Most companies know their cost per lead for each marketing initiative or channel. But only a few companies truly understand their cost to acquire a customer and their cost to acquire one dollar of revenue. This lack of insight results in funnel resource imbalance. RevOps teams can take the initiative to help their executive leaders understand how to improve efficiency to support growth.
“Funnel resource imbalance is an efficiency killer”
In this webinar, we dive into how to use a rep capacity model to identify a funnel resource imbalance at your company. Your revenue capacity is, by definition, constrained by the point of least capacity between the top and bottom of your funnel.
In short, you’re either bringing in too many leads for your sales reps to efficiently move deals through the funnel–and which might be a poor fit for your ICP anyways–or your headcount is too high for the amount of resources you’re putting into the top of the funnel. Either way, you need to rebalance spend to the part of the funnel that’s constrained.
“When your funnel resource is out of balance, you’re wasting money”
Today, most leaders plan for their sales headcount by starting with their new bookings goal, like reaching $15M in new logo ARR. This approach benchmarks sales rep OTE and quotas from the investors perspective.
“We view this as a blunt instrument approach that doesn’t take into account top of the funnel support or expectations,” says Scott. Nuances can include whether your sellers need to generate all their own pipeline or if they’re handed quality inbound leads. This will affect their booking rates.
Here’s what you need to model your rep capacity:
What are the conversion rates for each of your 7 stages of the funnel? You might see that 80% of deals make it out of the discovery stage, 60% make it into the demo stage, and so on.
Start by calculating how many hours reps have to work in a year. Account for and subtract public holidays, PTO, general human inefficiencies like eating lunch and bathroom breaks, and administrative tasks like weekly forecast meetings and CRM hygiene.
Using these two sets of numbers, you can calculate how many hours reps spend in each of your 7 stages of your sales pipeline. This rep capacity model will show you exactly how many deals each rep is likely to close for the year.
Rep capacity modeling helps your sales and marketing leaders understand where incremental changes can be made to the funnel that will improve your funnel resource balance so they can take action based on data.
“You can suddenly become the VP of Sales’ absolute best friend by talking to them and showing them that the quotas are arbitrary and not representative of your specific company.”
Be sensitive in how you communicate your findings. It might seem like the easiest solution is to get rid of salespeople to reduce headcount but you need to understand your company's strategic goal first. If your goal is growth, reallocate your reps’ time and energy to top of the funnel prospecting. If your goal is efficiency, reduce spend at the top of the funnel so reps can focus on fewer leads with a higher chance of closing.
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