      onlycfo.io · 2024-09-19
      · 623d
    

Properly Evaluate Sales Reps: Beyond Quota Attainment to Customer Lifetime Profitability

Sales rep performance evaluation should extend beyond topline quota attainment to include deal economics (discounting, customer lifetime, expansion potential) that drive long-term profitability. The article introduces the "Mendoza Line" framework for identifying underperforming reps and warns that commission plans incentivizing only topline sales can mask poor unit economics that destroy shareholder value.

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Metrics in this report

Average Customer Lifetime (Rep A)

4years

Shorter customer lifespan for higher-discounting rep, indicating worse retention.

Average Customer Lifetime (Rep B)

5years

Longer customer lifespan for lower-discounting rep, indicating better retention.

Average Sales Discount Rate (Rep A)

25percent

Example of higher-discounting rep with lower long-term profitability despite higher topline attainment.

Average Sales Discount Rate (Rep B)

10percent

Example of lower-discounting rep with higher long-term profitability despite lower topline attainment.

Customer Lifetime Profit Difference

600000dollars

Total customer lifetime profit advantage of lower-discounting rep over higher-discounting rep despite lower topline quota attainment.

Sales Rep Quota Attainment Target

80percent

target

Percentage of reps who should hit 80%+ of quota (Dave Kellogg framework); annual basis recommended.

Sales Rep Quota Attainment Target (Alternative)

100percent

target

Percentage of reps hitting 100% quota; alternate framing of attainment goal.

Team-Wide Sales Quota Attainment

75percent

target

Average company-wide quota attainment threshold some firms target.