Every 1% increase in revenue per-person can increase P&L profit by 4%. 

A systematic way to raise sales productivity is, to some people, the holy grail of business performance improvement. Because:

1. by increasing the close rate of a managed pipeline* from 10% to 15%, revenue per-person could rise by 50%, and P&L profit by 200%!

2. by raising a managed pipeline's* average $size of closed opportunities from $100K to $125K,  revenue per-person could rise by 25%, and P&L profit by 100%!

3. by reducing sales cycle length of a managed pipeline* from 5 to 4 months, revenue per-person produced could rise by 25%, and P&L profit by 100%!

4. by reducing a managed pipeline's* average discount from 15% to 10%, in effect raising price, revenue per-person produced could rise by 5%, and P&L profit by 50%!

Sales Productivity Impact on Profit

In a 1992 Harvard Business School study, Hindman & Sviokla¹ showed that if a typical manufacturing company were to increase its sales revenue per-person productivity by 5%, that it could increase its profit results by 20% (a 1::4 profit lever).

The traditional approach to "managing down cost of sales (COS)" focuses on reducing direct selling expenses. However, as the P&L chart shows in its rightmost column, reducing sales expense by -5%  may increase profit by only 3% (merely a 1:: .6 profit lever). 

And although raising selling price, (in the form of less discounting, give- aways, etc.), can be a 1::10 profit lever, the total range of possible discount reduction is usually quite small, as is its relatively limited impact to increase profit. 

However, by virtue of sales pipelines commonly operating at close rate yields as low as 10-15%, small %increases in yield could generate large gains in revenue per-person -- leveraging significantly larger total profit impact increases, over several years, than raising selling price and cutting sales expense combined.

Revenue productivity leverage on profit, unfortunately, works in both directions. If sales productivity decreases, P&L profit could be negatively impacted by the same ratios. Controlling the direction of this lever, and increasing predictability, are two powerful reasons to proactively manage* each pipeline.