Sales Operations: Sales Targets
Sales targets are incredibly important. They are the basis for budgets and everything related to the product or service — from marketing to growth. Yet many firms don’t take the time necessary to set a proper target. Often, sales targets are inflated to ensure a safe cushion, but when the target is missed, there are challenges for sales reps and, sometimes, the business plan.
There are a few common approaches to the problem of sales target setting:
- Estimated percent increase from past sales
- Flat quotas: The flat quota approach offers the same commission rate to all sales reps and maintenance. This can work for small sales forces or markets.
- Growth approach considers qualitative insights to allocate growth over the baseline volume.
A common problem for all of the above is accuracy. These approaches don’t consider changes in product or current market trends, which results in heavy or unrealistic targets.
How do unrealistic targets impact my business?
A salesperson never wants to give up on targets set by management. But management tends to stretch the targets in the hopes that a higher goal will boost performance. When the target is reached, everyone celebrates. But in the many cases where this is not possible due to externalities, problems occur:
- Affects cash flows
- De-motivates the team
- Affects management’s credibility
- Reduces sales productivity
A platform (sales operations), which links data and plans across the business activities to achieve an accurate forecasting helps the VP of Sales to set better sales targets which are achievable. This platform helps in estimating:
- Number of prospects or opportunities needed to be touched every month to reach the sales targets
- Number of new leads that need to be in the pipeline to hit targets
- Number of new customers needed
Optimization of sales targets
Sales operations can help optimize performance by setting more specific sales targets. The figure must align with a realistic understanding of where new customers will come from, both where they will come from, and when they will come through as leads.
Territory alignment is a traditional sales operations function, but it is still absolutely critical to keep track of territories so that prospects are not double-counted.
Sales by region and territory, sales by rep, opportunities, number of calls to be made, and orders by product number can be analyzed and forecasted using territory alignment tools.
Lead allocation management and lead qualification
Companies often focus on lead generation but can miss the importance of lead allocation. Lead allocation is the process of turning leads into sales calls. Lead allocation ensures that the leads are qualified before they are routed to your most effective salespeople.
If you want to increase the accuracy of sales targets, lead qualification could be worth a closer look. As you hone your understanding of what prospects are good prospects, your understanding of how many good prospects there are out there in the market will improve, as well.
Sales quotas are set based on past performance and estimation of expected, incremental growth. But most sales quotas rely on historical data and fail to account for sales territories even though territory can have a large impact on the numbers.
So how can sales operations help?
We advise two fundamental shifts in how your organization sets targets. They are:
- Consider externalities, like market trends, territories, and products
- Focus on qualifying leads because this will drive customer centricity and a more precise understanding of how many prospects there are.