SER – Sales Efficiency Rating.
Question: Is it better to have A) a few sales reps closing a high % of deals each day, or B) dozens of sales of reps closing a low % of deals every day?
The answer is A) a few reps closing a high % of deals. As obvious as that may be, I have seen far too many small businesses who thought that their ticket to the big time was to hire a bunch of sales reps and get mediocre production from each one. It’s the outdated mindset of ”lower the targets and hire more people”. Put another way, let’s “do less with more”. This type of approach rarely works in business these days.
When it comes to sales staffing, the only thing that overhiring does is add to a company’s “headcount” and “headaches”. On the other hand, the far better approach is go lean and “do more with less”. By this I mean that companies should strive to recruit, hire, train, and motivate a select group of superior sales performers. OK, so superior sales reps will cost you more in individual comissions, but consider this – they will pay you back many times over by reducing marketing costs, overhead, benefits, turnover, etc. Top producers will also contribute more profitable deals that lead to healthier earnings. What’s more, they will represent your firm’s brand with integrity and professionalism, while squeezing the most out of each and every opportunity.
How do you distinguish between superior sales performers and mediocre ones? You have to devote management time and focus to evaluating each producer against an objective set of criteria. In my consulting practice, I recommend a sales performance methodology called SER (an abbreviation for Sales Efficiency Ratio). SER looks at the pound-for pound performance of every sales rep in a company compared to the market potential, sales quotas, and to each other. SER actually measures the hard dollar ROI that is being delivered from each rep based on 6 critical success factors:
1. Marketing/Ad Spend per rep
2. Contract/Gross Sales generated per rep
3. Units Sold per rep
4. Closing % per rep
5. Contribution Margin (ie – profitability) per rep
6. Customer survey scores
All of these factors are weighted and factored into a proprietary equation that determines the net Sales Efficiency Ratio (SER) for each producer. A company can then use that data to make educated decisions about which reps to keep, which ones require more training, and which ones are bleeding the company dry and need to be fired. At the end of the day, I would rather have 5 reps who can really sell than 15 who can’t!
If you would like to learn more about the SER process, or would like to conduct an on-site SER assessment of your sales team, please feel free to call me at 1-877-341-GROW.
Next blog topic: All sales people are students of their compensation plan … so structure your comp plan wisely!
