Small Business: Setting optimal sales goals
Setting sales quotas in an uncertain economy can be difficult.
Set them too unrealistically high, and you risk demoralizing staff. Set them too low, and your sales team could become complacent.
Establishing benchmarks and tracking past performance play key roles in finding the right balance, say experts.
"Most sales people don't know what they've done [in sales] in the past year," says Stephan Schiffman, president of SteveSchiffman.com, a New York City-based sales consulting firm. "A lot of people guess on that."
You've got to track not only how you're spending your time but also what your efforts are producing, he notes.
Keep a time log for at least a month to see where your efforts are going, and if they're generating results, he recommends. Also understand what your selling history has been so you can set accurate quotas, says Schiffman, who practices what he preaches.
"I went on 368 sales calls last year and 88 flights in 50 weeks," he says, noting that 30 to 40 percent of those sales calls turned into business for him.
USE PAST PERFORMANCE AS A GUIDE
Base your goals and targets on what's proven to be possible by focusing on what your best sales people have been able to do, says Rich Isaac, president of Sandler Training in Hauppauge, a sales training and consulting firm. Your goals should be increasing each year, but at a minimum should be close to what your top salesperson has done in the past, he says.
"If you're setting too-modest goals to appease your average sales person so they don't feel bad . . . then you're clearly not stretching them or your organization to reach higher levels," Isaac says.
FINDING SALES SWEET SPOTS
If they're underperforming, you may need to build a better sales team either through training or recruiting stronger people, he says. Set an individual target for sales personnel as well as a company target, making sure you're more conservative on the overall company target so you don't suffer a cash crunch, he suggests.
"The objective is to find that sweet spot between suitably challenging and realistic and yet not too easy," says James Stoeckmann, senior compensation practice leader at WorldatWork, a Scottsdale, Ariz.-based nonprofit human resources association focused on compensation.
COMPARE AND CONTRAST
You've got to manage the dynamic tension between the top-down growth objective and the bottom-up view, taking into account the different stakeholders, including top management, finance and the sales force, he notes.
See what the sales team/person's understanding of what a realistic sales quota is and compare that to management's. Break it down by region, product line and territory, Stoeckmann advises.
If there's great disparity in goals/expectations, then there needs to be some negotiating to reach common ground. Last year's numbers plus some growth increment -- typically a number that reflects the growth in your industry -- is reasonable, he says.
Jeff Tempone, chief executive of East Coast Refrigeration in Deer Park, which services commercial and industrial refrigeration systems, hopes to grow sales to $3 million for 2013, a 125 percent increase from last year. In October, he hired a sales manager and is building his sales team.
Tempone, who uses Sandler for training, has created what he calls a "cookbook" that defines his sales person's daily minimum behavior to achieve their goal, such as how many calls they need to make. It's determined in part by breaking down what the company sells; average revenue from that particular sale; who's buying it; and how many of each item/service they need to sell to each group to reach their goal.
"If they're doing the behavior, then the results will come," he says.
"Last year plus" remains the most prevalent quota-setting approach, according to 84 percent of respondents in the 2012 Quota Practices Study.
Source: WorldatWork and Better Sales Comp Consultants