The Financial Business Case for Sales Operations
When facts appear to be opposed by a long train of assumptions, the danger is that it invariably proves to be capable of bearing some other form of interpretation.
‐-‐ Sherlock Holmes
What Effective Sales Operations Accomplishes
This paper provides a mathematical, evidence-‐based business case for considering the impact of sales operations to grow revenue. Sales Operations is a complex, scientific, process-oriented business discipline which brings organization and structure to the way in which a business enterprise generates revenue. It tightly aligns the sales efforts of the business to produce on-going sales out-performance.
Leveraging a sales operations program allows a business to bring the benefit of process methodology to sales and marketing decision-making to promote significant, predictable financial performance well-beyond what could be expected utilizing traditional sales management methods.
The Three Controllables Addressed by Sales Operations
When the sales efforts of a company are organized and work in alignment with each other, it drives increased results in three primary areas affecting overall financial revenue production and performance as defined in the following formula.
- Lead Generation (The Volume/Quality of New Prospects Being Contacted)
- Sales Close Rate (% of Prospects who Buy Services and Become Customers)
- Average Contract Value (Increase in the Average Size of Sold Deals)
- AFFECTS: Revenue Production, Revenue Growth Rate and Margin Efficiency
For a practical representation, let’s look at an example. The following business case does not outline HOW increased revenue production is accomplished through effective sales operations. The sole purpose of the sample business case is to illustrate the financial impact and benefit for considering the importance of applying the discipline of sales operations.
For Comparative Evaluation:
ABC Company has a core line of business which currently generates $3M in top-‐line revenue per year.
Example Business Math behind the $3M:
ABC Company won 200 contracts during the course of the fiscal year with an Average Contract Value (ACV) of $15,000.00. To win those 200 deals, ABC Company worked to engage 909 prospects for the year with a sales closing rate of 22.0%. Or, 200 contracts won (16.67 per month) x $15,000.00 ACV = $3M
What would it mean to change the variables?
Assume the following NEW variables accomplished through improved sales operations.
- The number of quality prospect engagements is increased – (5.0%) from 909 to 955
- The sales close rate is increased -– (5.0%) from 22.0% to 27.0%
- Average Contract Value (ACV) is increased —- (5.0%) to $15,750.00
What would this MEAN financially to ABC Company?
On the same core line of business, ABC Company will now generate top-‐line revenue of $4.06M. This represents a 35.3% non-compounded one-year growth rate and generates $1.06M+ of additional revenue for ABC Company.
The Business Math Behind $4.06M:
ABC Company now engages 955 new prospects for the year, with a close rate of 27.0%. This results in 258 closed contracts with an average contract value of $15,750.00 258 contracts won x $15,750 ACV = $4.06M
The emerging discipline of sales operations has proven its value and subsequently experience increased adoption as a Best Business Practice. However, as a new area of expertise, there are still only a few sales management professionals who are well versed in this discipline with the ability to apply concepts in a variety of industries and sales organizations. Understanding the value of sales operations is just the first step, next business leaders must hire consulting talent or find training opportunities to build a sales operations program specific to their organization until more of these experts are available on the market to hire into sales leadership roles.
Ryan D. Bretsch
COO Atomic Revenue