The Mathematics Behind Marketing & Sales Operations

By on February 9, 2016

Marketing & Sales Operations Effectiveness From A Financial Perspective

This paper provides a mathematical, evidence-based business case for considering the impact of sales operations to grow revenue. Marketing and Sales Operations is a complex, scientific, process-oriented business discipline which brings organization and structure to the proposition of how a business enterprise creates revenue generation. It tightly aligns and organizes the sales efforts of the business to produce on-going sales out-performance.

Leveraging the components of a revenue operations program allows a business entity to bring the benefit of process methodology to sales and marketing decision-making. This promotes significant, predictable financial performance — well-beyond what could be expected utilizing traditional sales management methods.

The Three Controllables that the Marketing & Sales Operations Discipline Addresses

When the marketing and sales efforts of a company are organized and work in alignment with each other, this drives increased results in three primary areas, which constructively increases overall financial revenue production and performance.

  1. Lead Generation (The Volume/Quality of New Prospects Being Contacted)
  2. Sales Close Rate (% of Prospects who Buy Services and Become Customers)
  3. Average Contract Value (Increase in the average size of sold deals)

AFFECTS: Revenue Production, Revenue Growth Rate & Margin Efficiency

This following business case does not outline HOW increased revenue production is accomplished through effective sales operations. That is outlined in summary prior to any client engagement. The sole purpose of the sample business case is to illustrate the financial impact and benefit for considering the import of selling operations.

Sample Small-Business Case: A Comparative Financial Example

For Comparative Evaluation:

ABC Company has a core line of business which currently generates $3.4M in top-line revenue per year.

Example Business Math behind the $3.4M:

ABC Company won 192 contracts during the course of the fiscal year with an Average Contract Value (ACV) of $17,708.33. To win those 192 deals, ABC Company worked to engage 873 prospects during the course of the year with a sales closing rate of 22.0%.

192 contracts won (16 per month) x $17,708.33 ACV = $3.4M

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 – (10%) from 878 to 959
  • The sales close rate is increased – (4%) from 22% to 26%
  • Average Contract Value (ACV) is increased – (5%) to $18,593.74

What would this MEAN financially to ABC Company?

On the same core line of business, ABC Company will now generate top-line revenue of $4.6M+. This represents a 35.3% non-compounded one-year growth rate and generates $1.2M+ of additional revenue for ABC Company.

The Business Math behind $4.6M:

ABC Company now engages 959 new prospects for the year, with a close rate of 26.0%. This results in 249 closed contracts with an average contract value of $18,593.00 249 contracts won x $18,593.74 ACV = $177.1K

About the Author

Ryan Bretsch

Managing Principal and Chief Sales Operations Engineer