Calculating sales efficiency in a start-up: The magic number that will help you scale

This post was originally published on this site

Ryan Floyd Contributor Share on Twitter Ryan Floyd is a founding Managing Director of Storm Ventures, investing in early stage enterprise SaaS companies, and the host of Ask a VC Youtube channel.

Sales efficiency is the best way to understand the economics of a business. To me, it answers the question as to whether a business can ever scale. The harsh truth is, if it can’t scale, investors won’t be interested.

Sales efficiency is more simple to measure than other related concepts like CAC (customer acquisition cost) or LTV (lifetime value). Here’s why:

CAC is harder to truly measure, especially new CAC. In a SaaS organization, sometimes it can be hard to allocate those costs to what that new CAC is, as opposed to upsell or cross-sell within the same organization. Salespeople are almost always trying to pursue two goals: Trying to acquire new customers Selling within an existing customer (more seats within an established department, or expanding to a new division)

These activities generate different CAC; trying to strip out only the new CAC can be tricky. Sales efficiency, on the other hand, looks at all

contactedorg

Check out http://contacted.org