You Will Definitely Miss Your Sales Target This Year!
Did you hit your sales forecast right on the nose last year?
Are your powers of predictive forecasting so strong that you nailed it right down to the penny? Of course not!
I was talking with my client Dave Baney – a very smart consultant in Chicago – and he gave me a new perspective on a belief I’ve long held. You’ve seen me discuss the importance of focusing on activities rather than results. What Dave pointed out was that in his consulting practice he only spends 10% of his time defining the annual budget and then 90% of his time defining the activities needed to drive the results.
What activities should your sales managers focus on?
Don’t let your sales managers spend too much time this month working on getting the sales forecast "perfect" because I guarantee they won’t hit it (exactly). Instead, focus on identifying the activities required to not just hit it, but absolutely crush it! What activities should your sales managers focus on? Have them work backwards from the sales goal - whether by sales person, sales territory, product line, vertical market, or any other way you want to track a sales goal - and then have them focus on....
- Typical revenue per sale and the number of sales required to hit that revenue target...
- Propsoal win rate and the number of proposals needed to win more than the number of sales required above...
- Number of conversations and meetings required with qualified prospective customers to generate the number of proposals needed above...
- Number of phone calls, referrals, in-bound marketing leads, and other activities required to get into the number of conversations needed above....
To absolutely crush the sales forecast, make sure everyone on the sales team overshoots the required activities at each step. For example:
- Let's say John Quotacrusher needs to sell $100k per month to hit his sales goal for the year.
- The average sale is $25k, so he needs at least four (4) wins of about that average size per month to reach goal. (Aim for 5)
- If he closes about 50% of the proposals he submits, that means he needs to generate eight (8) proposals per month. (Generate 10)
- Let's say about half the meetings and conversations he has with qualified prospects turn into a proposal opportunity, that means he needs about 16 good meetings every month. (Schedule 20)
- And then let's say he needs to speak with about five (5) potential prospects for every qualified meeting he sets up, which means he needs to call or be introduced to about 80 prospects per month, to generate 16 good meetings every month. (Aim for 100 conversations)
- That breaks down to or about 20 conversations per week with potential prospects, or about four (4) per day. Maybe John will get referrals, introductions, and in-bound marketing leads to hit that number, but to do it consistently he will need to prospect as well. How many calls will that take? It depends, but let's say it takes five (10) dial attempts to get into a conversation with a decision maker at a potential client, which means John needs to make about 40 outbound dial attempts per day to maintain the right activitiy level to hit goal, assuming he's not getting other leads, referrals, and introductions. (Aim for 50 attempts per day)
Conclusion of the breakdown