Archives for posts with tag: Sales Target

What’s the successful sales manager’s magic word?

Buffer.

Building buffer buys benefits for the sales manager.

I mean buffer in a money sense, not a time sense. Building a buffer into deadlines is always wise, regardless of your profession, to insure against the inevitable slips, trips and falls on the journey.

You should always have a buffer between your team target and the total of your people’s individual targets, because not everyone is going to hit target every month. Even in well-performing companies you might see a third-third-third split between those above target, those around target and those below target.

For example, to keep the maths easy, let’s assume you have 5 sales people on your team, each with a sales quota of $1,000,000 per year. Industry variances aside, your team target should be in the region of $4,000,000. Similarly, your sales director, if they have 3 managers with the same team target reporting into them, should have a sales organisation target of around $10,000,000. And so on, through the roll-up to the top person.

You want your people to hit target, and your Director wants you to hit target. That’s how successful companies retain successful sales professionals, rather than creating a constant need to replace churning staff.

Notice that I’m not talking about forecast buffer here. Building padding into your forecast makes it really difficult for the company to do meaningful measurement and planning.

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Commission is the financial incentive you give to sales people to help them meet or surpass the sales targets you set for the business. Many sales people receive a base salary and can earn commission on top of that base by achieving their monthly or sales quota. You want your sales people to hit their sales targets, right? If you do, there are a number of things you need to ensure to keep your sales people – and your company – happy.

Is your commission plan easy to work out? If it’s easy for your sales people to understand the commission they will earn by closing a certain deal, this will make them pre-disposed to do well. If your commission plan is an intricate, esoteric set of formulas requiring an advanced degree in pure maths to fathom, then you’re going to engender confusion and distrust.

Does your commission plan give your sales people a fair chance of achieving target? If the targets are reasonable and your sales people should hit them with a reasonable amount of effort and ability, that’s great. If you know they’re not achievable, then something’s wrong with either your people or – more likely – your business model or the need for your product or service. You need to take a long hard look at the root causes of the failure.

Is your commission plan correctly aligned to the long term goals of the business? You need to make sure your salespeople are chasing the right business for your business. Sales people, quite naturally, will look for the easy wins and the path of least resistance to achieving target. Some products and services are easier to sell than others, and if your people are concentrating on those easier-to-sell items that are not in the strategic interest of your business, you’re building a rod for your back. You need to make sure that your commission plan is structured in a way that is fair to your sales people while also enabling your company to grow in a stable and sustained manner.

Commit to a fair and wise commission plan and your people and the company will commit to you.

 

Perhaps ‘bad’ is a little strong. You’re reading this and thinking ‘how can it be bad when you exceed your sales forecast? I should stop here and talk about forecasts a little more.

Some managers use more than one forecast: the ‘drop dead’, which is the forecast they say they’ll make come hell or high water; the ‘manager’s shout’, which is what the manager thinks will come in; the stretch forecast, what might come in if all the stars are aligned, there’s a following wind, that kind of thing. Other managers take a more scientific approach to forecasting, either based on probability assessed and averaged across the pipeline, or – better – based on which deals should close in the period, excluding altogether those deals that should not close in the period.

Another crucial relationship is that between whatever interpretation of your forecast you use and your target, the sales you’re supposed to make.

It’s bad when the actual sales you end up making exceed your sales forecast for a number of reasons:

– if you’re a publicly quoted company, it’s viewed in a fairly dim light because it doesn’t give the analyst and investment community confidence that your business is predictable and your business planning is solid

– the company might feel that your sales targets are set too low and you and team are making too much money too easily. They may either raise targets mid-stream or ask you to improve your forecasting so they can plan properly

– companies crave predictability. If you can smash it out of the park one quarter, there’s a chance you can crash and burn the next. This kind of ‘lumpy’ revenue stream causes jitters for the same reasons as already outlined

But wait, I hear you say, what about the bluebirds? The bluebird is the deal that comes in out of the blue. Well, ask yourself two questions: one, how often do these deals happen, to which I would say hardly ever. Two, if this was your deal and you genuinely didn’t know it was coming in, then how close are you to your customers, prospects and opportunities? Control is everything, guesswork is nothing.

 

 

In a previous post I talked about why forecasts miss. Of course, the sales forecast is different from the sales target. The former is what you think you will sell in a given period. The latter is what you’re supposed to sell.

If you miss your forecast on the high side, in other words you exceed it, then people tend not to get concerned, even though they should. When you miss your forecast on the low side, as I alluded to in the previous post, it’s usually either because you don’t have a good sales process or your people aren’t following it.

But what if your sales forecast is less than your sales target? That happens a lot too, right? The sales target is $1.2 million and you’re only calling out $850,000 for your team. What to do here?

The first thing is to have an accurate forecast. If you have a well defined sales process and your sales people follow it, then you should have an indication pretty early in the sales period that you don’t have enough opportunity value to hit your number. Having an early accurate indication that you’re going to come up short gives you the chance to do something about it. This might be in the form of increasing your demand generation efforts to get more value into the hopper, but perhaps this doesn’t give the deals enough time to come to fruition before the time period is up.

If that’s the case, you need to coach your sales team to improve their effectiveness, either increasing the size of the deals on the table, or increasing the percentage of the deals you win, or – the hardest to do – accelerating the sales process so that the deals drop into the sales period.

Of course, it might be that your team’s sales targets are simply too aggressive. If, however, you can get your sales team to consistently and accurately hit the forecast, then you have a strong argument for more help to consistently and accurately hit the target.