If you don't reach for the sky you will not get off the ground

Many of our clients are starting to tell us of their sales targets for the next financial year, and the good news is that they are all predicting growth. However, what is interesting is the approaches they have used to defining the targets, so we thought we would share some of the key approaches with you.

Targets are self fulfilling
The first lesson of setting targets is that they are self-fulfilling. Experience shows that if you set a low growth target you will only achieve low growth, if you set high growth you are more likely to achieve high growth. This is due to the fact that sales teams moderate their behaviour around their targets as opposed to having a sense of responsibility to their employer and always trying to achieve the maximum revenue.

How often have you heard a sales person say "I have achieved my target in that area so I do not have to worry about it now".

Product mix is key
Targets drive behaviour in a sales team, if you need to sell a range of solutions then these must be separated out in the targets. Remember sales people always take the path of least resistance and if they can achieve a pure revenue target by focusing in one area they will.

There are many cases of businesses struggling to sell new offerings, or to move into new markets, this is invariably due to the sales team not focussing sufficiently. This can only be overcome by having specific targets which will drive the focus.

Retain, Acquire, or Develop
Targets are not just a number, they are a definition of how you expect your revenue to achieved. Are you looking to grow by selling more to your existing customers, or are you going to grow by acquiring new customers and retaining your existing ones.

But do you have the right sales team?
We have many customers who have decided that having spent the last 18 months defending revenue now is the time to focus on winning new customers. However, during the last 18 months these same businesses have reduce the size of their sales forces and in many cases culled their "new business" sales people who were not achieving target. They are now left them with account managers who successfully protected business in their existing accounts. So who is going to acquire new customers?

Yes, but how much will I earn?
Sales people are not sophisticated people, the reason we are in sales is that we like to earn more money than everyone else, which is how it should be. If you want to drive my behaviours, impact my wallet.

We are not looking to create complex commission plans, but if you want a specific mix of business then it needs to be reflected in the commission plan. The most successful plans limit my ability achieve OTE (On Target Earnings) by stating that I have to sell a specific mix of products, I cannot achieve OTE just by hitting revenue targets by selling one product. If sales people want to earn more than OTE then again this can only be achieved by over achieving in the target areas, it is these that drive the commission accelerators.

Margin or Revenue?
Clearly it is margin that businesses need to be successful, and if there is any chance that your sales team could sell loss making revenue and still achieve OTE then you have to consider moving to margin based targets (or change your sales management).

Margin based targets only work if it is easy to calculate margin. If calculating the margin becomes too much of an overhead to the sales team it will fall into the "too hard" category and become a disincentive to selling.

On a personal basis I am a fan of margin based targets as this ensures that we only sell profitable business, however there are times when we make a strategic decision to by market share and then we have to pay sales people on revenue.

Communicate the targets early
It is easy to fall into the trap of trying to create a complex set of targets and then tinkering around the edges before you announce them. Please remember that without targets being communicated the sales force will sit back and wait. Do not create a vacuum as in a vacuum nothing happens.

We have a client who regularly announces their targets in the second month of the financial year, they constantly appeared to be surprised that in the first month sales are low!

Next week building a roadmap for a successful year
We will examine how you have to define a clear roadmap for your sales and marketing organisation to ensure you have a successful 2011.

Do you want to know more?

Either read our "Helping business drive sales" document or contact mark.savinson@sales-accredit.com and Mark can take you through more detail.