How to set sales targets?

This is another can of worms as a topic, as many businesses that I speak with have no understanding of the impact on your sales team of getting it wrong.

Once again, keeping it simple, sales targets must relate back to your Business Plan and Marketing Plan, all underpinned by your knowledge of your potential markets supported by meaningful analytics to differentiate between ‘the dream’ and the ‘reality’.

You can read all of the stuff about this topic readily available on the web, but this post is straight to the point no crap common sense in business.

So my assumptions here are:

You have a Business Plan
You have a Marketing Plan

So let’s also assume that you understand your target market, perhaps segmented into vertical markets or subsets thereof, have some sales experience working within those markets, and now you want to set sales targets for your sales team. (it’s even harder for a start up company)

So in your Business Plan, you have stated that Y1 revenue will be (say) $2M AUD. Average gross value of each sale is (say) $20,000. That means you need 100 sales in year 1, or around 2 sales per week. Now depending on the effectiveness of your Marketing Plan, that means that you need to be generating at least 20 qualified leads per week, and as a worst case scenario a strike rate of 1:10. (if the strike rate is that low you may have a problem qualifying prospects) So 1 good BDM should be able to achieve those results but only if the sales process is finely tuned and working at it’s optimum which is rarely the case.

So based on 4 appointments per day (lead fed) plus cold calling and networking, the sales target for this BDM should be $167,000 per month.

WOW! You may say. Sales is a tough business, and the above is an example of how to set targets, not achieve results. The variables are many and varied.

I would welcome your comments on this as setting sales targets can break a sales person or sales team if the targets are unrealistic and unachievable.

Top down targeting for sales people is far less effective than bottom up targeting in my opinion as it gives our highly valued and highly skilled sales professionals some ownership of their own financial wellbeing.

Rick