Set Realistic Sales Targets

posted in: Sales | 0

In the course of my sales career, I can’t count the number of times that I had unrealistic sales targets imposed on me by some distant senior manager. To make matters worse, my pay was often determined by how well I achieved these targets, so I took a cut in pay, not because of poor performance, but because of poor management.

As managers, there are a host of reasons for setting good sales targets. As I just discussed, bad targets are unfair to your sales people, and can be demotivating. But sales targets are not just set to judge your sales people. A whole host of company budgets will be set based on your sales targets. Missing your sales number could drive your company into the red. In these tough financial times, companies cannot exist in the red for very long.

So how do you set good targets? First, you need lots of feedback from your sales force, both outside and inside. They are the people who are most closely in touch with your customers and the market. I am not naive, I know that some sales people have a tendency to “sandbag” the numbers, especially if their commission is based on hitting their sales goal. (If you are always imposing unrealistic targets, you can be sure that they will sandbag!) So don’t just solicit feedback at budget time, get it throughout the year, so that you share your team’s knowledge of the market.

Most budgets start with historical sales. Not a bad place to start. Now take a detailed look at the sales history. Are their big one-time orders that are unlikely to be repeated in the new sales year. Deduct them from the budget! Did you loose any large accounts. Take them out! Did any significant customers close their doors for good (not that uncommon these days). If so, take them out of the budget!

Now add in realistic growth. Are you planning a price increase? Add that to the budget number. Are you courting any large new accounts? Estimate the probability of success at that account, then multiply the probability times the expected sales, and add that to you your sales budget. Are you likely to add reasonable sales from some smaller accounts? Estimate that, and add it to your sales budget.

Total up the expected gains and losses, and you should come up with a realistic sales budget. With a bit of luck, your number will equal or exceed the number that senior management was looking for. Take a bow! But if not, be prepared to defend your number. If you have carefully done all of your estimates and calculations, you should be able to successfully defend your target.

If your senior management still insists on a higher number, take the challenge. If they need a higher sales number than your current resources can deliver, now is the time to ask for the resources you need. Do you need more people, more advertising, a better web site?

The final decision of course, comes from senior management. But if you have done your due diligence, you at least have a shot at receiving a realistic budget.

Do you need help with the budgeting process. We can help. Call for a free, no obligation needs analysis.