What do you think is going to happen if you think the way to manage your sales function, is simply double last year’s sales to create this year’s targets?
- Your sales will double?
- Your sales staff will start looking for new jobs?
I’d vote for B every time. As you can’t just double sales without a plan, and only checking in on a sales teams performances at the end of a year is a disaster.
See there is a couple of things wrong with just setting bigger targets.
- Targets require resources to get you there.
- Targets are designed to tell story at moment in time, not help you with the journey to get there.
Manage Sales Activities
Most people are aware that sales require activities to generate them, and that series of activities is normally called a pipeline or funnel. Perhaps 10 leads give you one prospect, and 10 prospects generate you one sale. In that example, 100 leads generate 1 sale. So to double your sales, at the simplest level, you need to double the number of leads you generate. If your average sale is $50K and your business turns over $1M a year, you need another 20 sales to get you to your two million, or another 2,000 leads require generation per year.
(Note you can also focus on multiple funnels, changing the ratio’s and the size of the sale!, but Im not talking about this today).
So to specifically address point 1, to double your sales you need to invest in doubling all the activities in your pipeline. I.e. how are you going to generate another 2,000 leads? Spend more money on SEO?, Spend money on PR?, Spend money on a content strategy? Spend money on advertising?
Hopefully I make my point. A sales target without a supporting plan and resources allocated to achieving it will fail. Sales staff know this and will start looking for a new job before they get blamed for managements lack of planning and execution.
The second thing wrong with just setting a bigger target is its focussed on measuring performance at the end, not along the journey. Making it much tougher to manage sales staff.
Set Activity Targets
I’m a big fan of two types of targets – sales outcomes and the end of a big period (monthly, quarterly yearly) and activity targets for your regular meetings (daily, weekly, fortnightly).
By your performance, you will be able to generate indicative ratio’s of how your sales funnel works. For example (for normal week):
• 10 leads from the website.
• 20 leads from advertisements in industry magazines.
• 10 leads from attending two events.
We may also discover that roughly 10 leads generate us 1 prospect, and 10 meetings with prospects generate us 1 sale. Therefore, our baseline operational cadence per week is:
• 30 leads generated from Marketing Activities
• 2 events attended
• 10 leads generated from events, and
• 10 prospect meetings conducted by sales people
However the average week has no sales, as our $50K sales occurs every 2.5 weeks!
Therefore a weekly sales meeting focused on sales outcomes only would be less than useful as even though we are supposed to generate sales averaging $20K per week, sales occur only once ever 2.5 weeks and are that the $50K per sale level. Hard to tweak your activities, when you are guessing on outcomes.
But a sales meeting focused on our activities and whether we have the required operational cadence is vastly more useful.
For example if out week generated (with suggested decisions in brackets)
• 30 Leads – from the website (Big Week!, is this a trend that means our ratio’s need revision?)
• 0 Leads – from advertisements (better investigate what’s happening)
• One Event – attended by sales staff (need to lift our game and identify some events to attend)
• 20 Leads : from the one event (can we discuss what made this event such a high performer so we can replicate it?)
• 5 Meetings – Attended with prospects (That’s too low, what’ss preventing us from getting out the door?)
You see focusing on your sales activity or your sales cadence allows you to make small changes to improve performance as they suggest themselves. Focusing on outcomes only makes staff either happy or sad. Manage sales activities!