is vital for sales teams looking to improve sales efficiency and cut back time spent on non-revenue driving activities.
{{a4s-guide-202401="/rt-components"}}
Boost your sales efficiency with Affinity for Salesforce
Affinity for Salesforce is the sales productivity tool designed to help modern B2B organizations elevate their sales performance. Through automated data capture and relationship intelligence, Affinity for Salesforce enhances sales efficiency so sellers can close more deals—faster.
- Save over 200 hours a year of manual data entry. Affinity for Salesforce eliminates data drudgery with automated record creation, data enrichment, and CRM upkeep, so sales reps can focus on doing deals.
- Make better sales decisions, faster with deal insights right at your fingertips. Say goodbye to toggling between tabs and tools. Accelerate deal velocity with access to relationship insights, deal data, and other critical Salesforce information right within the tools you use every day.
- Unlock warm introductions that help deals close 25% faster. AI-driven relationship intelligence helps sellers access their entire company’s relationship network to discover new opportunities and the most efficient way to access them.
{{request-demo="/rt-components"}}
Sales efficiency FAQs
What’s the difference between sales efficiency and sales effectiveness?
Sales efficiency and sales effectiveness are often used interchangeably. However, they are different metrics.
Sales efficiency is a measure of the revenue generated by a sales team in relation to the costs needed to secure that revenue. Sales effectiveness, on the other hand, is a measure of a sales teams’ ability to convert customers and accelerate pipeline progression.
While sales efficiency and effectiveness are different metrics, they are closely intertwined. Both metrics impact one another, which is why it’s important to strive for both efficiency and effectiveness.
How can a SaaS solution help improve your sales efficiency?
A SaaS solution can help improve your sales efficiency by automating tasks—such as data capture—that would otherwise be time-consuming or tedious. It can also harness the power of AI and other technology to quickly surface deal insights so sellers can quickly make informed decisions.
For example, Affinity for Salesforce automatically captures sales activity and surfaces up-to-date relationship intelligence alongside other CRM data. This information makes it easier for sellers to source and generate high-probability-to-close opportunities.
{{a4s-request-demo="/rt-components"}}
SaaS solutions help streamline the sales process, giving sellers time back so they can focus on revenue-driving activities.
Can you automate sales efficiency?
Yes, with tools like Affinity for Salesforce, teams can automate parts of the sales workflow to improve efficiency.
While not every part of the sales cycle can be automated, technology can play a big part in enabling sellers to focus on building relationships so they can close deals faster.
* Data from Affinity’s 2024 survey of 250+ business leaders across investment banking, media and communications, real estate, professional services, healthcare, financial services, manufacturing, and enterprise technology.
.webp)
