There are many reasons for this, chief among them the fact that setting the right sales goals is tricky.
But here’s the thing: if you work in sales, you can’t simply shrug your shoulders and say “Oh well, I’ll try again next year” like you can with personal resolutions such as a new diet or exercise regimen. If your team can’t hit its quotas regularly, your company could go bankrupt and you’ll be out of a job.
Instead, let’s focus on setting smarter sales goals that are realistic yet ambitious, motivating, and will propel your company forward. No one’s losing their job today.
A sales goal, also known as a sales target, is a fixed number of sales that a salesperson and/or sales team attempts to hit within a specific timeframe.
For example, if management at Company X needs to generate $65,000 of revenue next month, and every sale the business makes is worth $1,000, Company X’s sales team would need to close 65 deals. Thus, the organization’s sales target for next month would be 65 deals closed.
Are sales goals completely necessary? A self-motivated, well-equipped sales team could certainly sell enough of its company’s products and services to financially sustain the business without worrying about specific revenue targets or closing rates. But (and it’s a BIG BUT), sales goals have been proven to boost sales team productivity, which, in turn, improves revenue numbers.
In other words, setting sales goals is a great strategy if you want to grow your business.
In theory, setting a sales goal isn’t difficult: Just pick a number, any number, and call it a day. But setting a sales goal that’s smart, i.e. realistic and motivational to your sales team, requires a bit of effort. Follow the four steps outlined below to set (and achieve!) smarter sales goals for your organization.
“It’s important to make your goals realistic. Using past data will make sure you aren’t aiming for something your team can’t achieve, which will cause morale to plummet if they don’t meet unreasonable expectations. Analyzing your team’s current and past performance also gives you a metric by which to judge future success.” — Jesse Silkoff, Founder of My Roofing Pal
To set smarter sales goals, you first have to understand how well your sales reps are currently performing, which means calculating your team’s average close rate.
Fortunately, this is pretty easy to do. Simply take the number of leads your company generated over the past 12 months. Then divide it by the number of sales made over that same period of time. For example, if your team generated 1,000 leads in 2019 and made a total of 60 sales, your close rate would be 6%.
After finding your average close rate, decide if it’s acceptable or not. If the answer is no, don’t worry. There are plenty of ways to improve!
“In setting sales goals, it’s not only important to understand where you ARE, but also where you want to be. When companies fail to define the overall goals of the business, it’s impossible to define the sales goals to get there. Failing to align the sales goals with the business goals is one of the biggest mistakes I see companies make.” — Susan Mann, Founder of Compass Sales Advisory
Now that you know where you are, you can better decide where you want to go.
First, determine how many sales your team needs to make to keep the lights on. If your company requires $20,000 a month to operate and every sale made is worth $2,000, your team needs to make a minimum of 10 sales every 30 days to keep your business out of the red.
But you’re not just trying to do the bare minimum here, right? You’re trying to grow your business and excel! Which means the sales goal you set for your team needs to exceed the number you just came up with.
The trick is choosing a sales goal that’s both ambitious and realistic. You don’t want to choose a figure that’s too high for your team to reach. You also don’t want to shortchange your company and set a goal that doesn’t challenge your sales reps, allowing them to be complacent.
Before plucking a number out of the ether, be sure to take a hard look at your projections and sales history. For example, a good sales quota will:
Still crunching the numbers? Not to worry, this guide will help you set a quota that won’t sink your sales team.
“The key to both generating leads and increasing the close rate is to find the right leads to feed into your sales process. Start by clearly defining who your target customer is, and then ask yourself how you can best meet them where they are.” — Jason Aten, Sales Analyst at Fit Small Business
At this point, you know what your team’s average close rate is and the number of sales you’d like to hit every month. Now you have to craft a plan to hit that figure!
There are two ways to do this:
Let’s say that your team’s average close rate is 6% and you’re currently generating 100 leads a month. This will result in 6 sales every 30 days. But if your sales goal is 9 sales a month, you actually need to generate 150 leads to hit this target, assuming your close rate stays the same.
Pro tip: Your CRM should tell you all of the key metrics.
Just keep in mind, many lead generation activities cost money, which will increase your company’s operating expenses and will require your sales team to make more sales every month in order to meet required minimums.
Another way to meet your sales goals is to improve the rate at which your team closes deals. Imagine if your reps successfully sold to 9% of the leads that came their way instead of just 6%. Your team could then hit its sales goal without generating any more leads.
But how do you improve your close rate? You could:
These two strategies aren’t mutually exclusive. You can create a plan to generate more leads and improve your average close rate at the same time.
Whatever you decide to do for your company, make sure to break your sales goals down into bite-sized, actionable steps. Then tackle each step in a systematic and strategic way.
“KPIs to consider include customer acquisition cost (CAC), lifetime value (LTV), churn (customer unenrollment rate), monthly recurring revenue (MRR), annual recurring revenue (ARR), and burn (net cash loss).” — Ian Kelly, VP of Operations at NuLeaf Naturals
The final step towards setting (and achieving) smarter sales goals is to analyze your results. Are you accomplishing what you set out to do? If the answer is yes, congratulations! You’ve probably set the perfect sales targets for your team.
But in all likelihood, your initial sales goals will need to be adjusted. They’ll either be too high and your team will consistently miss these lofty targets, or they’ll be too low and your reps will always exceed the goals you set for them with ease. Neither is ideal.
If your team can’t reach the sales targets you ask them to, they’ll become discouraged. If they meet them too easily, they may not be inclined to put in the extra work to sell more. It’s your job as a sales manager to find that sweet spot, and stay on top of it as it changes.
So look at the results your sales team is achieving and adjust your sales targets accordingly. The perfect goals will be ones that your team can hit on a regular basis — but only if they work hard and stretch themselves a bit to make it happen.
Setting the right goals for your sales team is essential. Once you learn how to set ambitious, yet attainable goals for your team, you’ll be able to keep your reps better engaged, keep capital flowing into the company bank account, and keep your sales team extremely happy. Win!
While setting smarter goals does require a bit of elbow grease, you now know exactly how to do it. Just follow the four steps outlined in this article:
Join 30,000+ other sales and marketing professionals. Subscribe to our Sell to Win newsletter!