By Sam Balter
When execs are looking to grow their business many wonder: Exactly how many sales reps do we need to hire? How many marketers?
At ZoomInfo, we strive for efficiency in sales and marketing. We want every dollar that goes into the demand generation apparatus to not only pay off but pay off quickly. To understand how effective we are, we use revenue efficiency to measure performance within a quarter in addition to efficiency ratios such as LTV: CAC (Lifetime value of Customer divided by Cost to Acquire a Customer.)
Revenue Efficiency = Q# Revenue / Q# Sales and Marketing Spend
To better understand the effect of headcount ratios on revenue efficiency we looked into 18 publicly traded SaaS companies’ sales and marketing expenses versus their quarterly revenue to determine their revenue efficiency. We then paired that data with headcount information from ZoomInfo’s platform to understand the percent of sales and marketing employees compared to the rest of the company and the ratio of sales reps to marketers.
The results were surprising.
Of the 18 publicly traded SaaS companies analyzed the top half in terms of revenue efficiency were more than twice as efficient with their sales and marketing spend, had smaller sales and marketing departments relative to total headcount, and had fewer sales reps, relative to marketers.
More Marketers Relative to Sales People can be More Efficient
Revenue efficiency is not about getting the most money; it’s about how to take what you invest and get a sizable return quickly.
Companies that have large marketing departments can manage several go-to-market plays that make the sales team more effective. For example:
- Freemium products
- In-app trial experience
- Touchless sales
- Automated upsell campaigns
- Customer upsell campaigns
All of these plays not only can generate revenue directly but also improve the experience of sales reps at your company.
If marketers develop solid freemium products or improved trial experiences, then sales reps are not working cold leads. Instead, they’re reaching out to hot users — people who already know your product versus total strangers. When customers can complete a touchless upgrade, the experience is frictionless. They’re able to buy without a hassle and any major expense by the company.
One caveat to this data: We have only examined publicly traded software companies. As companies scale in size, the importance of sales and marketing varies. A smaller company might not be able to support the months-long projects marketers often embark on, even if these projects could ultimately improve the efficiency of the business.
At certain times, it’s better to get more money in quickly than make operational improvements that might take months or even years to materialize.
As Companies Scale, Non-Sales-and-Marketing Headcount Correlated to Increased Revenue Efficiency
For companies with higher revenue efficiency, I expected to see larger sales and marketing departments. I imagined top-performing companies would have giant marketing and sales departments that rule the organization and are solely focused on bringing in more leads, new customers, and upselling new products.
But based on ZoomInfo headcount data, this is wrong. The companies with increased revenue efficiency had 18% of their headcount in sales and marketing versus 31% for less efficient companies. The more revenue efficient organizations showed a strong commitment to large product and operation teams.
As a tighter ratio of marketers to sales reps may indicate more operational improvements, it’s likely the revenue organization of a company benefits massively from product development and operational improvements that allow marketers to be more effective and salespeople to have higher quotas.
Lessons on Revenue Efficiency
For SaaS companies looking to hit their revenue targets efficiently, it’s essential to consider the number of marketers relative to sales reps to ensure that marketing departments are large enough to support the short term needs of sales reps while investing in longer-term projects that will help the sales organization close deals faster, more efficiently, and for a higher average sales price.
Sam Balter is a writer, podcaster, and maker of charts. Director of Editorial Content @ ZoomInfo.
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