Your sales function or organization can vary wildly depending on factors such as the type of business you're running (e.g., software vs. hardware), the industry you're selling into (e.g., Defense vs private sector), and your product (e.g., Sales Force CRM vs Angry Birds). On one end of the spectrum, you may not have a formal need for a sales team if your business is selling CPG products D2C. On the other end, you may be selling very expensive machinery into a very niche market that requires a small village of people to work a single deal on an 18 month sales cycle.
"Our job as a sales force is to help our customers make the best decision they can in as little time as possible. If we aren’t the choice of that decision, at least they made that decision quicker and we were the ones that helped them. That good will will someday come back to us." - Brian Smith, CEO of Expedient
A sales strategy is a plan by an individual or a company to sell products or services to generate and increase revenue. It enables you to sell your "thing" over and again successfully. This strategy should be constantly tested, evaluated, and optimized to achieve the desired results. Your sales strategy should be informed by your GTM strategy. It should also be aligned with your product strategy and product roadmap. A well-developed sales strategy addresses three key areas: how leads will be generated, how prospects will be converted, and how accounts will be managed.
Your sales strategy will identify your target customer base and market, understand your company's unique selling points, develop your unique pitch, and evaluate the best sales channels for your product.
Your sales strategy should be customer-centric, emphasizing relationship-building and providing solutions to your customers' problems, rather than just pushing products or services. It should be flexible, allowing for modifications based on market changes, customer feedback, and sales performance.
It's common to think about sales and marketing as different functions, but many organizations also combine them into a joint Sales & Marketing (or Smarketing) team. In either case, sales and marketing need to be aligned and work cohesively to maximize customer acquisition and retention.
Sales Organization, Functions, JTBD
Sales Key Peformance Indicators (KPI's):
No sales conversation is complete without discussing the scoreboard. No function in the business has more clearly quantifiable inputs and outputs than the sales team. On top of that, sales is typically a very lucrative pay for performance setup that motivates a highly competitive environment to produce numbers. Sales KPI's are the heart of your scoreboard, helping you understand how well your team is performing and where there may be opportunity for improvement.
Sales KPI's can be vast - trackign and analyzing data in many ways. Unfortunately, there isn't a one size fits all list of KPI's for every business to use, but in general you should pick the ones that help you analyze what's most important to your business.
In "The High-Velocity Sales Organization," Marc Wayshak provides the following framework to increase sales: you must either increase your conversion rates, increase your average deal sizes, or increase the number of opportunities in the pipeline. Further, if you increase each one of these three by 26%, the result is that you double your sales.
The metrics you pick will be unique to your situation and should align with your overall business KPI's. Here are some popular sales KPI's to consider:
Annual Recurring Revenue (ARR): This KPI reflects the total value of the recurring revenue from your subscriptions on an annual basis. It’s often used by SaaS or other subscription-based businesses. Monthly Recurring Revenue (MRR) is the same concept, but on a monthly basis rather than annual.
Churn rate: – This measures the rate at which customers stop doing business with you over a given period of time, typically calculated on a monthly or annual basis.
(Number of Customers at Start of Period - Number of Customers at End of Period) / Number of Customers at Start of Period
Customer Acquisition Costs (CAC): This measures the total cost of acquiring a new customer, including all aspects of marketing and sales.
Total Cost Spent on Acquiring a Customer / Number of Customers Acquired
(Total Sales Spend + Total Marketing Spend) / Number of Customers Acquired
Customer Lifetime Value (CLTV or CLV or LCV or LTV): This measures the total value you can expect from a single customer account over the length of their relationship with your company. There are differing opinions on whether this value is purely related to lifetime revenue or profit. If you're making a one-time sale and don't expect many repeat sales or revenue streams, then this could be a fairly simple exercise. If you're providing a multi-year subscription service with annual billings and an annual cost of serving a customer, then this becomes a slightly more complicated exercise that may take into account the net present value of cash flow in future years as well as the cost of capital. With that in mind, here are some simple references for how this may be calculated.
Net retention rate (NRR): This KPI measures the growth of existing customer revenues, considering both upsells/cross-sells and churn.
(Starting MRR + Expansion + Upsells - Churn - Contractions) / Starting MRR
Meetings/Demos Scheduled: Popular in B2B SaaS sales. This simply represents the number of qualified meetings you set up per the definition of your sales process. For example, a B2B SaaS org may expect to convert 10% of all product demo meetings into a sale, so tracking demos scheduled is one way to estimate performance.
Remaining Performance Obligation (RPO): This is the contracted revenue that is yet to be recognized (i.e., your backlog). It’s commonly used in SaaS or other subscription businesses. It's also common in industries with long term service contracts.
Sales Velocity: This KPI has been growing in popularity over the last few years. This measures how quickly leads are moving through your pipeline and generating revenue.
(# of Opportunities in the Pipeline * Average Deal Value * Average % Win Rate) / Length of Sales Cycle
Time in Stage: The number of days an opportunity has been in a given stage of your sales process. This helps identify the average number of days per sales cycle, helping identify areas for improvement. It also helps you quantify the average sales cycle by aggregating the stages.