OPTIMIZING YOURGUIDE TO:

RATIOLEADS TO REP

SALES OPTIMIZATION STUDY

SALES OPTIMIZATION STUDY

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Executive summary

Imagine a top sales rep underutilized by 50%. Any sales manager having

visibility into the rep’s utilization level would most certainly look to

increase the volume of leads assigned. Often, however, the utilization

threshold ‒ where results and productivity are at their optimal level ‒ is

incredibly hard to identify. At Velocify, we are often asked by sales leaders

how many leads they should be sending to their reps, or if they should hire

more reps given the volume of leads generated. This guide presents a

methodology to help sales managers determine optimal utilization levels

to achieve peak performance.

The analysis of millions of sales calls and associated metrics allowed us to

create a framework that enables organizations to calculate an expected

conversion rate based on the number of new leads assigned per rep per

day. This calculation, coupled with a standard profit formula, can also be

used to find the optimal lead volume necessary to break even, maximize

profits, or maximize revenues, depending on an organization’s

ultimate goal.

In this guide, we also highlight current practices from our research, around

the distribution of work assignments and the days and times that reps are

most productive and effective in order to help organizations optimize their

sales engine. The application of these formulas to the data analyzed

revealed that sales reps are often underutilized and that workload is not

evenly distributed throughout the day or week.

Study Methodology This data reflects results aggregated across multiple industries

during a six month period. More than 5 million calls made by

more than 2,000 users were analyzed to arrive at the results

presented in this study.

In order to collect the most detailed call data possible, only

Velocify clients and users taking advantage of Dial-IQ,

Velocify’s intelligent dialer, during the six month period

studied were included in this analysis. Additionally, in the

analysis of rep data, the numbers reported reflect only the data

for reps that appear to be “active” in the system, meaning that

they are being assigned leads and working them during a

given hour.

It is important to note that while these results and

recommendations are widely applicable, they may not reflect

the optimal strategy for some businesses.

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Many sales organizations experience struggles between their sales and

marketing teams. Sales might claim they aren’t receiving enough leads,

while marketing might claim the leads they’re generating aren’t receiving

the proper attention from sales. So, who is right ‒ sales or marketing? How

many new leads should each sales rep get on a daily basis? Are they being

given more than they can handle? Is it better to give them a small number

of leads to make sure they are doing everything possible to convert every

one of those leads?

Finding the optimal operating level, given each organization’s unique goals

and conditions, can be an art form and is usually a guessing game for sales

managers. Fortunately, we can use historical data from a large number of

sales organizations to predict possible outcomes as lead assignment levels

are changed so that each organization can find its optimal leads-to-rep

ratio. If changes are necessary to current lead assignment volumes, it is

important to understand the level of rep utilization, when reps are the

busiest, most effective, and most productive, and the factors that have the

greatest impact on those measures in order to identify the ideal days and

times to reduce or increase the number of new lead assignments.

BACKGROUND

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Identifying a Sales Rep’s Peak Performance ZoneOne of the keys to arriving at an optimal rep utilization level is determining

how workload affects reps results. One of the most interesting insights

gleaned from this research was the predictability of sales rep performance

(measured in terms of conversion rate) using the number of brand new leads

assigned to that rep. Figure 1 shows the rate at which a rep’s ability to

convert a high percentage of leads decreases as that rep is assigned a

higher number of new leads per day. In other words, reps assigned more

leads will likely convert more leads, but at a lower conversion rate as lead

count increases. There are many factors that influence conversion rate, but

this study suggests the number of new leads assigned per rep per day is a

valuable predictor.

Based on this data, Table 1 allows one to estimate expected conversion rates

based on the number of new lead assignments per rep per dayA. The two

primary reasons this negative relationship exists between a rep’s conversion

rate and the number of new leads assigned are: (1) as workload increases,

reps’ effectiveness is more likely to decrease and (2) in some cases,

larger lead volumes usually come from lower quality lead sources. The

more new leads reps are assigned, the less likely they are to respond to each

new lead quickly.

RESULTS

APlease see Appendix A for the formula used to create Table 1. One can also use the formula to calculate expected conversion rates for di�erent numbers of new leads assigned per rep per day that may not be shown in the table.

Table 1: Conversion rate estimates

Figure 1: Impact of lead volume on conversion

con

vers

ion

rat

e p

er r

ep

new leads assigned per rep per day

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%0 5 10 15 20 25 30 35

123458

new leads perrep per day

expectedconversion rate

101215202530

24.5%14.2%10.3%8.2%6.9%4.8%4.0%3.5%2.9%2.3%1.9%1.7%

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At some point, reps may receive so many new leads that efforts to contact

all of them would leave no time for follow-up attempts. Eventually, their

only conversions might come from those they are able to close on the first

call, which for most industries can be extremely difficult, if not impossible

(please refer to prior Velocify research on the Ultimate Contact Strategy,

which illustrates what methods to use and how often to contact a

prospect). Moreover, if lead volume were to increase even further, reps

would not have enough time to even attempt to contact all newly assigned

leads. At this point of oversaturation, any additional leads assigned would

be completely wasted.

These findings reveal something most sales managers already know: there

is both a minimum and maximum lead volume per rep that is

necessary to break even. If you operate with a lead volume below the

minimum number, the small revenues you may be able to generate will not

cover the costs of running your business. On the other hand, if you operate

with a lead volume above the maximum number, the cost of generating a

large number of leads will exceed the benefit gained from additional

revenue. Logically, the key to maximizing profits is finding the peak

performance point between the minimum and maximum lead volumes,

as illustrated in Figure 2A.

RESULTS

Figure 2A: Maximizing profit (example)

pro

fit

per

sal

es r

ep p

er d

ay

new leads assigned per rep per day

$200.00

$150.00

$100.00

$50.00

$0

$(50.00)

$(100.00)

$(150.00)

0 5 10 15 20 25 30

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Obviously, finding those values is different for every organization and is

dependent on a number of factors, which include the Lifetime Value of a

customer (LTV), the Number of New leads assigned per rep per day (N), the

Expected Conversion Rate (ECR), the Commission per Sale (CPS), the Cost

per Lead (CPL), the Direct Cost per Rep per day (DCR), and the Other Costs

of Sales (OCS) B .

Figure 2 shows that for an organization with values similar to those used in

this example, each rep would need to be assigned an average of just over

two new leads per day in order to add value to the company and for the

company to be profitable. Also, the maximum profit contribution per sales

rep would be achieved at approximately 11 new leads per rep per day.

Finally, for an organization that is most interested in growth and not

necessarily profit without adding more reps, the highest volume that still

allows them to break even is shown to be about 28 new leads per rep per

day. The maximum value is not indicative of a rep’s actual capacity, which

is dependent on an individual rep’s skill level. Instead, it is just the value at

which most companies will begin to incur losses from a typical rep because

they’re wasting away too many leads.

RESULTS

BSee Appendix B for the complete pro�t formula and sample values used to generate Figure 2

Figure 2B: Maximizing profit (example)

pro

fit

per

sal

es r

ep p

er d

ay

new leads assigned per rep per day

$200.00

$150.00

$100.00

$50.00

$0

$(50.00)

$(100.00)

$(150.00)

0 5 10 15 20 25 30

Optimal

Minimum Maximum

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Table 2 summarizes these three key values for the example given. Just as

the expected conversion rate can be calculated using a formula based on

data from this researchA, a detailed profit formulaB, which is dependent on

the expected conversion rate, can be used to calculate expected profits

given a variety of different inputs, allowing organizations to find their

breakeven lead volumes and their optimal lead volume for maximum

profit. A little bit of calculus results in an optimal lead volume formulaC that

is only dependent on LTV, CPS, and CPL, assuming all other factors stay

fixed as lead volume per rep changes.

RESULTS

APlease see Appendix ABPlease see Appendix BCPlease see Appendix C

Table 2: Critical lead volumes (example)

10.6

28.2

new leads perrep per day

expectedconversion rate

sales profit perrep per day significance

3.81%

1.77%

2.1 13.6%

0.00

0.00

180.85

$

$

$

Minimum lead volume per rep to be profitable

Optimal lead volume for maximum profit

Maximum lead volume for highest revenue without profit losses

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The optimal lead assignment level can be calculated using the optimal lead volume formulaC or it can be estimated using the values for CPL and LTV ‒ CPS along

with Table 3. For example, for a company with an LTV of $9,000, a CPS of $1,000, and a CPL of $50, we would need to look across the $50 row and down the $8,000

column (LTV-CPS=$8,000), and we would find that 15 is the optimal number of leads we should assign each rep per day for maximum profit. If this company were

currently assigning fewer than 15 new leads per rep, they should work on increasing the number of new lead assignments. On the other hand, if they were

RESULTS

CPlease see Appendix C

(cont. on next page)

Table 3: Finding the number of new leads to assign each rep per day to maximize profits

(CPL) $500 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $8,000 $10,000 $15,000 $20,000 $25,000 $30,000

$5 8 20 48$10 3 8 20 33 48$15 2 5 12 20 28 38$20 3 8 14 20 26 33$30 5 8 12 16 20 28$40 6 8 11 14 20 26

152 192 277 367 615 886 1176 1486115 152 255 367 488 615

152 219 291 367106 152 202 255

121 152106

$50 6 8 10 15 20 33$60 6 8 12 16 26 38$80 6 8 11 18 26 35

$100 6 8 14 20 26 33$150 5 8 12 16 20$200

0000 00 00 0 0

80 11563 80

48 68 911 48 631 2 38 63 911 1 3 44 63 84

1 3 4 48 63 801 2 3 5 50 631 1 2 3 4 44

1 2 3 3 41 1 2 2 3 4

1 1 1 2 3 3 6 8 11 14

Cost per Lead

Lifetime Value (LTV) minus Commission per Sale (CPS)

SALES OPTIMIZATION STUDY

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exceeding that lead volume, they should probably consider hiring more

reps to reduce the workload at that lead volume because it is likely that the

cost of wasted leads is reducing their profits. Similarly, a company can

calculate how many reps they need by taking their daily lead volume and

dividing it by the optimal number resulting from Table 3. For example,

if the company in the example above generates 600 new leads per day,

the number of reps that will result in maximum profits is equal to

600/15= 40 reps.

For reference, and as a point of comparison, the average sales rep in our

study was assigned less than six new leads per day. Given the results

shown in Table 3, most organizations would likely benefit from

increasing the number of new leads they are assigning their reps each

day because most probably fall within the green operating range of Table

3, which generally suggests that optimal lead volumes should be at least

double what they are currently for maximum profit. At those volumes, the

expected conversion rates are between two and five percent. Comparably,

lead volumes should be even larger for maximum revenue growth.

One of the easiest and fastest ways to achieve larger lead volumes without

significantly impacting other costs of sales (OCS) is simply to purchase

more leads, but regardless of how new lead volumes are increased, it is not

advised that one just increase new lead assignments indiscriminately. As

the remainder of this study shows, there are clearly better and worse days

and times to increase or decrease the number of new leads assignments

based on rep availability, productivity, and effectiveness.

RESULTS

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Lead Volume Decreases Considerably on WeekendsOne of the first set of factors that an organization should look at when

considering lead assignment changes is their current distribution of leads

throughout the different days of the week. Overall, the number of lead

assignments is pretty evenly distributed throughout the first four days of the

workweek. As Figure 3 illustrates, there is approximately a 30% drop in

lead volume on Fridays and about a 90% drop on Saturdays. However, the

average number of lead assignments per rep per hour remains about the

same Monday through Saturday, indicating that most companies reduce

the number of active sales staff and/or the number of hours worked on

Fridays and Saturdays in proportion to the drop in lead volume. Figure 3 also

reveals that the total number of lead assignments is clearly lowest on

Sundays. Additionally, sales reps that do actively work leads on Sundays, on

average, are assigned 20% fewer leads per hour than they are during the

other days of the week. The drop in total lead volume on weekends is

probably not a surprise given the majority of sales organizations do not

operate on weekends.

RESULTS

Figure 3: Total lead volume assigned

19.6%

22.0%

21.3%

20.1%

14.1%Friday

Saturday Sunday0.3%2.5%

Monday

Tuesday

Wednesday

Thursday

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Lead Assignments and Activity per Rep Decrease throughout the DayAlthough the average number of lead assignments per rep per hour is

evenly distributed throughout the different days of the week, except

Sunday, lead assignments per rep per hour are not evenly distributed

throughout each day. Figure 4 shows that the total number of newly

assigned leads per rep per hour is highest early in the day and declines as

the day progresses. Notice the total number of lead assignments is

comprised of both brand new leads and re-assigned leads. Re-assigned

leads, which typically outnumber brand new leads, are leads that have

been previously assigned to one rep, but for a variety of reasons are

re-assigned to a different rep.

RESULTS

Our research found that the bigger the sales team, the more likely reps will

receive a higher proportion of re-assigned leads. Lead re-assignments are

normally highest earlier in the morning as reps catch up on prospects

requiring follow-up that accumulated overnight. This is especially true in

cases where a number of reps start earlier in the day, before the rest of the

team, driving lead re-assignments when reps originally assigned to certain

leads have not started working yet. Consequently, the total number of

lead assignments per hour per rep decreases throughout the day,

primarily because the number of re-assigned leads decreases. But also, as

shown in Figure 4, the number of brand new leads assigned per rep is

slightly higher earlier in the day.

Figure 4: Lead volume by time of day

new leads re-assigned leads

aver

age

nu

mb

er o

f as

sig

ned

lead

sp

er h

ou

r p

er r

ep

6.00

5.00

4.00

3.00

2.00

1.00

0.00

6:00 am7:00 am

8:00 am9:00 am

10:00 am

11:00 am

12:00 pm1:00 pm

2:00 pm3:00 pm

4:00 pm5:00 pm

6:00 pm7:00 pm

8:00 pm

after hours

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Our research found that for the most part, time spent on the phone and

the number of phone calls and actions taken on a lead were very much

in line with lead volume assignments. In other words, the more leads a

rep is assigned per hour, the more time one can expect the rep to be on

the phone and the higher the activity one can expect on leads.

Consequently, since reps typically have a larger number of lead

assignments earlier in the day (Figure 4), they tend to make more phone

calls, take more actions in the system, and spend a higher proportion of

their time on the phone earlier in the day, leaving them with more

available time in the afternoon and early evening.

Productivity and Effectiveness Peak on WeekendsSimilarly, since the average lead assignments per hour are fairly constant

across each day of the workweek, the average time spent on the phone

per hour is also fairly constant. Interestingly, Saturday and Sunday had

higher percentages of phone time per hour than Monday through Friday

even though the number of leads assigned per rep are the same on

Saturdays as they are during the workweek, and even lower on Sundays

than they are any other day. On average, sales reps spend approximately

20 minutes per hour on the phone on weekends versus only 15 minutes

on the phone per hour during the workweek.

The fact that sales reps are spending only a quarter, or at best a third, of

their time on the phone also suggests that most reps are probably being

underutilized from an overall capacity standpoint. Most sales

organizations would probably not want or need their sales reps to spend

100% of their time on the phone either, but these results indicate the

opportunity for added phone time per rep exists, further supporting the

earlier finding that most organizations would probably benefit from

assigning a higher number of new leads per rep.

RESULTS

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One of the main reasons reps tend to spend more time on the phone per

hour on weekends is that they spend a lower percentage of their time on

the phone waiting to connect and a higher percentage of their phone

time actually connected. Reps spend 25% of their phone time waiting

and trying to connect during the workweek but only about 20% of their

phone time on weekends. This is largely because reps are more

successful in contacting a higher percentage of their leads on the

weekends, with the greatest success rate on Sundays, when 11% of all

calls made successfully connect. That’s almost double the 6% connection

rate of weekdays. For more information about the largely untapped

opportunities that exist for working on weekends, please see Velocify’s

study on The Value of Weekend Leads Unveiled. Furthermore, Saturdays

are when reps are most productive, making 25% more calls than they

normally make during the workweek, as shown in Figure 5.

RESULTS

Figure 5: Average Calls per Hour per Rep16

14

12

10

8

6

4

2

0

Monda

y

Tues

day

Wedne

sday

Thurs

day

Frida

y

Satur

day

Sund

ay

Note:While these results may provide a benchmark and a point of

reference, the best way to make use of this information is to

actually compare them to your team’s speci�c metrics and

performance. Velocify’s solutions allow you to track and monitor

your team’s activity and effectiveness so that you too can optimize

your sales engine.

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Takeaways and RecommendationsWhile a rep’s productivity usually increases as more leads are assigned, conversion rate drops as reps are assigned a higher number of new leads per day.

It is possible to calculate the expected conversion rate of a rep based on the number of new leads assigned per rep per dayA. This calculation provides a higher degree of clarity around rep utilization.

The expected conversion rate formulaA coupled with a detailed profit formulaB can be used to calculate three key lead volume operating levels for an organization.

• The first breakeven point can provide the minimum number of new leads a rep needs to be assigned per day in order to make profitable contributions.

• The second breakeven point provides the maximum number of leads that can be assigned without losing too much money on wasted leads- this is the optimal volume for organizations interested in revenue growth rather than maximum profit.

• The final key operating level is between the two breakeven points, where the number of new leads assigned per rep maximizes the rep’s profit contributionC.

Data suggests that most organizations would likely benefit from increasing the average number of new leads assigned per rep per day.

Lead assignments per rep per day are fairly constant Monday through Saturday but drop about 20% on Sundays.

Lead assignments per rep decrease throughout the day.

Reps typically make more calls, take more actions, and spend more time on the phone when they are assigned more leads.

Reps are generally most productive on Saturdays and most effective in contacting leads on Sundays, signaling an untapped opportunity.

Ideally, organizations should try to increase the number of new leads assigned to reps during the hours and days in which reps tend to be most available, productive, and/or effective, which means in the afternoons, for most companies, and on weekends, for those companies whose industry and business conditions allow for that option.

SUMMARY & CONCLUSIONS

APlease see Appendix ABPlease see Appendix BCPlease see Appendix C

Call: (888) 843-1777Email: sales@velocify.comVisit our website: www.velocify.comVisit our blog: velocify.com/blog

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About VelocifyVelocify is a market leading provider of cloud-based intelligent sales

automation solutions that drive more effective and efficient sales

processes and improved conversion rates. With unmatched expertise,

drawn from a dedication to helping more than 5,000 clients automate and

improve their lead response and selling processes, Velocify has become

the platform of choice for organizations focused on improving customer

acquisition practices and business performance. Velocify is a privately held

company, recently recognized as one of the fastest growing companies in

North America on Deloitte’s 2012 Technology Fast 500. Please visit

www.velocify.com for more information.

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Appendix A Expected Conversion Rate Formula:The measure for reliability (R2) for the equation derived from the analysis of real performance data indicates that more than 43% of the variability of reps’ conversion rate can be explained by the rate at which they are assigned brand new leads. Therefore, the following equation can be used to predict a rep’s expected conversion rate:

Appendix B Detailed Pro�t Formula:

Appendix C Optimal Lead Volume Formula:

Optimal number of new lead assignments per rep per day =

Conversion rate = 0.245 ×(Number of new assigned leads per rep per day)-0.787

Profit per rep per day = (LTV×N×ECR)-(CPS×N×ECR)-(CPL×N)-DCR-OCS, where:

LTV = Lifetime Value of a Customer = (Expected revenue over the lifetime of a customer-Cost of product or services) or = (Expected revenue over the lifetime of a customer×Gross margin) = Used $4,000 in Figure 2

N = Number of New Leads Assigned per Rep per Day = Independent Variable

ECR = Expected Conversion Rate = 0.245×(N)-0.787 = Calculated using N values

CPS = Commission per Sale = Average $ amount paid to a rep for each closed sale = Used $300 in Figure 2

CPL = Cost per Lead = Average direct cost to generate or purchase a lead = Used $30 in Figure 2

DCR = Direct Cost per Rep per Day = Base salary and benefits for a rep per day = Used $200 in Figure 2

OCS = Other Costs of Sales per Rep per Day = Other costs including supplies, telephone, facilities, marketing support, etc. broken down per rep per day = Used $800 in Figure 2

APPENDICES

.0235 ×(LTV-CPS)[ ]CPL

1.27