What is Commercial Ratio Why Should You Care about it?
Simply put – it is an elegant measure to help you connect your operating performance with your income statement. From there, you can use various valuation metrics to see how sales and marketing alignment can drive your stock price.
Public saas company
Market Cap: $2.7 Billion
Price to Sales: 6.21
Total Revenues: $426.96 Million
Revenue Growth: $86.58 Million
Sales & Marketing Spend: $169.19 Million
Commerical Ratio: 0.512
This is below 0.75 and considered suboptimal.
Had this company been operating at a ratio of 1.0 (the preferred level)…
Its revenue growth would have been:
$169.19 million (or 96% higher)
It would have spent
$82.61 million less (a reduction of sales and marketing costs by 49%)
This would have created $471 Million in additional shareholder value achieved simply by stopping random acts of sales enablement and making sure the entire commercial systems are orchestrated.
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Sales is simple
Simple is hard