Assess sales team effectiveness by the money left after expenses, the conversion of enquiries into purchases and the time the team takes to get results. First compare sales with costs, then find the reason for any difference by looking at salespeople and deal stages. This order helps you decide where to put money: into attracting buyers, the team’s work or changing the terms of sale.
If you are looking for these measures, you probably already have reports. One shows performance against the sales plan, another shows calls, and a third shows spending on salespeople. But it is hard to get an answer to a simple question from them: should you give the sales team more money, or first work out where the current money is going?
Increasing the sales plan is the easiest thing to do here. But the sales plan will require more orders, and those orders require salespeople’s time, spending on fulfilment and sometimes discounts. Before demanding higher turnover, you need to understand how much the company gets from the work already done.
Measures of sales team effectiveness
You need three groups of measures for sales team effectiveness: financial results, turning demand into purchases, and the time and money spent. Look at them together: revenue shows volume, conversion shows the proportion of purchases, and the money left after expenses shows how much those sales left for the company.
For an initial review, this table is enough. Compile it for the sales team; also break down the rows on sales and customers by salesperson and area of business.
| Measure | How to calculate it | The decision it helps you make |
|---|---|---|
| Revenue and sales plan achievement | Divide revenue for the period by the sales plan for the same period and multiply by 100% | Whether the shortfall is in the number of purchases or the order value |
| Income after variable costs | Subtract the variable costs of the goods or services sold from revenue | Which sales leave money to cover the sales team’s costs and other expenses |
| Sales team costs | Add up salaries, bonuses, payroll charges, CRM system costs, phone services and other sales team costs | How much the current team and its way of working cost |
| Money left after sales team costs | Subtract sales team costs from income after variable costs | How much is left for the company’s other expenses and profit |
| Purchase conversion | Divide the number of buyers from a selected group of enquiries by the total number of enquiries in that group and multiply by 100% | Where in the handling process to look for losses |
| Average order value | Divide revenue from completed orders by the number of those orders | What explains a change in revenue when the number of purchases stays the same |
| Time to first payment | For each paid order, count the days from the enquiry to the first payment | When a sale brings money back and where delays arise |
| Result per salesperson | Divide sales team revenue and income after variable costs separately by the average number of salespeople working | Whether returns grow as the team gets bigger |
Take revenue from the sales records used by your company. Show money received in the bank account alongside it as a separate amount: an advance for a future order and payment of an old debt do not describe the current month’s sales. For money that buyers are already due to pay, you also need the amount of overdue payments. Compare it with the agreed deadlines, rather than a wish to collect everything sooner.
Keep the same cost categories from one period to the next. You cannot include a bonus for orders secured in variable costs and then deduct it again as part of sales team costs. If advertising is counted separately, note this beside the amount left. In this calculation, that amount must still cover advertising too.
The money left in the table is not net profit. The company still has to use it to pay expenses not included here. But it already answers the question of whether more money is left after paying for the sales team. You do not need to combine all the measures into one score to find that out.
Keep the number of calls and meetings for finding a specific cause. If there are just as many enquiries but fewer purchases, the head of sales finds out where progress stops. Simply demanding more frequent calls does not explain this. There is a separate review of the connection between being busy and getting results: Sales have dropped. Why are salespeople busy all day?.
Analysing sales team effectiveness
Start analysing sales team effectiveness by comparing results and costs for the same periods. Then break down the change by product, buyer and salesperson: the business owner needs to choose a cause the company can influence and assess the cost of changing it.
1. Choose the periods and the purpose of the comparison
For the first calculation, take two completed months. If sales depend on the season, add the same months from the previous year. If a deal takes a quarter, the monthly report will show the current financial picture, but assessing conversion will require tracking enquiries for longer.
State the decision this calculation is meant to help you make. For example, whether to hire another salesperson, increase spending on attracting customers, or keep the team as it is and improve how proposals are handled. With this question, you can immediately see what data is missing. A table for a general assessment of “good or bad” will keep growing endlessly.
The head of sales gathers deal data and salespeople’s results; the person who keeps the financial records compiles revenue and costs. The owner needs a combined calculation that covers the same scope. You should not become the link between two reports yourself every month.
2. Calculate what is left from growth
Take your revenue, subtract the variable costs of those sales, then the sales team’s costs. For example, with revenue of 6 million ₽, variable costs of 4.2 million ₽ and sales team costs of 800 thousand ₽, 1 million ₽ is left. Now repeat the calculation for the second period.
| Calculation item | First month | Second month |
|---|---|---|
| Revenue | 6 million ₽ | 8 million ₽ |
| Variable costs of sales | 4.2 million ₽ | 6.2 million ₽ |
| Income after variable costs | 1.8 million ₽ | 1.8 million ₽ |
| Sales team costs | 800 thousand ₽ | 1 million ₽ |
| Sales team costs as a share of revenue | 13.3% | 12.5% |
| Money left after sales team costs | 1 million ₽ | 800 thousand ₽ |
In this calculation, revenue grew by a third, and the share of sales team costs even fell. Two encouraging measures. Yet 200 thousand ₽ less was left for the company’s other needs. The extra 2 million ₽ of revenue went entirely into variable costs, while the sales team became more expensive to run.
Here it is too soon to reward the team for growth or blame it for the costs. First you need to find out what changed income per sale: the product range, discounts, purchase cost, delivery or order fulfilment. If production has become more expensive, training salespeople will not bring back the previous financial results. If discounts are given without good reason, you will have to start with the terms on which salespeople close deals.
3. Find the area that changed the overall result
At a minimum, split sales into new and repeat sales, then by main products. For each group, you need revenue, the number of orders, income after variable costs and the salesperson. This will show whether the team sold more of the same product or an area that leaves less money per order grew.
Compare salespeople doing similar jobs. A salesperson who receives repeat orders from buyers ready to purchase and an employee who looks for new customers start from different conditions. For each, it is useful to compare how well they keep to agreements and the results of their own work over several periods. An overall ranking by revenue will not explain whom to train, whom to give more enquiries or whose task to change.
Calculate conversion for one group of customers over the same observation period. For example, suppose 200 enquiries came in during the first half of the month, and 40 led to purchases by the chosen date. Conversion on that date is 40 divided by 200, or 20%. Unfinished enquiries stay in the group. In the next comparison, use enquiries of the same age; otherwise, the more recent group will lose out because it has had less time to buy.
4. Connect the figures with the head of sales’ actions
Choose an action based on a combination of signs. One red cell tells you too little about the cause.
- There are fewer enquiries, while conversion, average order value and income per order are unchanged. The head of sales works with marketing to examine where enquiries come from. Paying for sales training now does not address the problem identified.
- There are just as many enquiries, but purchases happen less often after a proposal. The head of sales compares the terms and conversations at this stage, identifies the recurring reason for rejection and changes how it is handled. More purchases from comparable proposals without extra discounts signal a result.
- Revenue has grown, but income after variable costs has stayed the same. Financial records show how products, discounts and costs contribute to the difference. The decision concerns a specific product or the terms of a deal; demanding even more sales will preserve the same result.
- Income from sales is growing, but suitable customers are waiting for a reply and salespeople are missing promised deadlines. The head of sales assesses workload and available time. Hiring is justified once it is clear which additional orders will cover the cost of the new person.
To assess someone’s work, you need to connect the figure with what that person did. If a salesperson loses a buyer after a proposal, the head of sales examines this stage and gets them to make changes in their next conversations. If the new approach is followed but purchases do not increase, you need to reconsider the explanation of the cause. There is no point in endlessly demanding that an employee follow an ineffective method more carefully.
How do you choose the first change and avoid spending more than it brings in?
Start with a change that has a clear source of additional money, someone to carry it out and a spending limit. Before starting, calculate how much it needs to bring in to at least cover its cost.
Suppose you want to improve how proposals are handled. With 200 comparable enquiries, raising conversion from 20% to 22% means four additional purchases: 200 multiplied by the difference of 2 percentage points. If each order leaves 30 thousand ₽ after all variable costs, four purchases will bring in 120 thousand ₽ before additional fixed costs.
This is a calculation of the required result, not a promise of growth. If the chosen change costs 150 thousand ₽ over the same period, four purchases are not enough. To cover this amount, you need five: 150 thousand ₽ divided by 30 thousand ₽. Five purchases will cover the expense but will not yet provide anything extra. This gives the owner a basis for discussing the budget before paying for the solution.
From the outset, fix the start date, the group of deals, the person who will change how the work is done and the assessment period. It must allow new enquiries to take the usual path to purchase. If a customer usually takes a month to choose, three days are not enough for a financial conclusion. In the first few days, the head of sales sees whether the new approach is being followed; at the end of the period, they see purchases and costs.
Also set a limit on losses: how much the company is prepared to spend before deciding whether to continue or stop. Include discounts, extra bonuses and the cost of attracting customers in this limit. Otherwise, the team will achieve the conversion it needs, but the cost of doing so will exceed the return.
What should you do if the report stops at total sales?
You need an assessment of each salesperson that lets you see the deals and conversations behind their results. The sales team’s total revenue does not show where losses recur or whose work the head of sales needs to review.
RENTROP has AI ROP for this: a sales team assessment shows money and conversion by salesperson, while a review of calls and messages alongside the record helps reveal the reasons for losses. The service reads the data; the head of sales makes decisions and changes how the work is done.
Costs from the financial records still need to be compared with sales. A list of strong and weak salespeople is no substitute for an answer to the question of how much the company keeps for itself and whether it should expand the team.
Growth from 6 to 8 million ₽ is easy to take as permission to spend even more on sales. But with 800 thousand ₽ left instead of a million, that permission needs to be justified again. Extra turnover also needs to benefit the company paying for all this work.