Sales Ops

How to analyze and optimize a SaaS sales team

In my previous company, I had the opportunity to see first hand how a SaaS sales team is built, managed, measured, and optimized.

I worked closely with a number of very talented and experienced sales managers and operations specialists who helped guide my team and I on how best to measure, track and report on the performance of a sales team.

In this post you'll learn the following:

  • The importance of the sales funnel, pipelines, time and other areas for measuring your sales organization.
  • Which sales metrics you should be tracking.
  • How to proactively help optimize your SaaS sales team.
  • Which tools to consider for your sales reporting.

The importance of the sales funnel

When it comes to sales analytics, it all starts with the sales funnel.

For most SaaS companies, their sales funnel will look something like the funnel shown below.

SaaS sales funnel example

As you can see the typical sales funnel for a SaaS sales team is very long. Thankfully every step in this funnel can be tracked and therefore understand exactly where the sales team is underperforming.

Before I start dissecting the funnel and providing more context, I want to mention that my version of a SaaS sales funnel isn't the only version of such a funnel.

For example, not all companies employ the "sales development rep model" (SDR model) and instead prefer to send every lead to account executives (AKA "closers").

You will quickly learn that the core concepts I cover in the remainder of this post are more critical than the actual steps in the funnel.

As a general rule, the more granular you can get with your funnel, the more opportunity you'll have to optimize it.

Top of the sales funnel: Marketing's responsibility

top of the saas sales funnel example

The first steps in the sales funnel, what we could consider the top of the funnel, are under the responsibility of the marketing team.

In all organizations that have a direct sales team, there is a symbiotic relationship between the marketing and sales teams.

Sales can't serve their purpose without leads, and marketing can't show a ROI for their efforts without deals being closed.

It is the marketing team's job to generate leads, qualify these leads, and pass them to the sales organization.

Today most companies use the inputs in signup forms, or third party lead scoring systems, to determine which leads should become marketing-qualified leads (MQLs), and which should be marked as "lost".

The middle of the sales funnel: SDRs responsibility

middle of the saas sales funnel

The next few steps in the sales funnel, and the first section of the funnel under the responsibility of the sales organization could be considered the middle of the funnel.

This phase of the sales funnel will be used to achieve the following:

  • Further qualify the lead - We need to know that this lead matches the criteria we have set for the ideal paying customer. This will change from company to company but common criteria include budget, size of company, stage of the company, and what exactly the company hopes to achieve with the solution. Since the time of an account executive is worth more than that of an SDR, the SDRs job is to filter out unqualified leads so the AEs can focus on closing deals.
  • Set expectations and warm up the lead - A secondary goal of the SDR is to share the sales process with the lead, set expectations in terms of timelines, and generate excitement so the lead is more likely to close with the AE.

The end of the sales funnel: AE's responsibility

end of the saas sales funnel

The last part of the sales funnel is under the responsibility of the account executives.

In this phase of the process the goal is to demo the solution to the relevant decision makers, and drive the opportunity to closure ("closed won").

In some organizations it is the responsibility of the account executive to make sure that payment has been received, and should consider the deal under their ownership until the money owed has hit the bank account.

Once payment has been received the next logical step is to pass the new customer to the customer success team.

The sales funnel metrics

There are a number of important metrics we can track and analyze in the sales funnel.

Like in any funnel, we can analyze the conversion rate between each step, and the volume, in absolute terms, that passes through each step.

In other words, when looking at the funnel above we get the following metrics:

  • # of leads
  • Lead-to-MQL conversion rate
  • # of MQLs
  • MQL-to-SDR assigned MQL conversion rate
  • # of SDR assigned MQLs
  • # of contacted SDR assigned MQLs
  • SDR assigned MQLs-to-contacted SDR assigned MQLs conversion rate
  • # of connected MQLs
  • Contacted SDR assigned MQLs-to-connected MQLs conversion rate
  • # of connected MQLs with completed intro calls
  • Connected MQLs-to-connected MQLs with completed intro calls conversion rate
  • # of SQLs
  • etc etc

As you can see there is a long list of metrics we can, and should, track.

saas sales conversion rates

You might think this is overkill and that you should focus on the major steps in the funnel.

If you have a lot of gaps in your data and limited resources then I would agree and you should focus on the ends of the funnel and make your way inwards.

If you are using a quality CRM system like SalesForce then you should be able to track the majority of the conversion rates in your funnel without too much problem.

The reason you want to track and analyze the steps in your funnel is because this is the best way to identify major inefficiencies in your funnel which you can then work on optimizing.

In the example above you can see that the first two steps in the funnel are very healthy. Out of the 500 leads which enter the funnel, 83% (415 / 500) are contacted by an SDR. Unfortunately only 48% of contacted leads respond back. This is where I would focus my attention since this is where a high percentage of the leads leave the funnel.

To address this big drop, the sales ops and sales managers could analyze the number, and quality, of emails and calls which are sent out at this stage of the funnel, and try and improve their effectiveness.

The importance of time when analyzing the sales funnel

The next set of metrics which are important to measure and analyze is the time it takes the input (leads) to flow through the funnel.

This piece of the puzzle is very important since it will help set expectations among your sales team and management, and provide the ground work for improved prediction of your sales numbers.

the importance of time in the saas sales funnel

The time between each step in the funnel, as well as major steps in the funnel, should be measured and communicated across the entire sales organization.

time to convert lead in a funnel

Additional metrics which are important when analyzing the SaaS sales funnel

Lead pipeline

One of the biggest drivers of a healthy sales funnel is the lead pipeline. This is defined as the number, quality and age of the leads currently under the ownership of the sales organization.

The lead pipeline can be broken up by leads under the ownership of the SDR teams, and leads under the ownership of the account executive teams.

Since sales can't close deals without leads, the lead pipeline is critically important to track.

Over time you will get a sense of the ideal number of leads that each SDR and account executive should have under their ownership. The more senior reps will be able to manage a larger pipeline.

The lead pipeline by age

An interesting analysis I recommend you run is analyzing converted leads by how long they were under the ownership of SDRs, and separately, under the ownership of account executives.

You will most likely find that the vast majority of deals happen relatively quickly with a small number taking significantly longer, and thus moving the average higher. You can then calculate the likelihood of a lead converting after a certain amount of time.

If for example, 95% of the time a lead becomes an SQL within 7 days, then leads which are under the ownership of SDRs for longer than 7 days are significantly less likely to convert than leads that are "fresher".

Once you understand these numbers you can at any time see the "health" of your lead pipeline based on the age of your leads.

An efficient sales organization can move leads through the funnel quickly and limit the energy spent on less valuable leads.

The opportunity pipeline

Similarly to the lead pipeline, the opportunity pipeline is an important component of the sales operation.

The opportunity pipeline is the number of opportunities which are open at any one time. The pipeline can be measured both in terms of absolute number of opportunities, and expected revenue.

Once an SDR has finished the introductory call there should be a general idea of which product, or set of products the lead is interested in. At this point the company can estimate the amount the lead will pay if converted.

As a fall back, assume everyone will buy the cheapest product. It's better, in my opinion, to have some idea of the value of the opportunity pipeline in "dollar terms" than simply knowing how many opportunities are open.

Number of touch points, and output by the sales teams

A more controversial set of metrics you may want to consider tracking is the number of touch points (emails and phone calls) needed to move leads through the funnel, and the overall output by the sales teams.

Some organizations get highly granular, looking at emails sent per day, per rep, and even the average time spent on the phone.

I do believe it is important to track output of individual sales reps to a point. You don't want your sales reps slacking, especially if they have a healthy pipeline of leads which need to be worked. The issue is that not every rep is the same and some are simply better at writing emails, and speaking on the phone than others.

It's not a perfect science and getting too "1984ish" could hurt the moral of the sales team.

My suggestion is to tie expectations of output to performance. In other words, reps which are better at converting won't be held to the same standard as reps which push less leads and revenue down the funnel.

Reps which need to improve their conversion rates should be sending more emails and making more calls.

Discount rates, and "lost after won"

Two other interesting sets of metrics you may want to consider tracking are discounting and "lost after won".

If you allow your account executives to offer discounts to close deals then you should consider tracking the volume and size of discounts your reps give out.

Some reps may discount at every opportunity significantly reducing their average contract value. Some reps may rarely use discounts, harming their overall conversion rates.

Once you've measured how your sales reps use discounts, you'll be able to share these numbers with the sales management and encourage them to work directly with certain reps to adjust their use of discounts.

"Lost after won" is a term used to describe deals which become lost after closing as a won deal. In other words, the customer signs the contract but for whatever reason becomes a lost opportunity. The most common reason is failure of payment or liquidation of the lead's business.

The number of "lost after won" deals should be very low but it's worth tracking the numbers per rep and raising the alarm if the number of "lost after won" are significantly higher among certain reps. This could indicate that certain reps are not being truthful or over promising. Compensation should be directly tied to gathered revenue as to disincentivize reps to use tactics which could result in "lost after wons".

How to proactively optimize your SaaS sales team

Once you've "turned on the lights" and have your sales analytics at a reasonable level, you can start proactively helping the SaaS sales team optimize their performance.

I've listed below my three favorite ways to optimize the sales team using business intelligence:

Hire a sales analyst and/or sales ops person

One of the best way to move the needle on your sales metrics is to hire a dedicated analyst or operations person that has this responsibility.

This individual can leverage your analytics and operations infrastructure to turn insights into action items and implement processes to help the sales organization become more data-driven.

Ideally this individual should be under the sales management so he or she can be as close as possible to the day-to-day of the sales teams.

Build self-service reporting for the sales management

Each sales team leader should ultimately have his or her own dashboard where the performance of their individual reps can be monitored and used for training.

The head of sales and other executives should have an executive dashboard which shows high-level metrics related to the funnel, pipelines and monthly / quarterly performance.

Tableau is a great option for your data visualization needs but it does require certain expertise and a reliable data infrastructure to connect to.

A solution like InsightSquared is a good starting point if you don't yet have the resources to build out your own business intelligence infrastructure.

Train your sales reps on the drivers of the sales funnel, and how to read reports

Once you have a good idea on how your sales funnel performs, and which cohorts of leads make it to the end of the funnel, you should communicate this info to your entire sales organization.

If for example your SDRs know that 95% of leads convert to sales qualified leads (SQL) within 7 days, they will understand the importance of speed and aim to contact every SDR within the first few days of receiving them.

Once the sales reps understand the funnel it's time to help them track their individual pipelines. This can be done quite easily within most CRM systems. The sales analyst, sales ops person, or at the very least team leaders should sit with each rep and go over their individual reports with them.

The focus should be on empowering the sales rep so they can understand where things stand at any time. This will help them spend their time and energy on the right actions.

In summary

In this post I covered a wide spectrum of topics related to analyzing and optimizing a SaaS sales team.

I covered the importance of the sales funnel, listed a number of sales metrics you should be tracking, and provided some tips on how best to use your data to help your sales reps succeed.

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