One of the best things about being in sales and sales management is knowing how you’re performing at all times. Unlike some other careers, when you’re in sales you are evaluated not just by qualitative opinions but by where you are quantitatively relative to your revenue goal. That goal could be a division goal, a department goal, a team goal, or your own individual goal. It could even be a combination of all the above. I believe that being in sales and sales management is like being a small businessperson…you may work for a big company but your own success depends on you.
This week’s post is going to discuss establishing a revenue goal and will be the first of a series of posts toward ‘working your plan’.
How are revenue goals developed?
Step 1 – Develop the baseline
I believe the correct way to develop revenue goals is to begin with the customer lists of all the salespeople on the team. Each individual customer should be evaluated based on past history, current status, and future prospects. For example, you might want to look at a 3-year history of the customer’s investment with you and your company.
- Are they a growing or declining customer?
- Have there been changes in their leadership team?
- What outside events have impacted them (technology issues, legal issues, PR issues, natural disasters)?
- How is this individual customer doing relative to their own competitors?
These questions can be answered by doing research within your company and by also researching industry publications and websites to obtain the more macro data. In addition, nothing beats having a conversation with someone at the customers’ business and listening to their insights and opinions. Many times, you will learn a great more from an ‘unvarnished’ conversation than from public information.
After reviewing the history of the customer, you will then want to review how they are currently doing…with their relationship with you and your company and externally. Things to look at are:
- How is your overall current business relationship with them?
- Are there any major pain points that they have with you personally or with your company?
- If there are challenges with this client, can they be easily resolved?
- What one thing could you do to improve the business relationship?
Make sure and also understand how is their business doing…sales, culture, leadership, and morale. If you are fortunate to work for a company with an analytics or research team, take advantage of that expertise to help you get current information and data. Finally, work to discover how this customers’ prospects look for the next 1-2 years. You will need to include overall industry data as well as individual information for that specific customer. Remember, this will by definition be a prediction.
Step 2 – Develop the goal target
This part of the revenue goal process can be the most difficult if not done correctly. Sales management is responsible for agreeing to an overall sales goal number (% increase) and for disseminating that number equitably throughout the sales team and, eventually, to the individual salesperson. Determining the revenue goal increase is impacted by a number of factors:
- How is the growth of your company’s industry segment doing?
- Double digit % increases? Flat year-over-year (YOY)? Declining industry revenue?
- What are the growth goals for your individual company?
- Is your sales division subject to greater or lesser % growth increases?
- Are there other factors which could impact achieving the increased sales growth for your team?
- Unfilled sales positions? Lack of internal support teams? Morale issues? Lack of new products available to sell?
All of these factors should be taken into consideration when sales management is developing revenue targets for the next year (or any time frame, really). Most of the time, you are going to be looking at increases in revenue goals…that’s the nature of the business. However, in 2009, our sales team was struggling to have our customers equal their previous years’ investment and we coined the term, “Flat is the new up”!
Once the overall percentage increase for the team has been established, it is sales management’s responsibility to take that overall increase and assign it to individual salespeople. I’ve heard of some managers who might just assign the same increase to everyone on their team…across the board. While that approach might appear to be equitable, I don’t believe it is the right thing to do for a number of reasons. The first reason is that each customer is different and has different issues. Salesperson A might have a list of customers that includes one client that has significantly increased their investment with your company and is continuing to do so next year. Salesperson B, through no fault of their own, might have a customer on their list who has cancelled all business with not only your company, but also your competitors. In this scenario, I might increase the sales goals for Salesperson A as they have a greater opportunity to achieve the increased goals. I might then also lower the percentage increase on the sales goals for Salesperson B, as they are going to have more of a challenge reaching their target.
Now, I am fully aware that the reality is that we are sometimes given unrealistic revenue goals and don’t have the luxury or opportunity to go through the process described above. I get it.
But, it is well worth the time going through the aforementioned steps to give yourself and your team or management the ‘reality check’ needed to make good business decisions. A responsible and logical goal setting process is critical in retaining the best talent on your sales team…conversely, a pattern of setting unrealistic goals will drive away the highest achieving salespeople on your teams. Not a smart or cost-efficient way of doing business.