The more your SaaS or software company offers a more sophisticated, higher priced solution, the more likely it is you will use a salesforce – yes, one with real people! Their role is to help convince customers of your merits and bring in orders. Whether your salespeople are inside or field representatives will depend on your offering and your target customers. In either case, how soon will they generate the right levels of revenue?
Impact of Time to Productivity on Your Profit and Cash Flow
One thing is sure: the faster new sales reps can achieve productivity and quota, the more profitable your company will be. Conversely, a business plan for a new company must allow for productivity ramp-up time for sales people. This will have an impact on your cash flow and funding requirements. It could even constrain your growth, because you’ll need to pay staff for a certain period before they can contribute full value back to your company.
Ramp Up Times of 2 to 6 Months, Depending on the Type of Salesperson
With this benchmark – “Productivity Ramp Up for Sales Dev., Inside Sales and Field Sales Reps” – Lean-Marks give you data on the average time companies must wait before seeing full productivity for these different kinds of salespeople:
- Sales/business development reps focus on generating market interest and leads for the business. A lead means “serious interest from prospective customers with the necessary budget for a solution your company can profitably provide.” Ramp-up time may cover induction, creation of a base for prospecting, and starting initial contacts with customers. Insight Partners cites a ramp-up time benchmark of 2 months, and Bridge Group 3.8 months.
- Inside sales reps make sales by phone and by email. They deal with complete sales cycles or with the part of the sales cycle from a lead to closure – customer subscription, signature of an annual contract, or similar. Successfully completing the sales cycle may take longer than the time taken to generate the sales lead that started the cycle. The benchmark from Insight Partners for productivity ramp-up this case is 6 months. Bridge Group puts it at 4.9 months.
- Field sales reps meet customers in person. They also handle a complete sales cycle or the part from lead to closure. The ramp up benchmark from Insight Partners is 6 months here.
Beyond the Initial Salesperson Warming-Up Period
To improve your model start-up and ongoing sales productivity further, you may also want to use benchmarks like:
- Average tenure of salespeople (to factor the productivity ramp-up time into your business plan, each time a salesperson is replaced)
- Percentage of salespeople actually achieving quota throughout their period of tenure (after the initial ramp-up period)
- Average ratio of employees across sales functions (for example, 1 Sales Engineer can support 5 Inside Sales reps, whereas 1 Sales Engineer can onlysupport 3 field Sales Reps)
Can You Reduce Sales Productivity Ramp Up Time?
Can you simplify and shorten the purchasing process for the customer? If so, you might then increase your potential for making sales online and decrease your need for salespeople. Overall, you would then reduce the financial impact of the productivity ramp-up time. On the other hand, customization to end-user needs and personal contact may be key differentiators for your solution, compared to competitors. Time to productivity may simply be incompressible.
Through these different benchmarks, you can refine your business pre-launch and launch planning, and your ongoing cash flow and profitability thereafter.