Over the past few years here at LeadIQ, we’ve gone through many different team members prospecting. Some of our Sales Development Reps make it through our rigorous onboarding, stay there, move on, or get moved into other roles, while some sadly perish into the mighty night.
Cough cough...wow that got really dramatic for some reason. It’s scary to admit, but we’ve had some failed hires. It’s no secret that hitting quota is hard. Salesforce says that 63% of sales reps will miss their quota this month.
Yesterday we went through the data in our prospecting platforms to calculate why some reps make it here, and others haven’t. As we were doing this process, we realized that measuring success goes way deeper than just looking at opportunities.
Today I’m going to talk about how sales leaders should measure how well their team is doing with cold prospecting. I’m going to show you what we call internally our Prospecting Efficiency Score, or PES for short.
What is the Prospecting Efficiency Score?
The Prospecting Efficiency Score, or we call it, PES, is the way we determine how well reps are doing, and where they need coaching.
This equation is super important for telling you almost the whole story with your reps and where they need help. We’ll go into why each part of the equation is important to measure independently.
Let’s start with the obvious inputs you need to do measurements.
Okay! I know reps have quotas for producing opportunities. Obviously opportunities are the output of what a rep puts in with prospecting, and then the next thing you look at is “Closed Won” opportunities.
The problem is, especially if you have full time outbound prospectors, these numbers don’t help you identify what’s going on with each rep’s prospecting.
The goal of these equations is to explain how they work, why they are important, and how to diagnose problems or successes you may be having with your prospecting.
What tools do you need to measure?
In my opinion, if you really care about helping your team, you need to have some sort of tool for measuring the number of touches a rep has done, how many opportunities they have, and the number of replies.
If you don’t have these three things, you should setup a CRM and use reporting, or get a sales engagement platform that will help measure replies. In my opinion having a dialer combined with emailing is usually the easiest way to attack this.
Equation 1: Response Rate
Ok. First things first, you’ll need to calculate your Response Rate. A good response rate will tell us how effective your cold emails, social, and cold calling activities are. Generally speaking, we have a pretty high bar at LeadIQ.
If we see a rep isn’t hitting close to at least a 10% response rate, we usually focus a lot of attention on them because a low response rate could soil our good name we’ve worked so hard to create.
We obviously can’t afford to soil our good brand with a bad response rate.
Here’s metrics from of one of our reps that didn’t work out here.
Notice that in this image above, I don’t really care about open rates or clicks. While these numbers are useful for a rep to figure out how effective their subject lines are, plus cold calling the prospect after they open, I think these stats are some of least useful things managers tend to dwell on.
Outside of triggering your next activity with a prospect, tell me why so many reps get excited by open rates?
Now back to calculating response rates....
First you need to add up all the touches your sales rep does. Social, cold calling, and cold emailing all should count as touches. Then calculate the number of responses you have from all three media. If you don’t track responses over phone and social yet, you need to do this.
We sum all of the responses up from all three media, and divide them by the total number of touches.
In this example, it was 1181 touches divided by 50 responses.
This rep didn’t end up working out for us, and a big part of this is because they only had a 4.23% response rate. Far too low for our standards here.
A good response rate is important because you aren’t hiring your sales rep to pump up awareness when they are prospecting. They have a different job. Their job is to book meetings. If you want awareness, go talk to marketing.
Response rates are obviously a very good sign of how well a rep is doing, however they don’t tell the whole story. A huge part of prospecting once you get high enough response rates is turning the response into a qualified meeting.
This is why we added the next part of the equation
I would love to just to tell reps this is the only metric that matters, but part of the art of prospecting is figuring out not just how to get responses, but how to turn those responses into
Equation 2: Qualification Rate
Qualification Rate is calculated by the number of opportunities, divided by the number of responses you’ve received.
Now to calculate opportunities, I recommend running a report in Salesforce where you see how many opportunities were “created by” the rep’s name over the same time period you are looking at touches and responses. This will keep the reporting accurate for a given time period.
With the rep in question that we went over earlier, I found out they had 8 opportunities created during that period. So we’ll take the 8 opportunities they created and divide it by their total responses, which was 50.
*The Qualification Rate: 16%. *
Qualification rate is the best way to assess how well your rep is at dealing with responses. So this rep had a low response rate, and a higher qualification rate. However, generally speaking, your reps should have a much higher qualification rate than response rate. I’ve calculated some people on our team having higher than a 50% qualification rate, which is pretty impressive!
Now we have both these numbers for this rep that failed to hit quota. Let's finish the equation off.
We now multiply their Response Rate of .042 (4.2%) and their Qualification Rate .16 (16%) and get 0.00677. Since we want to present this in human terms, let’s make it a percentage. That’s the rep’s Prospecting Efficiency Score.
.042 x .16 = 0.00677
This rep’s PES is .677%.
That means for every 100 prospects they reach out to, they book an opportunity with .6 of them. It basically tells us this rep needs to do well over 100 touches just to book one meeting.
...But wait..there's a twist!
Here’s the plot twist my friends. Since number of responses is in both fractions and being multiplied, we can actually cancel out both parts of the fractions and it a simpler equation to remember:
So this is the same equation, but with less information involved.
This number is also the number of opportunities divided by the number of touches!
So in the example, the number of opportunities is 8, and let’s divide that by the 1,181 touches the rep did.
Recognize that number? This is also the sales rep’s PES! PES is the probability that a rep’s touch will turn into a qualified sales opportunity.
That means that probability of that rep’s outreach turning into an opportunities is .677%. That number is far too low for us.
So how do you know what is a good Prospecting Efficiency Score?
If you go through multiple organizations, Response Rate, Qualification Rate, and Prospecting Efficiency Score are going to be different based on what your prospecting strategy is, how many touches you expect from your reps, and how many qualified sales opportunities (QSOs) your reps are accountable for.
If you have reps that are consistently hitting the quota you have in place, calculate both parts of their Prospecting Efficiency Score, and use that data to benchmark what a good PES should be for your team.
For example, if your top rep has a .22 (22% Response Rate) and a .5 (50% Qualification Rate), their PES is 11%. That means that 11% of the touches they do turns into an opp. That’s pretty impressive, and can be a good benchmark of where you want your team to be.
*Let’s jump back into our example to calculate how bad this rep was. *
At LeadIQ our SDR’s quota is 15 QSOs for a baseline every month. Since PES is the probability that a touch will turn into an opp, I can actually work backwards to determine how many touches the reps have to do to hit their quota based on the historic PES score.
The rep that failed here had a PES score of .677%. Since I want them to get 15 QSOs, I can calculate how many touches it takes for them to get there.
You can calculate how many touches your sales rep has to do to hit quota. Take your QSO quota and divide it by their PES.
In this the example we’re using for this blog post, we’ll take the 15 QSOs and divide them by .00677.
15/.00677 = 2216 touches/month
This number is wayyyyy to high for us. This is roughly 100 touches a day, which is impossible to do personalization for. Clearly this rep needs coaching, or they may just be a bad fit.
So how do you use these numbers for coaching?
So here’s how use these numbers to give you direction on coaching.
Here’s the equation again for reference.
If you are looking at a rep and you see their response rate is lower than the best reps on your team, you know to focus on coaching that rep up on their cold prospecting. Spend some time showing them better ways to do cold calling, emailing, and social. Teach them personalization.
If your rep has a decent response rate (let’s say the benchmark is 10% like LeadIQs), but their qualification rate is lower than your best reps, you should be coaching your sales reps on how to overturn objections, how to create urgency, and book the meeting.
Both problems are much easier to identify using this equation as oppose to guessing, and you should measure your reps on this month by month.
If your rep has a Prospecting Efficiency Score, but isn’t hitting their QSO quota, there is a pretty good chance they aren’t working fast enough. Maybe they are having some issues with focus or time management?
See if you can find ways to help them focus, or give them a little bit more micromanaging to get them focused.
If it's time management, do the 10 minute game or watch how they are working to try find gaps in their effieciency. The good news is coaching time management is very easy to fix, and your rep is already getting the difficult parts done. They just need more guidence on the way they get their outreach done.
It may seem nerdy to keep track of this data, but you won’t regret it. This equation is the easiest way to tell how well your sales reps are doing with prospecting.