As sales leaders, we’re constantly looking for ways to grow the business and ultimately, it boils down to bringing in more revenue. A simple solution is to just keep hiring more and more people, and it sure feels good to have a big salesforce reporting to you, but there’s another route as well. What about, instead of doubling your headcount, all your existing reps could sell twice as much?

In other words, improving the productivity of your existing reps can be a huge boost for the business. How do you know your reps are working at their maximum capacity? It sounds harsh and we shouldn’t forget the human element out of the equation, but if they are making only 10% of what they could, chances are you wouldn’t get much out of your new hires either.

Whenever you want to start improving something, the first steps are to define the thing you’re improving, then setting up proper metrics to track progress. That’s what this post is all about- figuring out what are the different components of sales productivity are, and suggesting some simple formulas to measure it.

Productivity = Efficiency x Effectiveness

Before diving into the different metrics and measurements, let’s take a moment to specify what we mean by Sales Productivity. It’s a phrase often used vaguely to describe a lot of different things, so let’s get our terms straight.

In short, Sales Productivity is the amount of revenue generated by sales rep’s, or the organization’s efforts. If we break it down to different components, it’s a product of efficiency and effectiveness. Here’s what I mean:

  • Sales Efficiency is all about resource management—time management, budget management, you-name-it management. An employee who can accomplish a great deal of work with the resources available to them is more likely to have a high level of sales productivity (increased revenue). However, efficiency means little without one last thing — effectiveness.
  • Sales Effectiveness is a measure of performance and quality rather than output. A sales rep who, for example, meets with 10 prospects in a week and nails 8 clients is highly effective. A less experienced sales rep or a rep who needs to brush up on their skills may meet with the same number of prospects but only attract 3 callbacks. Both were equally efficient by scheduling the same number of meetings in a week, but one was clearly more effective and, therefore, more productive.

In other words, you increase sales productivity as a result of efficiency and effectiveness combined. They do not all mean the same thing, and understanding these differences provides critical insight to sales team managers and business owners.

Simple Formulas for the Win

Despite its concise definition, there are many ways to calculate or measure sales productivity. Some calculations are more complex and require a lot of data that might be difficult to collect, but luckily there are also a few simpler formulas.

Here are four simple ways to concretely measure sales productivity either for an individual rep or team.

  1. Calculate sales per hour without including time the employee spent on non-sales related tasks.
  2. Divide the gross dollar amount of sales within a week by the number of transactions completed by a sales rep to calculate the salesperson’s average transaction amount.
  3. Use the average number of items in a single transaction as a metric to measure productivity by dividing the total items sold within a week by the number of transactions within the same week.
  4. Average profit per transaction can be calculated by dividing the total weekly profit made by a single sales rep and dividing it by the number of items sold by that rep.

One benefit of tracking progress with a simple formula is, that even though it might not reflect all the nuances, you don’t need to spend a ton of time collecting the data and can instead focus on actual productivity improvements.

It’s a Good Start

Speaking of improvements, setting the measurements is a good start, but doesn’t by itself make a dent in the bottom line. The only reason you should measure something is, that you intend to track progress and actively make improvements. In the long run, what matters is the rate of improvement, not where you started from.

How to achieve those improvements, then? An obvious answer would be to acquire and develop better tools and technology, which certainly is important. For example, if your team spends time on unnecessary busywork or reporting, it’s away from actually making sales, and therefore reduces their productivity. But, sometimes people mistake technology as a goal in itself, instead of seeing it just as means to an end.

What’s more important than technology is a mindset. You track progress week over week, and actively look for inefficiencies to eliminate and best practices to boost effectiveness. The real gains come from the mindset of continuous improvement.

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