EP221 - Pipeline Per Rep Hour: The Ultimate Sales KPI

Market Dominance Guys

In this solo episode of Market Dominance Guys, Chris Beall unveils the ultimate sales KPI: pipeline dollars generated per rep hour. This metric is a game-changer for CROs, CFOs, and CEOs looking to optimize their sales efforts and drive business growth. Chris explores the importance of measuring and maximizing this KPI, sharing insights from ConnectAndSell's own data and revealing the significant potential of a well-executed market dominance program. He breaks down the different types of attribution, ideal conversation and meeting rates, and optimal prospecting hours per week. Whether you're a sales leader aiming to improve your team's performance or a C-suite executive seeking to understand the economics of your sales efforts, this episode will help you discover how pipeline per rep hour can help you take your company's revenue generation to new heights.

FULL EPISODE TRANSCRIPT Below:

[00:00:00] Chris Beall: Hey everybody, Chris Beall with Market Dominance Guys with an episode about a bunch of numbers, a bunch of KPIs. And I decided since it's just going to be numbers I'd leave Corey to do something more useful than ask me questions about numbers.

[00:00:16] Chris Beall: So, I came up with the questions myself and [00:00:20] I'll play you with them. It's right now, the 4th of April, 2024, right before Tax Day. And I was speaking last week, had the pleasure of speaking with Mike McCracken, the Founder and CEO of McCracken Alliance Partners, who provide all the information. amazing help with regard [00:00:40] to finance things, not just taxes, which is that'd be fairly straightforward, probably, although they can be complex, but really how to make your company sing, how to make your company dominate even with the help of financial professionals who know what they're talking about and who will work with you to make [00:01:00] some stuff happen that you probably didn't believe could happen.

[00:01:03] Chris Beall: So I asked Mike a question. I said, Hey, Mike it kind of bothers me that ConnectAndSell, which primarily has two impacts on companies that one would think CFOs would be interested in. One is immediate increase in pipeline, and everybody [00:01:20] knows that pipeline is a leading indicator of future revenue, and CFOs sure like to be able to forecast future revenue with

[00:01:27] Chris Beall: greater accuracy, specificity, and fidelity. And then it also allows you to decrease costs immediately because you can do more with less. And [00:01:40] less tends to be unnecessary headcount, extra headcount. You can also do more with more if you're in the mood to do that. But in any case, there's an efficiency play and capital efficiency is of great interest to CFOs.

[00:01:51] Chris Beall: And Mike, he gave me a great answer. He just like, boom, hit me between the eyes. He said, Chris, you gotta come up with a KPI that [00:02:00] is meaningful to CFOs, that's meaningful to the business. And I said, well, we have one of those, and it's called Pipeline Built Per Rep Hour. And I thought, as I was out doing my little barefoot trot today, getting the usual comments from folks, what is it about going barefoot that makes everybody think that you're weird?

[00:02:19] Chris Beall: I [00:02:20] don't know. In any case, I was out there trotting along in beautiful Arizona sunshine, and thinking, why don't I just say what some really good values would be for some, KPIs, some metrics that folks tend not to think about very much. And so I, I just thought I'd share [00:02:40] some we measure at ConnectAndSell what we call attribution, and we measure three kinds.

[00:02:47] Chris Beall: So one kind is what we call direct attribution. That's looking at all the pipeline that's been built directly from meetings, appointments that were set in, ConnectAndSell. We know that happened because there are [00:03:00] dispositions that indicate that a meeting was set and there. Certainly is pipeline out there to be measured, and you can link it together a number of different ways.

[00:03:09] Chris Beall: The most straightforward is by the account name, by the customer name, and you can say, hey, set a meeting with somebody. Pipeline shows up later. How much pipeline? [00:03:20] What stage is it in? And you get a pretty good read on what you're prospecting is accomplishing in terms of dollars of pipeline. That are being set by your reps, but what's in the denominator and the big question that I think really is out there for all of us who care about prospecting and anybody who doesn't care about [00:03:40] prospecting, certainly they either got some other weird kind of magic going on.

[00:03:45] Chris Beall: Or and bless you if you do, right? You don't need prospecting, you're in a special place. But most businesses need prospecting. And, in fact, Jason Lemkin just wrote an article this week talking [00:04:00] about how the new KPI for venture finance companies, not just net retained revenue, not even just gross retained revenue, all the stuff that's about, oh my God, what if we lose a customer?

[00:04:13] Chris Beall: We got to keep them all very conservative sort of way of looking at the world. It's about your [00:04:20] ability to add new customers. Well, add new customers is what prospecting is all about quite frankly. So now we have tied prospecting to the new, most important KPI that venture capitalists care about, which is adding new customers.

[00:04:37] Chris Beall: It actually made me go take a look and I [00:04:40] was pretty happy with what I saw for our company. It was interesting to see, a little bit more than a hundred percent new customers added over the last year. Some of which have come through partners who are working on an appointment setting basis, and they're doing things for companies that would rather have somebody else do it, most of which are [00:05:00] customers of ours that are having ConnectAndSell help them do prospecting so they can get new customers and get new pipeline in a reasonably efficient way with predictability, visibility, and control.

[00:05:13] Chris Beall: So that's really interesting. Pipeline is the number that we tend to look at. [00:05:20] And new customers are a, another number. I'll call those numerators. But what should we be looking for in the denominator? Well, I'll go to pipeline right now. We measure something called pipeline per rep hour. And we measure it, as I said, one way, which is what we [00:05:40] call direct attribution.

[00:05:42] Chris Beall: That means came from meetings. We measured it another way, which is came after positive conversations. Positive conversations are like, I'm interested, send me information, that sort of thing. And then, there's the pipeline that comes from any old conversation. So any old conversation could be a negative [00:06:00] conversation, could be a blow off.

[00:06:02] Chris Beall: The fact of the world is, when you talk to somebody, they're more inclined to take a look at your website. And they're much more inclined to answer that email that you wisely sent them that says thank you for our conversation today and also much, much, much more inclined to actually speak with you if you call them in the future [00:06:20] because you've already demonstrated that they answer the phone.

[00:06:23] Chris Beall: And it's more likely to be a good conversation because you've had a conversation, however brief, and you can open the next conversation effortlessly with what you wanted to say, but kind of didn't get to say. How to, start that next conversation is something you make [00:06:40] available to your future self and in a set it and forget it kind of way, you become a sales genius.

[00:06:46] Chris Beall: But what's in the denominator? Okay. So there's pipeline measured three ways. In the denominator. must be, it seems to me, the number of hours that reps spend prospecting. Now, I venture to [00:07:00] say most of us have no idea how many hours our reps spend prospecting. And one of the, I think, appeals of the SDR BDR revolution is, hey, I've got reps that are just prospecting, so I can allocate all of their hours, I can tag all of their hours, categories, categorize all of their hours [00:07:20] as prospecting hours.

[00:07:22] Chris Beall: I don't know if this is true or not, but I am sure that when somebody's in a ConnectAndSell session and they've pushed the button, as we say, and they're having conversations, that we have verifiable time spent prospecting. And that's a cost to the business. Those reps cost money. [00:07:40] They're fully burdened rate is whatever it happens to be that can be burdened with just the usual, but you could also throw in all the tools and technologies and data and all that kind of good stuff you have to provide and you can get an idea of what a rep costs you per hour.

[00:07:56] Chris Beall: You can, if you know how much pipeline was built by that [00:08:00] rep, by each rep, in each hour, and you know it in all relevant ways, one way would be directly through meeting set, that's the one that most folks will measure, if they measure anything, by the way. Another one is positive conversations that lead to pipeline.

[00:08:15] Chris Beall: And another one is the really the good one, this you probably [00:08:20] won't believe, but it is the best KPI. Is. Pipeline built per hour from any conversation. You don't know what really has happened. A lot of stuff kind of goes out into, I'll call it sort of the action cloud. That is what's going on out there when someone has been spoken with by [00:08:40] one of your reps.

[00:08:41] Chris Beall: You don't know. They can, that person, that target. They could talk to somebody else. They could go to your website. They could have a thought about what it is you do. They could check out you and your competitors, which is not a bad thing, by the way, if they haven't been thinking about a solution in your space.

[00:08:56] Chris Beall: They certainly can answer an email or at least [00:09:00] read an email that you send them. So there's a lot of things that can happen. You can advertise to them. A lot of things can happen after a conversation. But the pipeline is pretty easy to measure. It comes right out of your CRM. Opportunities are there.

[00:09:11] Chris Beall: They're in stages. Therefore different accounts, and you know that you talked to somebody at that account. Certainty is not the goal here. You can get [00:09:20] a perfectly good KPI without certainty. And, like all good data, you can measure it over time. You can trend it. And then you can go and correlate it to the final results, which is

[00:09:32] Chris Beall: ultimately bookings and then revenue and if you're a kind of an ARR or MRR kind of company ARR and MRR [00:09:40] because those could be interesting too. So number one new KPI to pay attention to pipeline generated per rep hour, and I'll give you some numbers that will sound different from what you might expect. I'm looking at the last year.

[00:09:57] Chris Beall: So today is I'm [00:10:00] treating it as the end of March, so sort of April of last year, which is 2023 to end of March 2024. And I'm looking at a fair number of companies, about 130 of them, that I have pipeline per rep hour measured for. So, a really good number, [00:10:20] a fantastic number, is also a really big number.

[00:10:24] Chris Beall: Some of these you kind of look at and you go, well maybe they're a little early in the game, but some of them are pretty stunning in any case. So one of our customers, for instance, and I won't say their name because they haven't authorized me to do that. They sell deals in an [00:10:40] average of about $73,894. And the pipeline that they're building per rep hour in the last year is $378,082 of pipeline per rep hour of prospecting.

[00:10:57] Chris Beall: Now, darn well they're not paying any [00:11:00] of their reps. $378,000 an hour. Do we know what their gross margin is? So we'd actually be able to say how much money is coming in, do we think, from these deals. Do we know what the probability of the deals are? Do we know when the deals are going to close?

[00:11:14] Chris Beall: Yes, we actually do know all those things, and those are very interesting to break down. But the [00:11:20] first thing to know is , you got to generate pipeline across all the different stages with a lot of different cycle times when they're actually anticipated to close, a lot of different probabilities in order to have business.

[00:11:34] Chris Beall: That's just the way it is. So this is $378,082 an hour. The [00:11:40] next one down is a very large company that is pretty fascinating, actually, if you kind of looked at what they do. But their deal sizes are really big, like $2.77 million per deal. And they're generating $265,047 of pipeline per rep hour. And now I'm going with the pipeline that [00:12:00] is from all conversations, not merely that came directly through meetings, although we could look at that, but this is, I believe, the true most important KPI to pay attention to.

[00:12:12] Chris Beall: So next is $258,586 of pipeline per rep hour, [00:12:20] $164,766. So let's go down a ways. I'm going to get to a company that is at about number 30 on the list. So actually, I'll go with our company, ConnectAndSell. How much pipeline do we generate per rep hour? So, our average deal [00:12:40] size is not huge. We do initial deals that are in the sort of $20,000 range.

[00:12:45] Chris Beall: There's, some of them can be very large, some can be smaller, but we like to get started with folks in a way that really makes sense for their business. And we do a lot of prospecting. How much prospecting in that last year? A lot of prospecting. [00:13:00] 13, 578 hours of prospecting. That's a fair amount to generate a fair amount of pipeline.

[00:13:10] Chris Beall: So when you look at it, that's 132 million dollars of pipeline. So it's $9,731 per rep. hour [00:13:20] of prospecting that can be measured. This is not taking all of the hours in the day for these reps. This is the hours they're spending. in sessions where they're pushing button, talking to a target, and then wrapping up, we call it, which is taking notes, setting the, that little teleprompter for their future self and [00:13:40] setting a disposition.

[00:13:40] Chris Beall: So, and we're gaining intelligence as a company about all of these conversations and also separating out and segmenting the market into folks who answer the phone, we know answer the phone because we spoke with them and folks who haven't answered the phone yet. Across all of those, of course I don't, know why we wouldn't do [00:14:00] this.

[00:14:00] Chris Beall: We measure their tendency to answer the phone across the entire community. We crowdsource that tendency to answer the phone and keep that current every day. Not for everybody, but for about 24 million folks that are worth talking to. We call it fast phone numbers. So all that intelligence is coming back.

[00:14:17] Chris Beall: But the other thing that's coming back is [00:14:20] opportunities going into the CRM and those opportunities have dollar amounts associated with them. They also have probabilities and stages and all that kind of good stuff. But right now I'm talking about the most important KPI that's probably new to you. And if you're measuring this KPI already, pipeline [00:14:40] dollars per rep hour, I'm super impressed, unless you're already a ConnectAndSell customer, in which case we're measuring it for you.

[00:14:47] Chris Beall: And then you're getting to understand it and break it down. We break it down for you, trend it, see how it's associated with individual reps. Would you like to know that each rep that is doing prospecting [00:15:00] is generating pipeline, and how much? Because being able to do attribution to marketing spend is one thing, but being able to do attribution to what you're spending on the actual folks that are out prospecting, that's whether they're SDRs and BDRs, or whether they're account executives, in our case, it is a mix.

[00:15:18] Chris Beall: Everybody at ConnectAndSell [00:15:20] prospects. Big surprise, right? So when you look at all of your numbers and you think about your business, whether you're a CEO, whether you're a CFO, whether you're a CRO, whether you're a business development manager, a BDM, a SDR manager, a sales manager, a VP of sales, whatever you are, [00:15:40] this KPI is the KPI you should be paying immediate attention to. Now, once pipeline per rep hour, you've kind of simplified this production of pipeline, which is you either add more rep hours or you improve the pipeline [00:16:00] being set per rep hour by improving either the number of conversations and impact of those conversations. So conversations per hour, is important.

[00:16:10] Chris Beall: Now we're going to go to the other end of the spectrum. What are the drivers, right? So the simple drivers are conversations per hour. Have more. What's a [00:16:20] reasonable number of conversations per hour that makes sense to have? There's a number somewhere between six and say 12 really can make a difference.

[00:16:31] Chris Beall: Our average over all of our customers last year is about 9. 4, but it's highly varied because they're using different [00:16:40] protocols. Some are connecting on live voice, some are connecting only when the target answers. But if you've got five conversations an hour going on with your reps, you're probably doing pretty well.

[00:16:50] Chris Beall: Now they're probably setting meetings. That's direct attribution. How many meetings per hour is a good number. About half a meeting per hour is a great target. If you're setting [00:17:00] half a meeting per hour per rep, you're probably doing quite well. How many rep hours per week really depends on what your reps are doing.

[00:17:08] Chris Beall: If they're SDRs, my view is they should be doing as many as they can manage. That number is probably about five or six a day. And I know it [00:17:20] sounds like it's terrible talking to people for five or six hours a day. It's actually pretty fun. As long as you don't have to dial, navigate phone systems and do all that kind of junk.

[00:17:29] Chris Beall: So that's that's a number that is interesting in the SDR world. Not many people achieve that. Our reps at ConnectAndSell, they run at [00:17:40] about 5. 8 hours of prospecting per week if they are SDRs. And they run at about 2. 5 hours of prospecting per week if they are account executives. So you can see it varies.

[00:17:54] Chris Beall: The AEs are busy doing other things, but they find time to prospect. They tend to prospect together, by the [00:18:00] way. Together in time, not in space. They're all over the place because it's more fun. And because management then can talk about what we're trying to do in this particular session and we can gain more insights than just the data might give us.

[00:18:15] Chris Beall: So this is about is it, this is a tough one, but I [00:18:20] would say for an AE two and a half hours a week prospecting, real prospecting measurable, probably get the job done. And for an SDR if you really want to dominate, you're probably talking about five and a half hours a week. Then you've got, okay, all this prospecting, prospecting is going on.

[00:18:38] Chris Beall: Have we got the conversations [00:18:40] per week that are, or per hour that are happening? So we now know maybe 60 conversations a week on average, but again, very different between SDRs and account executives. And the same thing with dials that should be done for them. No rep should ever have to do a dial.

[00:18:58] Chris Beall: It makes no sense [00:19:00] whatsoever. Reps should push buttons and talk to people, or hey, if you can talk to people without pushing buttons, that makes sense too. So what do your conversion numbers need to be in order to make this happen? Well, there are two kinds of conversion numbers, cold and follow up. Cold should be North of 5 percent if you're in a market [00:19:20] dominance program, but the main reason you're talking to folks is to segment the market into people you can talk to.

[00:19:25] Chris Beall: Those who answer the phone and people you need to kind of go after a different way. Those who don't answer the phone. For those who answer the phone on the first conversation, what we call a cold call, you're going to be shooting for around 5 percent across all [00:19:40] of your reps. If you have a rep languishing at 2%, or then you have a skill issue.

[00:19:45] Chris Beall: If you have all of your reps languishing at 2 or 3%, you probably have a targeting issue. The issue is that either your target market is being chosen incorrectly, or more likely, your scripting is allowing that easy [00:20:00] exit where somebody just says, "Thanks, we're all set." Almost every cold call script has got a major flaw in it that is going to drive your conversion for cold calls way, way down.

[00:20:11] Chris Beall: Now, not to worry, even if your conversion for cold calls is way, way down, the money is actually in the follow ups anyway. So as long as you're having enough conversation, say a [00:20:20] rep is having something on the order of 50 or 60 conversations with targets per week. That should be generating something on the order of 40 to 50 follow ups.

[00:20:31] Chris Beall: Follow up opportunities. That's people we know answer the phone that you can talk to next week or more likely next quarter. And you can nurture through the 11 [00:20:40] quarters in the future it's going to take for their company to finally want to do business with anybody. And that could include you because you've got the inside track.

[00:20:48] Chris Beall: So you've got a kind of a two distributions called bimodal around the conversion rate. So the conversion rate can be at 5 percent for cold calls and should be at north of [00:21:00] 10 percent for follow up calls. And that also will, interestingly enough, follow up calls reduce the conversations per week just a little bit, because they tend to be longer conversations, but everything kind of comes out in the wash.

[00:21:14] Chris Beall: So, how many conversations should you get, by the way, per dial that's executed for you? Highly [00:21:20] variable, but the cold call world, about 5%. And in the follow up world, something around 12 or 13%. And then, when you kind of look at it overall, you've got dials going on, how many meetings should you have per dial.

[00:21:32] Chris Beall: I don't think this is a particularly compelling, KPI, unless your reps are doing the [00:21:40] dials, but it's kind of good to know. So a number of about 0. 6 percent is a decent number for meetings per dial. And after that, what are the drivers? So let's figure out how can we make the number that we want go up?

[00:21:55] Chris Beall: Well, you can make your average deal size go up, but your market probably determines [00:22:00] that. So I don't think you should push on that one, but that's that one can be interesting. Mostly the big correlation, interestingly enough, and obviously Well, pipeline per rep hour, let's just increase the number of rep hours and we increase the pipeline.

[00:22:18] Chris Beall: It seems too simple, [00:22:20] but it actually is the key to everything. The number one correlation between any of these KPIs and the number of dollars a pipeline produced per day or per week, or per month, whatever it is that you care about, it's actually primarily driven by [00:22:40] simply prospecting time. And a little bit of prospecting time goes a long way.

[00:22:45] Chris Beall: If your pipeline per rep hour is big $100,000 or even $10,000, just add more hours to get more pipeline. But what if I want to get my pipeline per hour up also, not just [00:23:00] add more hours, but add more pipeline? What do I do? Number one thing to do is increase the percentage of follow up calls, follow up pipeline generating prospecting calls compared to cold calls.

[00:23:14] Chris Beall: For some reason, folks get obsessed with cold calling, which they don't even like to do. And it's [00:23:20] like, well, we talked to this person, talked to this person. It's almost like scratching lottery tickets and hoping to get lucky and hope might be a strategy in the world of lottery tickets, not a great strategy in the world.

[00:23:31] Chris Beall: of Market Dominance. So what do you want to do? Well, you want to make sure that your reps are talking to people it [00:23:40] makes sense to talk to, and your follow up lists automatically are full of those people because they either expressed enough interest or your rep decided it was worth talking to them in the future, and they're easier to get a hold of.

[00:23:53] Chris Beall: So that's number one. Number two is fix your messaging so it resonates. Your [00:24:00] messaging probably is driving folks away because it contains too much value. And the value statements in your messaging, we do X and Y for companies like you, blah, blah, blah, are causing somebody to get to achieve their goal in the call.

[00:24:16] Chris Beall: Which is to get off this call with our self image intact by [00:24:20] simply saying, "Thanks, we're all set." So that's the next thing you should do. Why should you do that before you change your targeting, your actual lists? For a simple reason. Until you, you really get there and get to a point where you're confident that at least you don't have a structural, psychological issue in your messaging, [00:24:40] then until you get there, you don't really know how well it's working for targeting.

[00:24:45] Chris Beall: That is, you can't really tell what's resonating. You can get lucky sometimes. But you've got to have what we call a calibrated message. Then you need to get at least one of your reps to the point when, where when they deliver the message it is, consistent. You're going to get [00:25:00] consistent read. That comes back in the form of meeting set per rep hour.

[00:25:06] Chris Beall: So that's, a good one. It also actually comes back in conversion rate, meeting set per conversation. So you need to get to the point where, yes, we know what that, that is, what the conversion rate is, and how it ties to the reps [00:25:20] time. Then we're free to say, okay, now, what part of our list is this working well for?

[00:25:26] Chris Beall: And what part of the list is it not working well for? And you can do segmentation that is more fine grained than what you have today. This is actually a little bit tricky to do, but if you take the [00:25:40] folks that you're setting meetings with, then you take them off to a company like Rev, at GetRev. ai.

[00:25:46] Chris Beall: Fred Mondragon was on one of those. Market Dominance Guys talking about this. You can have them point to a whole bunch of companies that are in this exographics way, in a significant way, similar to the ones that you're setting appointments with. That is, [00:26:00] you don't have to even wait until you've got a whole bunch of business.

[00:26:03] Chris Beall: You're brand new, you're going after a new market. What's the first signal that says that you're going to have pipeline built? It's meetings set. So go and use that. You can also look at the pipeline that's being [00:26:20] set in the CRM based on the conversations. That's the, we call that the possible attribution.

[00:26:26] Chris Beall: So you have two very nice signals that you can use in order to improve your targeting. Once you've done all of that, then it makes sense to actually increase the amount of prospecting time. Until you've got it all calibrated, if you [00:26:40] just increase the prospecting time, you just irritate yourself and people.

[00:26:43] Chris Beall: And you actually, you can burn out a team and you can burn through lists in ways that don't make a great deal of sense. And you can also trick yourself into thinking that you're seeing things, positive and negative things, that aren't actually there. You got to get to the data to see the reality. So, that's that kind of [00:27:00] wraps it up.

[00:27:00] Chris Beall: That's a whole bunch of numbers, but I'm going to come back to the main one. Pipeline dollars per rep hour is the KPI that you need to be looking at. And to do that to have that number to hand, you have to have a way of measuring the actual rep hours spent prospecting and [00:27:20] tying that to the pipeline that's sitting in your CRM.

[00:27:23] Chris Beall: Again, it's something we do at ConnectAndSell as a convenience for you. It's just go ahead and hook up your CRM and we'll measure this every single day and break it down all the way to the individual rep, or to the list, or to the team, or whatever it is that you want, and you'll have that [00:27:40] KPI in hand, but without that KPI, it's really, hard, unless pipeline dollars that are being built per rep hour, it's really, hard to figure out the economics of a market dominance program.

[00:27:54] Chris Beall: So for Corey Frank, you got a day off, Corey, and Chris Beall, this [00:28:00] is Market Dominance Guys