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About The Sales Management AssociationA global, cross-industry professional association for sales operations and sales management.Focused in providing research, case studies, training, peer networking, and professional development to our membership. Fostering a community of thought-leaders, service providers, academics, and practitioners.www.salesmanagement.orgwww.salesmanagementconference.com 16 – 18 OCTOBER 2017 ATLANTA
Territory Planning and ManagementQuota Planning and Management
Forecasting Commissions
Campaign
Performance
ManagementMarketing
Spend
Management
Account
Planning
The connected pathway to smart sales performance
Account Segmentation and Scoring
Capacity Planning and Management
Marketing Budget
Allocation
Marketing Campaign Planning
Compensation Planning
Deal Desk
Commissions
Marketing Attribution
Territory Planning and Management
Quota Planning and
ManagementForecasting
Crediting
Campaign Performance Management
Marketing Spend
Management
Account Planning
Topics for todayo What do we mean by sales targets?o Why are sales targets valuable?o What are common issues with sales targets?o How do many companies approach sales targets?o Who should own sales goal-setting?o What does a best practice process look like?o What information and inputs are required?o How can we improve incrementally in the next few weeks and
strategically in the next 12 months?o Q&A
oDouble in size over the next five years
oDeliver $1 billion of revenue next year
o Secure orders for 10,000 units of the new product
o Achieve gross margins of 55%o Contribute gross profit of $550
million
o Increase net promoter score to 32%
o Reduce cost of sales to 5.0%o Reduce days of sales outstanding
to 38o Improve solution selling capabilityo And many others…
There are several types of sales targets (or goals or quotas) that can result from long- or short-term strategies and objectives, for example:
What do you mean by sales targets?
Studies have shown that a sales person with a goal who understands how that goal was set and believes that there is sufficient opportunity in his or her territory will perform 5-15% higher than a comparable sales person with no explicit goal.
This doesn’t appear to be a massive difference… but if you can keep 100 or 1,000 sales reps pushing through the end of the year rather than coasting once they have made enough money to sustain their lifestyles, you can move the needle on organic revenue growth significantly.
Why are sales targets valuable?
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$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
Weekly Cumulative Sales FY16
With Goal Without
GOAL
What are common issues sales targets?o Lack of visibility into future
market growthoOver-burdening top performers
with higher quotaso Sandbagging by reps (and
management)oNegotiation of quotas favors
more senior repso Failure to communicate quotas
in a timely fashiono Failure to communicate
quota-setting methodology
oUnclear ownership of quotasoMid-year changes create
perception of gaming
o Change management from commissions to quotas
oMeaningless quotas with no impact on pay, promotion or recognition
o Inaccurate quotas driving up sales force cost
Earnings may be up at an all-time high…Current market situation
S&P 500 Earnings$ inflation-adjusted earnings per share
…but revenue growth has been flat, and recently declining. How is this possible?Current market situation
S&P 500 Real Sales Growth
Earnings are being made on the back of cost and operating efficiency –rather than growing revenue.
Let’s take some of the prevailing dynamics in the market today and show how they can impact quota achievement:o Last year, Acme Corporation delivered $1 billion of revenue with 200 field sales representatives
delivering on average $5 million each. Growth in the industry is slowing a bit, from 6% to 4%. Gross margins have been 48% and are being pressured by commoditization of the core product lines. Compensation Cost of Sales is about 5%.
o The CFO would like to grow by 10% and improve operating margins from 15% to 16%, and has asked the business not to replace any employees who resign from the company. Turnover in the sales force runs 15% annually. Sales management has been able to fight for replacement of key resources in some cases (strategic account coverage, key managers, etc.) but not all.
Quota achievement is down 10-15% below best practices over the past couple of years… why?
So let’s imagine we are the head of sales for Acme and we choose to attack the year’s goals within the CFO’s parameters:o In this scenario, Acme goes into the next fiscal year with 180 field sales representatives and because there are no productivity
improvement initiatives planned, market lift will only produce $5.2 million of revenue on average. To address the CFO’s 10% growth goal and the traditional 10% buffer applied to the business plan by sales management, each rep would need to carry a $6.7 million goal.
o Through long hours and diligent performance management, let’s say the sales force produces $5.8 million on average. This still drops the percent of reps achieving goal from over 60% to about 40%.
o The company achieved less than half the CFO’s revenue growth plan. But because of the operating margin improvements, the company grows operating profit by $17 million. Finance views that as a win in terms of employee productivity, and may be willing to try the same thing next year.
This logical chain of decisions creates a dynamic that puts tremendous pressure on front-line sales, and it is a hard habit to break
The quota allocation process is interconnected with the business planning, sales coverage, and compensation
design processesCoverage CompHC BudgetLRP
Finance
HR
Sales Ops
Sales Mgmt
Sales
No
May Jan
Confirm Budget
Confirm FTEs
Calculate Potential Yes
CalculateShare
Confirm Territories
ForecastSales
Gap?
SumForecast
Allocate Gap
Assess Impact
Review Final Model
DevelopComms
AccountPlanning
Poll Question: When do you start planning/calculating targets?
A. Q1– early, immediately after start of yearB. Q2C. Q3D. Q4E. Q1– late, after everything else is rolled out
Ideal Proposed Territory & Quota Process (Moderate Detail)Step Short Term/
Long TermTerritory/ Quota/Both Category Activity Driver Ideal
Timing
1 ST Both Business Planning Assess Market Marketing/Sales -26 weeks2 ST Both Business Planning Develop Growth Goals Finance -25 weeks3 ST Both Business Planning Confirm LTV/CAC Ratio Finance -25 weeks4 ST Both Business Planning Assess Product Plan and Impact Marketing -25 weeks5 ST Both Business Planning Headcount Planning Sales/HR -24 weeks
6 ST Both Territory and Quota Principles Refine Territory and Quota Principles Sales/Finance -23 weeks
7 ST Both Territory and Quota Principles Initial Principle Compliance Check Sales Operations -22 weeks
8 ST Both Assess Sales Potential Clean Internal Data IAMs/BDMs -21 weeks9 ST Both Assess Sales Potential Obtain External Data Sales Operations -19 weeks
10 ST Both Assess Sales Potential Clean Combined Data Sales Operations -18 weeks11 ST Both Assess Sales Potential Calculate Total Potential Sales Operations -17 weeks12 ST Both Assess Sales Potential Calculate Untapped Potential Sales Operations -17 weeks
13 ST Both Assess Sales Potential Sum Untapped Potential for Existing Territories Sales Operations -17 weeks
14 ST Both Customer Segmentation Refine Criteria for Dividing Accounts Sales/Marketing -16 weeks
15 ST Territory Draft Initial Territories Determine Where New Headcount Will Reside Sales -15 weeks16 ST Territory Draft Initial Territories Balance Territory Potential Sales Operations -14 weeks17 ST Territory Profile/Target Profile Accounting Firms and Qualify Targets Sales -13 weeks18 ST Territory Finalize Territories Finalize Sales Territories Sales -12 weeks
Ideal Proposed Territory & Quota Process (Moderate Detail)
Middle 1/3 of New HiresAverage of All New HiresAverage of All AMs
Month After Hire
$K
In the next few 4 weeks:o Revisit headcount plano Remove excess buffer from the goalso Confirm top reps aren’t punished or
given a passo Speed up the processo Improve the communications
What can you do next to improve your sales targets?
In the next 4 quarters:o Re-evaluate sales territories for potentialo Acquire more/better external datao Designate a total process ownero Ensure both top-down and bottom-up elements
are in the processo Acquire/develop enhanced planning tools
Add External Data
Listen to Bottom-Up Forecast
Close Gaps Engage Sales Force
Poll Question: What improvements will you make in 2017?
A. Improve internal data collectedB. Improve external data usedC. Designate clear owner of the processD. Start earlierE. Purchase/deploy systems and tools to support goal-setting