Achieve Success with this Sales Target Formula

Achieve Success with this Sales Target Formula

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Having no future sales visibility is the number one challenge that CEOs face.

We’ve already detailed why an established pipeline is critical to the success of your sales team, which provides greater transparency of the sales process. But there are two more things you need to do to ensure you don’t fall short of achieving your sales targets:

1. Pick a growth target that is a slightly stretched goal

It needs to inspire you and your sales team, but it also has to be realistic and not too far out of reach – as this can demotivate the team. Get your sales reps involved with the planning too, to help increase buy-in and so they take ownership of the target.

Always err on the conservative side as you want to make sure you can overachieve. For mature businesses, anything short of 7% and you’re going backwards – this is inline with the growth of most markets. So double digits bare minimum!

2. Here’s the sales target formula!

Split the revenue target (RT) into three income streams.

Revenue target (RT) = (EB + NTE + NB)

Existing business (EB).

What existing business can you always count on? This is business that will come to you no matter what – clients that have service level agreements, forecasted sales/orders and contracted sales agreements.

You can also account for existing business growth based on historic spend (the last three years). Take a calculated guess as you should be close enough to these clients to know what their growth objectives are for the next year, and how they view your part as a supplier. You can also get closer to your existing accounts with Net Promoter Score (NPS).

New to existing (NTE).

It is far easier to sell to existing customers than to new ones, and the cost of sales is reduced by 400% when selling to clients who know and trust you. It takes 7 to 12 touch points to sell to someone new, therefore increasing the sales cycle and cost of sale.

Look at the top 20% of clients that bring in 80% (or thereabouts) of your revenue and develop a strategic account plan CDR (client development and retention plan) to sell more products/services to them.

Find out what they are buying from another supplier that you could provide, or how you could add value to their business in ways they are not aware of. Think about how can you innovate and become an integral part of their organisation. 

Work out how much new products/service you could get from your top 20 clients and get your sales people to work out a strategic sales plan to grow existing accounts. They should never make a call to existing clients without an objective.

Map out when you will strategically have a conversation to your clients, and take into consideration the conversion ratio and length of the sales cycle before you forecast it into your future sales.

New business (NB).

Consider how much new business you need to bring in and focus on. 

New business (NB) = RT – (EB + NTE)

Here’s an example of the sales target formula:

Company growth: 20%

Current revenue: $10,000,000

Revenue target (RT): $12,000,000

Existing business you can count on (EB): $8,000,000

New to existing (NTE): $2,000,000 (You’ll need to strategically work out what growth is possible to get this number).

New business: $12,000,000 – ($8,000,000 + $2,000,000).

The new business goal = $2,000,000

The next step is to work out what you’re going to sell to whom in order to achieve this growth, and by when. Reverse engineer the target – what is the average sales revenue, how many sales will you need to make, how many proposals, meetings and calls need to be actioned? You can do this by working out the conversion ratios.

Also honestly ask yourself – is your current team capable of implementing the strategies and if not – what development do they need?

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