Expert insights for sales, operations, capture, proposal, and marketing pros.
Expert insights for sales, operations, capture, proposal, and marketing pros.
For sales leaders, navigating a recession is one of the most dreaded and difficult components of the job. Recessions mean everyone is tightening their pockets, which leads to prospects being less willing to spend money on your products or services. As new revenue decreases, management usually calls for cuts in marketing and sales spending, making it more difficult to create and convert leads. And worst of all, recessions usually foretell layoffs, which is the most heartbreaking part of sales management, bar none.
Recessions are incredibly difficult to navigate. Sales leaders must batten down the hatches on their ships, make sure everything is secure, and jettison any dead weight.
To help sales leaders navigate the difficult waters of a recession, we’ve compiled a list of the six most important sales performance metrics for sales leaders to track during a recession. Let’s dig in.
Difficult tests are graded on a curve.
In business, the same idea should apply to quota during pronounced economic downturns. Setting quota always requires a bit of guesswork and is an aspirational benchmark for every rep to reach. But when the economy takes a sharp downturn and revenue projections start to look as though they are falling short, it’s important to recognize that quota might have been set artificially high because the economic reality of the quarter wasn’t known in advance.
To understand, then, just how effective reps were with their opportunities in a difficult quarter, it’s important to analyze the Quota Attainment Percentage. Calculate the Quota Attainment Percentage by dividing a sales rep’s bookings by their quota.
Use the Quota Attainment Percentage to determine which reps performed the best in a difficult quarter and which performed the worst.
The Sales Efficiency Index, also known as Gross Efficiency Index or The Magic Number, is a popular Software-as-a-Service (SaaS) Metric that demonstrates the rate of return for investments in Sales and Marketing.
In other words, Sales Efficiency asks if I invest $1 in Sales and Marketing, how much should I expect to generate in revenue?
Sales Efficiency is calculated roughly as follows:
(New Revenue Generated in a Period) / (Sales & Marketing Costs in a Period)
In a recession, Sales and Marketing expenses are almost certainly going to be cut. To try and preserve as much budget as possible, you should understand exactly what your Sales Efficiency number has been in past quarters, so you can make the case to executives that X amount of dollars cut in Sales and Marketing spending will mean Y amount less expected revenue.
In addition, Sales Efficiency is a powerful metric to evaluate performance while holding Sales and Marketing spending constant. Track Sales Efficiency quarter by quarter throughout the length of the recession to help you understand how effectively your team is converting the company’s investment in Sales and Marketing.
During a recession, companies are more likely to drag their feet and be more careful with their money. As a result, sales cycles during recessions will be longer than the typical sales cycle during economic booms. Track the length of successful sales cycles during economic downturns to help your company understand how they should adjust their pipeline and forecasting expectations moving forward. Long-term, your observations can help your company make more intelligent investment decisions when the next recession rolls around.
During a recession, prospects are going to be more price sensitive. In turn, salespeople operating during a recession will want to be equipped with knowledge of the potential discounts and price adjustments they can offer to help close a difficult deal. But how much should you be willing to adjust your prices to try to close new customers?
The answer depends on several factors. But one of the biggest factors is this: the prospect’s price sensitivity.
As customers inevitably churn during a recession, don’t lose your opportunity to gain more information about the prices at which they would have stayed onboard. To every churning customer, send a survey asking about how willing they would be to stay on board with your company at a given price.
Not only will you start to gather information for potential discounts to offer to high-risk customers, but you can also flat-out offer to keep the churning customer at the acceptable prices they listed!
This win-win strategy helps you better understand the customer’s priority and gives you information to keep your customers from churning by offering a more competitive renewal price.
Okay, this one’s not really a “metric”, but it’s just as important to track. Make sure your company is keeping track of the reasons why deals are lost and customers are churning. If it’s because of price or budget cuts, then you want to make sure you are tracking this information in your company’s CRM or another central database. When the recession clears up and companies have more discretionary funds, you can create a sales campaign focused on recovering customers who churned because of budget and converting leads that didn’t close because they didn’t have the purchasing power.
Tracking why you’re losing deals is more important than ever during a recession because it creates the perfect dataset for who to target when the economy begins expanding again.
Recessions generally mean that some sales staff will be cut and so will spending on sales and marketing. As a result, your sales organization is going to be asked to do more with less. Not only must every remaining staff member justify their position with corresponding revenue, they must also take on the leads, territory, and responsibilities of their colleagues who were laid off.
To effectively manage a sales team that is being asked to do more with less, sales managers need a sharp understanding of the opportunities in their pipeline, so they can instruct their reps to focus on the highest-value opportunities and ignore those most likely to waste time and net little revenue.
The best metric by which to understand the quality of your pipeline is a metric called Opportunity Fit Scores. An Opportunity Fit Score is a quantitative measure of how strong of a fit a given opportunity is for your business. Opportunity Fit Scores take into account three factors on a deal: winnability, serviceability, and profitability. By comparing current opportunities to past wins and losses, Opportunity Fit Scores provide a quantitive measure of which deals are on-track to close and which would be better off qualified-out early in the process.
Patri is the leading provider of Opportunity Fit Scores. Utilizing comparisons to similar opportunities your company has won or lost in the past and providing quick, easy-to-use surveys to augment information about opportunities, Patri provides a powerful summary of the strength of every opportunity in your pipeline.
Recessions are incredibly difficult times. Companies need to make difficult decisions to stay alive. As a result, budgets get tight, purchasing slows down, and staff is often let go.
Sales Managers are often in the eye of the storm. Not only do their deals dry up, but they must make difficult personnel decisions that will impact not only the company’s health but also the well-being of those who have been reporting to them. Nothing about navigating a recession is easy.
But the sales leader’s job is to maintain as much revenue as possible, so they can keep the company afloat and keep as many people on their teams employed as possible. To that end, Sales Managers need to operate as efficiently as possible to make the most of their limited resources to secure revenue.
By tracking the most impactful sales performance metrics, sales leaders can put their companies in a position to weather the recession’s storm and emerge resilient on the other side.
Patri provides instant AI-powered revenue intelligence for every team and every deal by revolutionizing sales qualification around the core principle of the Ideal Customer Profile (ICP). Find, refine, and apply your ICP across the go-to-market motion with Patri’s AI-Generate ICP Engine. Win smarter with Patri by understanding your ICP(s), discovering the true health of your pipeline, qualifying effectively, and refining your forecast.
Top companies have increased win rates and saved millions in selling costs by leveraging Patri to prioritize and manage active opportunities, better understand why they win or lose, act upon automated deal insights, seamlessly share progress, and more reliably hit quota.
Learn more about how Patri helps sales leaders navigate recessions by scheduling a demo below: