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The process of setting sales targets is demanding. Both for sales professionals, business unit leaders and finance leaders. The business ambitions for next year will get a face and a number. As a sales leader you need to balance the challenge of shareholder and employee interests. You want to set targets securing the growth for your company. You also want to secure your team can deliver on the expectations.
The target setting baseline in larger companies is defined by a set of well-defined processes. Long term strategic planning, tactical sales funnel and comparisons with in year results and book-to-bill ratios are part of the mix. This baseline is very fact based and represents a stable base for 2 out of the 3 main growth scenarios. It suits both expansions for proven offerings as well as exploiting the tail of stable flat/declining businesses. The baseline for exploring new business in the form of customer/solution/channel expansion is more demanding.
Your role and choice of strategy
As a sales leader your role is to set targets based on facts as well as ambitions for emerging areas. Just aggregating facts and placing safe bets is half of the challenge. This first skill requires a solid sales management process and quality in the data input. The second skill is more demanding. When growing by exploring new areas the target setting is more driven by a will to grow and succeed in new areas. You are operating more in a grey zone between facts at one end and insights, believes and aspirations at the other end.
You have a choice to make about how you approach the challenge. You can play safe to put safe targets based on facts. The second option is to build on the fact base as a baseline and add aspirations on top. For a result based on a combination of fact and will based ambitions.
The safe bet is sometimes viewed as sand bagging. You restrict aspirations to short term opportunities with high success probability rates. You build upon proven success recipes with regards to solutions, customer focus and channels. Playing safe create a clear predictability for the business and a high likelihood for reaching the goals. But you gamble with the growth ambitions. To maximize growth you need to aim higher.
When building new business you need a balance between sales ambition and investment to drive the new business. Playing too safe is likely restricting the resources allocated for you to win in your expansion areas. In outside in driven organizations it is often the sales aspirations that set the frames further up the food chain.
Statement where your drive will make a difference
Sales leaders focused on growth have an ambition to add an element of how they will make a difference. From a range of growth opportunities they select 3-5 important strategic priorities. These strategic priorities rely on known market development facts as well as own insights, beliefs and aspirations. By putting numbers on your will, a large step is taken towards a successful realization. Building new business in dynamic markets cannot succeed without a strong will power by the sales leader/s. By selecting this approach you get the added benefit of being in control of your destiny.
A forward leaning approach in the target setting expose you upwards and downwards in the organization. Your superiors expect you to deliver on your stated ambitions. Your peers and direct reports get clear guidance not only about the safe bets but where you have decided to grow. Sales ambitions carrying zero $ targets are hard to succeed with. The lack of commitment in the front line is likely to propagate backwards. It is better to roll-back these pursuits into the business development bucket and introduce them 1 or 2 quarters later.
The risk of getting an impossible target by being too passive
Sales leaders leaning towards a sand bagging approach over a more forward leaning approach are not safe. If you get to keep the low target you can deliver one year but will get challenged the following year. If the growth you are suggesting is too low, or not agreed between sales owners and business owners you might get a random target. Targets allocated to you suffer from less buy-in by the team executing and a clear risk they end up in the impossible bucket. By delaying the process in a larger sales organization you risk to carry the plug. What is left as your colleagues have closed their targets ahead of you. Being dead straight out of the gate is demotivating for a sales organization.
Questions from you and your team
In the target setting process it is valuable to think through the following questions
- What is the mix of growth opportunities in your frame for next year – aim to have a clear view of the division into explore, expand and exploit type of opportunities.
- What is the quality in the fact base you are using as the base for your sales targets – current year/trends and sales funnel quality is required for a solid foundation.
- What is the approach you want to select for this year – it is hard to move from sand bagging to forward leaning during the process and your choice will be irreversible.
- What is the nature of the excluded opportunities you have just outside the inclusion line – expect a negotiation to take place where a view on what is out will be central.
- How does your company reward you and your team for selecting a forward leaning approach – after all the forward leaning approach involve a lot higher personal commitments for all involved.
Suggested additional readings
For additional insights the following can be considered for a deeper understanding of the options
- Five tried-and-tested tips for setting sales targets and objectives [BLOGPOST] – by The Business DueDil
- Use of aggressive goals to will motivate your sales teams [BLOGPOST] – by Fatstax
- Aim for the stars, why aggressive sales quota works [ARTICLE] – by Forbes
- Don’t let sandbagging ruin your sales pipeline visibility [BLOGPOST] – by Gary Smith Partnership
- Five ways that higher sales goals lead to lower sales [CASESTUDY] – by Harvard Business Review
- 5 Tips for setting sales goals [BLOGPOST] – by University of San Francisco