Definition
Sales efficiency compares net new revenue to sales and marketing spend over a period. It shows how effectively spend converts into growth.
Formula
Sales efficiency = net new ARR (or MRR) / sales and marketing spend
Example
If net new ARR is $1.2M and S&M spend is $1M, efficiency is 1.2x.
How to use it
- Use consistent windows (for example, quarter vs quarter) to avoid timing distortions.
- Pair with payback period to see both speed and magnitude of returns.
Common mistakes
- Mixing booking metrics with recognized revenue in the numerator.
- Ignoring expansion vs new logos when interpreting efficiency.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Sales Efficiency" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Sanity-check with a related calculator from the same category on MetricKit.
- Read the related guide (e.g., Sales ops metrics hub: quota, pipeline, win rate, and capacity planning) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- DAU/MAU (Stickiness) Calculator: Compute DAU/MAU stickiness and translate it into implied active days per month.
- WAU/MAU Calculator: Compute WAU/MAU and translate it into implied active weeks per month.
- Feature Adoption Rate Calculator: Compute feature adoption: what % of active users used a specific feature in a time window.
- PQL to Paid Conversion Calculator: Compute PQL-to-paid conversion rate and the number of paid customers implied by PQL volume.
- Gross Margin Impact Calculator: Quantify how gross margin changes affect gross profit LTV, payback, and LTV:CAC (before vs after).
Guides
- Sales ops metrics hub: quota, pipeline, win rate, and capacity planning: A practical hub for sales ops planning: quota attainment, pipeline coverage, required pipeline, sales capacity with ramp, and OTE math.
- Pipeline coverage and sales cycle math: set realistic targets (and avoid sandbagging): A practical guide to pipeline coverage: connect quota, win rate, sales cycle length, and CAC/payback constraints to set realistic growth targets.