Technical Sales by Hub
Chief Revenue Officer: Explore How Presales Can Improve Your Sales Efficiency
If you are a Chief Revenue Officer (CRO) concerned about your sales efficiency, you should find this post interesting.
Historically, CROs and the C-suite pay close attention to funnel stages driven by sales development representatives (SDRs), account executives (AEs), and customer success (CS) reps. However, less attention has been paid to optimizing the middle of the funnel that presales and sales engineering drive. As go-to-market professionals, presales could present a huge opportunity to drive more growth and do it more efficiently.
To better set the stage, let’s first grasp the definition of sales efficiency.
Tomasz Tunguz from Redpoint Ventures published a blog post, “Sales Efficiency Benchmarks For SaaS Startups,” that defines sales efficiency and provides metrics of publicly traded SaaS companies. The sales efficiency definition is simple: incremental revenue returned by sales and marketing expenses.
Tomasz gives this example: “If a startup invests $500k in marketing and sales this quarter and generates $1M in incremental revenue, net of the cost to provide the service for the next 12 months, the sales efficiency would be 2.” Tomasz goes on to provide metrics on the average SaaS company sales efficiency, as depicted below, which ranges from 5.0+, which is exceptional, to below 0, which is bad. The higher the sales efficiency score, the better it is for your company.
Tomasz also provides sales efficiency metrics for 34 companies that include the likes of ServiceNow, LinkedIn, WorkDay, Salesforce, Qualys, and many more.
As the CRO, you and the C-suite should be tracking your company’s sales efficiency score relative to your industry peers, as these metrics have a direct implication for the enterprise value of your company.
Now let’s look at a few scenarios on how sales efficiency can be increased by improving SDR, AE, and presales and sales engineering performance.
Improving Sales Efficiency
For illustrative purposes, let’s look at a SaaS company that has a baseline sales efficiency metric of 0.8. This company follows a sales-led growth approach that incorporates SDRs to drive outbound awareness, AEs to provide business-level qualification and presentations to drive the purchase of the prospect, and presales to deliver technical presentations and demos as well as manage evaluations, commonly referred to as Proof of Concept (POC) and Proof of Value (POV).
How can the company improve its sales efficiency score? There are several possibilities. First, let’s look at the scenario where the CRO and C-suite opt to improve SDR performance with a mix of tools, such as sales engagement platforms provided by companies like SalesLoft and Outreach, to help SDRs increase awareness with prospects and set up more qualified sales meetings. These investments in SDRs related to top-of-the-funnel (TOF) activities result in a 0.2 increase and a new sales efficiency score of 1.0.
Now let’s run through a scenario where the CRO and C-suite invest in making their AEs more effective by providing them training on sales methodologies like MEDDIC that improves their qualification skills, tools like Gong to analyze and enhance their presentation skills, and quote-to-cash tools to streamline the purchase stage of their sales cycle. Let’s say that a combination of these investments results in a 0.1 increase in qualification, 0.1 increase in presentation, and 0.2 increase in the purchase phase of the sales cycle. The cumulative 0.4 sales efficiency increase results in a new sales efficiency metric of 1.2.
Now let’s look at the final scenario where the CRO and C-suite invest in presales training and tooling specifically built to support presales workflows, thus making sales engineers more effective with their time. These technology investments could include solutions like Consensus or Demostack — designed to automate demos and systems like Hub that provide a unified presales system of execution and source of record — that not only help presales better orchestrate their daily work but also enable presales leadership to better analyze their business so they know where additional investments will yield the greatest return.
It’s important to note that presales can support anywhere from 1 to 10+ AEs who may have anywhere from $750K to $1.5M quota objectives. This means presales are critical to middle-of-the-funnel (MOF) activities, and it gives them great influence across a broad spectrum of quotas. So it is not unreasonable to expect that presales could increase technical presentation performance by 0.1, technical demos by 0.3, and eval POC/POV management by 0.4, resulting in a new sales efficiency score of 1.6.
In the scenario above when comparing the impact of investments across SDRs, AEs, and presales, you can see that presales can yield the greatest sales efficiency improvement at +0.8, achieving a score of 1.6. Improvements in AE, on the other hand, provide a +0.4 increase, resulting in a 1.2 overall sales efficiency score. and SDR performance with a +0.2 increase resulting in a new efficiency score of 1.0.
While the scenarios above may or may not directly apply to your business, that’s okay. This post is intended to spark conversations and thoughts on how you can improve sales efficiency for your business without overlooking the value of presales.
Even so, we operate in an era where investing in SDR and AE performance with specific training and purpose-built systems is a given. A plethora of sales methodologies, training providers, and vendors that cater to these personas is evidence enough. But, as the CRO, you might also explore the potential for sales efficiency gains by investing in presales. There are now specialized presales trainers and an emerging class of presales vendors focused on helping the C-suite optimize MOF steps of the sales cycle.
If you and the C-suite want to find new ways to significantly improve sales efficiency, it’s time to broaden your options. Start having those conversations now with your presales leaders to see how they can help unlock greater efficiencies that drive your growth and increase your enterprise value.