In an ever-changing sales landscape marked by economic uncertainties and rapid technological advancements, new trends are shaping how businesses approach their GTM strategies. In order to shed light on what companies are seeing out in the field, we surveyed 143 startups and aggregated benchmark data around sales representative performance, revenue goal attainment, and the adoption rate of AI-driven sales applications.
*The data appearing in the following report is anonymized.
Our 2023 report explores several noteworthy findings. Notably, sales rep quota attainment has been on a declining trajectory since 2021, yet a larger percentage of companies are optimistic about hitting their 2023 revenue targets compared to the previous year. Paradoxically, even as revenue goals appear more achievable in 2023, companies are witnessing decreased win rates and lengthier sales cycles. Despite a decrease in win rates, renewal rates have largely remained consistent, and while AI-driven sales support tools are yet to become mainstream, they signify an area of growing interest and future investment.
Below is a closer look at these notable trends shaping the future of sales.
This year, only 33% of reps reported attaining their quotas in H1 2023.
42% of companies saw a decrease in win rates, with 30% declining by 11% or more.
Sales cycle times increased for 53% of companies. Additionally, nearly half, 46%, of initial sale prices over $100k increased by more than 21%.
Since 2021, both gross renewals and net renewals (which include expansions) have been consistent and close to current industry standards of 90% gross and 110% net.
52% of companies plan to hit or exceed their sales team’s 2023 revenue targets, despite only 37% achievement in H1.
While many companies are not currently using AI-driven applications to improve sales team performance, replacing the SDR function is a key area of future investment.
The report below contains benchmarks for key sales metrics including quota achievement, standard ramp durations, sales rep measurements, team configuration, revenue attainment, reasons for wins and losses, sales cycle durations, and the use of AI tools. The information is current as of September 2023.
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After enduring several long years of profound economic change and continuing uncertainty, many company founders and sales leaders find themselves assessing their revenue performance with outdated and obsolete data. The questions, "How does our performance compare to that of our peers?" and "What can we realistically expect?" have become increasingly difficult to answer.
To address this, we surveyed 143 companies across our portfolio and the broader startup ecosystem to identify benchmark data and trends. The findings we gathered confirmed our initial hypothesis – companies are indeed facing a challenging sales climate given the macroeconomic conditions.
In this post, we will unpack key findings and takeaways from the full report and provide practical recommendations CEOs and revenue leaders can follow to weather the storm.
The ability to accurately forecast and reach revenue targets is essential for several reasons, including correctly calculating burn rates, understanding the overall health of the business, modeling potential growth scenarios, and showcasing a competency investors often look for during fundraising.
Across all initial sale prices, only 52% of companies plan to hit or exceed the sales team's 2023 revenue targets; this is up from 39% attainment in 2022. In the first half of the year, 63% of companies missed their revenue targets. Even more concerning, 27% of those companies missed their revenue targets by more than 21%, indicating significant challenges in meeting their goals.
The most impacted initial sale price was $100-249k, where companies missing revenue grew from 68% in 2022 to a projected 76% in 2023. This is expected given larger deal sizes are under greater scrutiny and often require additional C-level sign-off (particularly from the CFO).
It’s increasingly difficult to acquire new customers. Across the board, sales rep quota attainment has declined annually since 2021, with only 33% of reps attaining quotas to date in H1 this year.
Companies with $100-249M revenue and >$250k sales price have experienced a significant decrease of 44% and 47%, respectively, in their quota performance between 2022 and 2023. This may indicate that high-cost products and companies earlier in their scaling journey need to achieve a “must have” status to gain executive purchasing approval.
While the majority of reps are missing their quotas, nearly half of all companies surveyed, 49%, are keeping quota levels the same. Companies that decreased quotas had under 25% of their sales reps hit their goal. The decision to decrease quotas may be a sales rep retention effort and/or the impact of re-forecasting revenue targets.
Additionally, we analyzed companies that increased their quotas, 28% of companies, and found that at least 50% of their reps hit quota targets. Increasing quotas is common as sales reps become more tenured and the sales process becomes more established.
Effective sales leaders pay close attention to the reasons their team wins and loses deals. This qualitative data can provide insights into product market fit, competitive positioning, and sales process improvements. Many companies experienced a drop in their win rates with 42% reporting a decline and 30% of these companies declining by 11% or more.
The top deal-losing factors were “Lost Funding,” “Decided to Do Nothing,” and “Went Silent,” indicating a continued, cautious approach of buyers investing in new solutions.
Only 25% of companies saw an increase in win rates, with the driving factor being “Features & Product Roadmap”. This implies that products that address the core needs of a customer will be able to increase deal win rates.
Winning new deals is not only more difficult, it’s also taking longer. Sales cycles increased for 53% of companies, with 46% of transactions over $100k taking 21%+ longer. Across our portfolio, we have seen deal pace slow largely due to adding additional executive approvals, particularly for large sale price products.
Large transactions take time, with $250k+ deals taking 69% of companies over 6 months. Even smaller transactions, under $99k, take 49% of companies over 4 months.
Combined with sales rep ramp periods of 3-6 months and decreasing quota attainment, elongated sales cycles require careful planning to ensure there is sufficient rep capacity to achieve revenue targets.
Current AI-driven sales solutions still lack the user experience sales teams are seeking. AI-driven products face critical challenges, such as the inability to handle complex scenarios and user adoption. However, we believe the recent innovation in foundational models will enable a new generation of AI-driven sales apps that will address complex sales scenarios with a seamless user experience.
While many companies are not currently using AI-driven sales apps, those that are have focused on SDR (sales development rep) enablement. SDRs are responsible for filling the top of the sales funnel with leads through outbound prospecting. SDRs are typically fresh grads in their first sales role. Training is time-consuming, the average tenure is ~12 months, and scaling productivity is linear. SDR work is largely transactional: researching customers, running outreach campaigns (email, cold call, etc.), and lining up meetings for sales reps. The work is not only time consuming and repetitive, it also takes a lot of managerial time to hire and manage the team.
SDR enablement is also reflected where companies are currently seeing the most value – outbound prospecting and prospecting research. Our thesis is that the SDR function will eventually be replaced entirely by an AI-driven solution, like the one offered by our portfolio company Bluebirds, an account research automation tool designed to help reps personalize outbound at scale. It combines Large Language Models with powerful signals like customer job changes, 10Ks / earning calls, job descriptions, public profiles, prospect websites, tech stack, and more to provide a comprehensive research and lead generation solution.
How is your company navigating go-to-market challenges? We’d love to hear any insights or experiences about your company’s approach. Get in touch with us at Launch@lsvp.com.
Lightspeed portfolio companies benefit from exactly this kind of data, analysis, hands-on support, and much more as part of the Launch program, which covers hard-won lessons from founders and executives on key topics, including Founder-led Sales, Core Team Building, Finding Product Market Fit, and Managing the Business. While full access to the Launch program is only available to Lightspeed-backed founders, we believe in supporting the global startup community.
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