Sales Targets: What They Are & How to Meet Them
What is Sales Targeting?
Sales targeting is the practice of setting objectives for your team. Most folks will think about this in the context of setting quotas. Quotas are really another way of looking at goals. The target, quota, goal – may be a daily, weekly, monthly, quarterly, or annual goal.
This is usually dependent on the nature of the business. In the enterprise space, with longer sales cycles, annual targets make the most sense from my perspective. In a more transactional environment (i.e. Point of Sale, Fast Food, etc), with shorter sales cycles – one could argue for daily objectives.
The real answer is likely someplace in between for your business.
Examples of Sales Targets
When thinking about sales targets – I prefer to use financial targets. Specifically, the financial target for the Month, Quarter, or Year. In an emerging market, it might make sense to use non-financial targets. i.e. Meetings, Opportunities, Commitments. As you gather data, determining your financial targets will get easier.
For a mid-market sales professional, with an annual plan of 600K in new business, they might have a 50K per month target, or a 150k quarterly target.
These targets might be modified based on seasonality in the business. Let’s say 50% of your annual number comes from the 4th quarter of the year. The mid-market sales professional above might have 100K Q1 target, 100K Q2 target, 100k Q3 target, and 300k Q4 target.
Adjust based on what you know about your business.
Why is Sales Targeting Important?
Establishing targets is important, it’s the first step in clarifying your goal & your teams goal for the year. Once the goal is established, the team can design their approach to execute on the goal. This plan will help you create focus on what you (and your team) will do next. It will also be useful when you reflect on progress to date.
How to Set Sales Targets
If you ask 10 VPs or Directors of Sales how they set targets, you’ll likely get the following three responses:
- Start with your annual objective for the organization, add 20%, and distribute the objective across the team.
- Take your annual objective for the organization, and distribute across the team
- Use the performance from last year, add x% of growth, and distribute it across the team.
There are many ways to address this challenge. My preference is to take a combination of 1 and 3.
The individual plan/target for each member of your team, should equal more the 20% of the organization’s plan for the year. I like to use historic performance to refine modeling and expectations across the unique teams and individuals.
Sales Target Calculator
I have created this sales target calculator for easy calculations of sales targets at every level. In this calculator, we take into consideration base pay, commission, and variables when determining the quota for each position.
When Should Sales Targets Be Set?
Sales targets should be established in the last month before the end of your fiscal year and should be finalized within 30 days after the beginning of your fiscal year.
Ideally, you and your finance team should begin conversations about the following year plan at the beginning of the last quarter of your current fiscal year. You can leverage forecasting to begin to set expectations and consider how the team should be organized going into the following year.
Sadly, it is common for organizations to delay the launch of comp plans and targets for the current fiscal year/sales year, until late into Q1. This highlights a gap in planning, coordination, and preparation.
How to Exceed Sales Targets
In order to hit your sales target, you have to have a strategy.
FIRST – What is the number you want to hit?
SECOND – What is your average deal size?
THIRD – What is your close rate?
FOURTH – How long is the sales cycle?
Now, do the math. With what you currently have in the pipeline, what is your current projection? How many people do you need to add to the pipeline?
Set Your Sales Targets for 2021
Now is the time. If you operate using a traditional calendar year, it’s time to get those 2021 Sales Targets in place.
Take the next 24 hours. Review your performance to date, and compare it against where you thought you would be at this point. Are you ahead of plan, behind plan, right on target?
Once you have your current state established, it’s time to take a look at the future. Do you expect 20% YoY growth? 100%?
Establish your desired state, and let’s build the plan.
Create a Sales Plan for 2021
We know our current state (historic performance), and we have established our desired state (next year’s goal). How can you improve the likelihood of success?
It starts with Focus (the goal), Clarity (the metrics), and Action. If you align the actions that will help you achieve your goal, and the metrics that you will use to hold yourself accountable, you will improve the likelihood of your success.
We’ve created the G.A.M.E. approach to goal setting and execution, through clarity and focus, which is designed to help you do this.
Get started with your G.A.M.E Plan today.