We all know that sales are imperative for the growth of any business. What is often overlooked is that sales are just as essential for the sustainability of the business. With this in mind, how do you as a business owner or sales manager go about setting effective goals and motivating your sales team? In a previous blog, we talked about empowering your sales team by working together to set effective sales goals. Specifically, we focused on the importance of actually setting three goals – an audacious goal, a goal that exceeds expectations and a satisfactory goal. This sets clear expectations for your sales team and incentivizes them to never be satisfied, always reaching for that next sale.
When setting sales goals, it is important to start with the end in mind and work your way backwards. What is the net income you want the business to generate for the year as a whole? Then based on the number of people on your sales team, what is the net income that each individual needs to generate in order for the business to hit its overall goal?
If the goal for your sales professional is to generate a net income of $100,000, what level of sales will it take to get there? How many prospective customers will you need in order to reach the appropriate level of sales? How many meetings, phone calls and emails (“touches”) will it take to accumulate the necessary number of customers to reach your sales goals for the year? In other words, what is the conversion ratio of turning prospective customers (“prospects”) into actual buyers of your products or services.
Once you have these numbers, break down the necessary activity. How many sales calls need to be made each day to reach your yearly goal? What are the average number of calls it takes to set a meeting? What are the average number of meetings it takes to book the sale? Based on the average size of sales, what number of new sales will it take to reach your goals. As the business owner you don’t necessarily care how many individual sales it takes for the sales professional to reach his goals. However, for newer sales people it is helpful to walk through different scenarios, taking into account the number of individual sales, and the size of the sales, and the various pricing margins.
Let’s say you have a sales professional who is comfortable playing in the shallow end of the swimming pool. They consistently hit “singles” (smaller individual sales), but the quantity of singles needed to reach their yearly sales goals isn’t realistic to achieve in one year. Helping them set their sights on a few larger prospects and building a pipeline of potential customers in that arena will be a good use of their time. You know they can drop back into singles mode anytime, but to really move the needle they need to focus in the deeper end of the pool. Vice versa, you may have a “home run” hitter on your sales team who sometimes hits their target and sometimes misses. When they miss, it’s a big miss however when they connect the result is a large win. By focusing some of their efforts on singles they can absorb the misses (or you could say “strike outs”) a little better in the years when they don’t hit a home run or two.
For newer sales professionals or for those who haven’t had much guidance with goal setting, setting a goal without knowing the activity it takes to achieve it is truly throwing darts blindfolded. It seems like a tireless effort with no end in sight. As the business owner or sales manager, you must determine the numbers your team needs to hit. For example, let’s say your conversion ratio of prospects to new sales is 15:1, 10:1, or 5:1. If you know how many sales it takes to generate the desired net income you’re aiming for, you now know how many prospects you have to get. If you also know how many sales calls it typically takes to get one prospect you have the clarity to focus on how many calls you need to be making each day, week, and month. Once your sales professional has a determined number of new customers in his targets area he can then boil it down to the required number of daily calls and own the process. It’s important to know your ultimate end goal and then structure the nature of your sales process and activity numbers to reach that goal. If you do, then you are truly in control of the year ahead of you.