How To Calculate YOUR Company's Sales Efficiency Index®
Posted by Jim Kasper on Wed, Apr 21, 2010 @ 01:58 PM
New Metric Belongs On Your Sales Management Dashboard
There are four primary, key metrics that belong on YOUR company's sales management dashboard:
- Actual sales vs. forecast
- Gross margin vs. forecast
- New business dollars (includes new accounts)
- Sales Efficiency Index
The first three are no doubt on your dashboard already. So, what is the Sales Efficiency Index and why is it so important?
What Is The Sales Efficiency Index (SEI)?
To begin, let's examine the fundamental meanings of "efficiency."
1. Competency in performance (sales performance)
2. Accomplishment of performance vs. the cost of accomplishment
3. Ratio of output vs. input
Quite simply put, YOUR SEI is the output (measured in gross profit) of your sales team, collective or individual, compared against the total input (measured in dollar cost) of your sales team, collective or individual.
Why Is SEI So Important That It NEEDS To Be On YOUR Sales Management Dashboard?
- It is the one and only measurement of true sales efficiency and return on investment in your sales team, collective or individual.
- It is the only metric that exhibits cost of the sales team, collective or individual, vs. what that cost produced in profit.
- SEI is the only impartial, unbiased, true measure of YOUR return on investment in your sales team/individual.
- It is the best comparative measurement in stack rankings (regional teams and individuals).
- SEI is the only true measurement of how effectively YOUR sales managers are utilizing YOUR investment in YOUR sales team. It is an excellent measure of "management prowess."
Your SEI is purely quantitative. It is much more meaningful than most metrics because it does take into consideration sales production (in the form of gross profit) and what YOU have invested to get that production.
How Often Should I Calculate MY SEI?
The answer to that question is determined by the other metrics displayed on your sales dashboard. "Best practices" dictate YOUR SEI should be calculated monthly, quarterly, and annually.
Besides Sales Efficiency, What Other Uses Are There For MY SEI?
Since this is a true measure of return on investment, YOUR SEI is very useful for:
- Compensation plan modeling
- Account and territory alignment
- Management evaluation
- Fringe benefit changes and their impact on ROI
- Gross margin analysis
How Interested Is Your TOP Management In Seeing Their Return on Investment In YOUR Sales Team?
Blog format is not conducive to displaying the electronic calculation for YOUR Sales Efficiency Index. If you would like to have a free, no-obligation calculation and explanation, please click here.
Photo Credit: Brianapa's Photostream