For many IT outsourcing and consulting businesses, an inside sales team can drive growth through lead generation. However, simply investing in inside sales is not enough; key metrics must be tracked to measure effectiveness and value.
Current challenges:
The inside sales revenue target may not be fully achieved. Revenue growth has also slowed compared to the previous year. Higher revenue is needed to cover costs.
The sales team may generate the targeted number of leads per month. However, only a portion of leads actually need the services. Lead quality needs improvement.
The conversion rate of qualified leads into customers may be below the targeted rate. This indicates the sales process and value proposition may not be effective.
The amount spent to make a single sale may be high, which needs to come down through better efficiency.
The average recurring customer lifetime value may be less than targeted to justify high acquisition costs. Longer customer lifespans are required.
The average sales cycle from lead to close may be longer than aimed for, slowing revenue recognition.
Here are some potential "loss" metrics for an underperforming inside sales function:
Revenue Loss: If the inside sales team is achieving only 70% of its revenue target, that could equate to a revenue loss of 30% of the target. For a $10 million revenue goal, that's $3 million in lost revenue.
Lead Loss: If only 30% of leads actually have a need for the company's services, that means 70% of leads are wasted. For an average of 125 leads per month, that translates to 88 wasted leads per month.
Conversion Rate Loss: If the actual conversion rate is 7% but the target is 10-15%, that represents a conversion rate loss of 3-8% (relative to the target).
Cost Inefficiencies: If the cost per sale is $1,200 when the target is $500, that represents an excess cost of $700 per sale. Multiply that by the number of sales closed in a year to determine the potential cost savings that could be achieved.
Customer Lifetime Value Loss: If the actual customer lifetime value is only 2.5x their initial contract value when the target is 3-5x, that represents a 25-50% loss in lifetime value per customer.
Revenue Delay: A longer sales cycle of 55 days versus a target of 40 days means a delay of 15 days per deal on average. For 100 deals closed per month, that amounts to 1,500 days of delayed revenue or over 4 years of "lost time".
Here are some ways to reduce the cost per sale for an inside sales function:
Improve lead generation efficiency - Focus your lead generation efforts on sources that provide higher quality leads at a lower cost. Narrow your targeting to only the most relevant prospects.
Optimize sales processes - Streamline your sales processes to minimize redundant tasks and time spent per lead. Implement automation and software tools where possible.
Improve sales skills and training - Ensure your sales team has the knowledge and tools they need to qualify leads properly and close deals more quickly and effectively. Ongoing training can improve conversion rates.
Split sales roles - Consider having dedicated sales development reps to qualify leads and pass them to closers once they are sales-ready. This specialization can improve efficiency.
Offer tiered solutions - Provide lower-cost, simpler solutions for prospects that don't require as much time and hand-holding. Save your most custom solutions for higher-value customers.
Boost conversion rates - The easiest way to lower cost per sale is by increasing the number of sales closes without adding significant extra costs. Focus on improving sales messaging, qualifying processes, and customer experience.
Optimize commissions - Adjust your compensation model to reward salespeople more for acquiring higher value, lifetime customers rather than just deal volume. This can shift focus to deals that offer the most profit.
Leverage technology - Implement sales automation tools like CRMs, marketing automation, and chat/messaging platforms. Technology can reduce administrative tasks and support your sales team.
Reduce overhead costs - Look for ways to reduce costs outside of the direct sales process, like office space, software subscriptions, travel expenses, etc. Every dollar saved helps lower the cost per sale.
Examining key metrics reveals opportunities to make the inside sales function more effective and valuable. Tracking the right KPIs is the first step - implementing changes based on those insights will truly improve performance.
The potential "loss" metrics can provide a sobering reality check for an underperforming inside sales function. By quantifying the gaps versus targets, it helps illustrate the urgent need for improvement to minimize losses and optimize performance going forward.