Attention C-Suite! Revenue by Salesperson is Faulty Data

I’m going to provide CEOs, CROs, COOs, CFOs and anyone else who cares, a lesson in rating salespeople.

There is rhetoric, there are facts, and there are conclusions to be drawn from the facts.

In companies, one fact that comes directly from the spreadsheet is revenue by salesperson (RBS). In my opinion, RBS tends to be more rhetoric than fact.

Temperature is widely accepted as fact but it too can be rhetorical when an 80 degrees Fahrenheit temperature lacks context. On a summer day, that’s nothing special, but in the middle of winter? That’s crazy hot! It’s the same thing with RBS. Until you unpack the context for the number, it’s a grade, not an entire report card.

In sports, where panels judge an athlete’s performance, their best and worst scores are sometimes ignored or deleted, to remove possible bias and outliers, before arriving at an overall score. This practice is called a Trimmed Mean.

To unpack revenue by salesperson, I’ll share a common example of what I have consistently seen for decades.

Don’t Let One Big Deal Fool You

Bill’s revenue was 25% of the company’s overall revenue of $40 million. It was a very important $10 million, and significantly more than the $30 million contributed by the other 8 salespeople combined. It’s also a meaningless number until we know more about it:

• Let’s apply the Trimmed Mean to Bill’s $10 million year-end revenue. What was his average sale after applying the trimmed mean?
• What is the gap between the largest and second largest sale making up his $10 million? Was there a 7-figure gap? Then the largest sale was a huge outlier.
• Was the largest sale from bringing on a new customer or was it from an existing customer? If it was an existing customer, was that a typical, annual purchase or did something change?
• What was year-over-year growth of his existing customers?
• Is Bill the salesperson who sold the existing customers or did he inherit them from others?
• How many sales made up the $10 million? How do his number of sales compare to the other 8 salespeople?
• Did his volume come at the expense of margin, making it more costly revenue?
• What was Bill’s win rate? If it was high compared to the rest of the sales team, he probably didn’t have many opportunities in his pipeline beyond those he closed from existing accounts. If it was low compared to the rest of the sales team, he was more active at hunting for new business, but less effective getting opportunities closed.
• What did Bill contribute to the company’s growth? If company revenue was flat, and Bill grew his revenue by 10% or more, that’s positive. If company revenue was up by 10% and Bill’s revenue was flat or down, that’s negative.
• If we conduct the same exercise on the other 8 salespeople, we might learn that some of them found more new opportunities, had higher win rates, sold at higher margins, had a higher average sale, but were simply not the beneficiaries of 1 or 2 large sales from existing large accounts. You might conclude that they are actually better salespeople despite the lower annual revenue.

Revenue by Salespeople isn’t a statement on sales effectiveness, it’s an envelope that holds the keys to the sales kingdom.

It’s also an opportunity to identify training and coaching opportunities. I’ve previously written that when salespeople get just 10% better at 3 metrics, revenue increases by 33%. Do the math!:

• 10% more opportunities in the pipeline
• 10% higher win rate
• 10% higher average sale

Multiply them: 1.1 × 1.1 × 1.1 = 1.331, or a 33% revenue lift. What’s not to like?

So, what do we need in order to train salespeople to be 10% better at those 3 metrics?

• Targeting the sweet spot
• Prospecting and scheduling new meetings with new prospects
• Following a consultative, value-based Sales Process for consistency, shorter sales cycles and predictive results while respecting the buyer journey
• Listening and questioning skills for better discovery
• Being the value
• Differentiating from the competition
• Thorough qualifying and disqualifying
• Improved Sales DNA – the strengths that support the execution of sales process, sales methodology, sales strategy and sales tactics.
• Improved motivation to compensate for complacency
• More consistent use of CRM to help them sell

The most important element to assure that you achieve a sales increase of 33% is coaching. Not as a substitute for training, but in support of training. Only 7% of all sales managers coach daily and effectively. Your sales managers must be able to prioritize daily coaching, while using role play to demonstrate what good sounds like.

Unfortunately, it’s proven that asking sales managers to coach doesn’t change anything. They’re buried in busy work, call reports, fire drills and hitting your numbers. Your sales managers must be trained and coached on how, when and why coaching is so important, and you must hold them accountable for improvement, application, execution and success with their coaching.

We’ve circled back to you in the C Suite.

We can help and we’re just a click away. You can reach us by clicking here.

Bonus – this three minute video on Revenue Sensitivity is my most watched ever.