- 11 Aug
Many businesses often fail to set accurate sales targets. A common method is to simply look at the previous year’s revenue and add what appears to be a reasonable rate of growth. However, this does not take into any changing variables such a market volatility, a new product line, or expand into a be geography, and therefore can lead to an unreasonable, unattainable figure.
Setting unrealistic or inaccurate sales targets can have a major impact on a business. Not only can it affect cash flow, but also it can ruin management’s credibility and leave sales lacking motivation, either because the targets are consistently underachieve or easily over-achieve.
In order to accurately set sales targets, organization need a platform that takes into account past performance, account value, rep performance, and foresights based on the business goals. With the Smart Business Platform™ organizations are able to use unrivaled modeling capabilities and predictive analytics to create an accurate forecast and obtainable sales goals. With a platform like Anaplan, your sales team is better armed to meet and exceed their goals.
Now with a platform that can accommodate past and future outcomes, consider the following five factors to set realistic sales targets—that span outside of your basic historical data:
Every business is different. That’s why it’s important to start by considering which factors affect your revenue quarter-by-quarter. Is your business seasonal? Do you have a strong recurring revenue stream? Is your business contract driven? Does your business have high cogs or high margins? To create a more accurate forecast that’s tailored for your business, consider all of these factors, along with the lifecycle of your product or service portfolio.
What is happening in your industry and the wider economy that could have an impact on revenue? Do you operate in volatile markets? Are you in a highly competitive industry? Be as thorough as possible in your evaluation of the variables that may impact either your revenue or the performance of your sales reps.
Revenue per rep.
Take a look at what each rep generated in the previous year and years before that. Collect customer share of wallet for their accounts which could be indicative of future potential. This is where a thorough account segmentation and scoring process is extremely valuable—it can greatly impact sales targets and incentives you should set for your team.
It is important that you solicit sales feedback—before and during the forecasting and target setting process. As your frontline employees, they may provide objections or highlight variables that you have not considered. They can tell you more than the numbers can—like industries that may be very hard to break into or regions that your product’s value proposition is not working. This type of crucial field insight can change the breakdown of the forecast and targets into something more obtainable and realistic.
Implement a rolling forecast.
Despite the well-documented advantages of rolling forecasts, most companies still do traditional forecasting based on a preset annual or quarterly schedule. That approach turns the forecasting process into one of performance evaluation as opposed to elevating the opportunities and risks ahead—leading to a lose in forward visibility on their opportunities. To overcome this disadvantage, consider using rolling forecasts with consistent periods in each forecast window. No economy market or customer organization is static so neither should your sales forecast.
If your revenue expectations are not in tandem with what you can reasonably expect from your sales force, you will of course see a ripple effort on business revenue, employee engagement and turnover. Don’t risk this—see how the Anaplan platform can transform your business by enabling informed business strategy and advanced decision-making.
Ram Krishnan. (2016). 5 Steps to Set and Manage Realistic Sales Targets. Available: https://www.anaplan.com/blog/how-to-set-and-manage-realistic-sales-targets/?utm_source=Website&utm_medium=Blog. Last accessed 11/08/2017.