Sales Goals

Sales Goals

Sales Goals Jonathan Poland

Sales goals are targets for the revenue or units sold that a sales team or individual is expected to achieve within a specific time period. These targets are often set by sales managers and are used to motivate and guide the sales team to perform at their best. Sales goals can be set at various levels, from individual sales representatives to the entire sales department or organization.

Setting effective sales goals involves a number of key steps. First, sales managers should assess the market conditions and the team’s capabilities to determine realistic and achievable targets. Next, they should break down the overall goal into smaller, more manageable targets for each member of the sales team. This can help to ensure that everyone is working towards the same goals and that their efforts are coordinated and aligned.

Sales goals should be specific, measurable, attainable, relevant, and time-bound (SMART). This means that they should be clear and well-defined, with specific targets and metrics for success. They should also be challenging but achievable, and should align with the overall goals and objectives of the business. Finally, they should have a specific time frame for completion, so that progress can be tracked and measured.

In summary, sales goals are an important tool for sales managers to motivate and guide their teams. By setting clear, measurable, and achievable goals, sales managers can help their teams to focus on the right activities and drive better sales performance for the business. The following are some examples.

Revenue

Revenue targets for products, teams and sales people. These are often incentivized with a system of sales quotas whereby commissions are higher for sales people who meet monthly, quarterly and annual targets. For example, a salesperson may have a base salary, a 2% regular commission rate and a 4% commission for each month they exceed a quota of $270,000 in revenue.

Monthly Recurring Revenue

Sales of services and subscriptions may have targets based on monthly recurring revenue (MRR). For example, a salesperson with a quota of $20,000 in monthly recurring revenue with a commission of 10% of MRR if they miss quota and commission of 50% of MRR if they hit quota.

Annual Contract Value

Recurring revenue or long term contracts may be converted to an annual measurement known as annual contract value for the purpose of targets and commissions. For example, a salesperson may have a monthly target of $400,000 in annual contract value. To convert monthly recurring revenue to annual contract value you multiply by 12. For example, $7000 in monthly recurring revenue represents an annual contract value of $84,000. One time sales such as an initial cost of $48,000 can simply be added to annual contract value. This allows targets to include both recurring and non-recurring revenue as a single number.

Units

Revenue goals may be stated in units. For example, a luxury car salesperson who is given a target to sell 20 vehicles in a quarter.

Margins

Where prices are negotiated, sales managers may be given gross margin targets. This requires the manager to balance revenue targets with the need for sales to be profitable. For example, a sales manager in an industrial equipment firm may be given an annual gross margin target of 40% together with a team sales target of $40 million.

Customer Acquisition Cost

Customer acquisition cost is the cost to close a deal with a customer including all marketing and sales costs that can be attributed to the deal. This may include all salaries and commissions paid to sales people and is a way to measure the cost of the end-to-end marketing and sales process. For example, a solar panel systems sales team that has a target average customer acquisition cost of $2400.

Customer Defection Rate

The percentage of your customers who cancel their service or fail to make a regular purchase. For example, a consulting sales team with a target to reduce monthly customer defections from 3% of customers to 2%.

Customer Lifetime Value

If a sales team are responsible for maintaining customer relationships it is common to give teams and salespeople a target for the estimated value of their accounts expressed as customer lifetime value. This captures initial sales, upselling, cross-selling and customer retention efforts in a single metric. For example, a telecom services sales team may target an 18% improvement in customer lifetime value by upselling new services and improving customer satisfaction to reduce cancellations.

Share of Wallet

The percentage of a customer’s total spend in a product category that goes to your products. For example, an IT services company may target an average of 7% share of wallet by building relationships at large firms to upsell. Share of wallet is also known as account penetration.

Win Rate

The percentage of opportunities, quotes or proposals that are closed. For example, a solution sales team may target at win rate of 30%.

Customer Satisfaction

If sales people are the primary contact point with customers such that they represent your product and brand they may be evaluated based on customer satisfaction. For example, a cloud software salesperson who is expected to be visible when customers have a question or problem to sustain customer relationships may have a target of 80% customer satisfaction.

Qualified Leads

The number of qualified leads generated in a quarter. Ensures a full pipeline of opportunities. It is also common to set a target for the average quality of leads. For example, a sales operations team with a target to generate 100 qualified leads a month with a score of at least 77% on a qualification scale.

Cycle Time

The average time it takes from lead-to-opportunity, opportunity-to-close or lead-to-close. For example, a sales team with a target opportunity-to-close of 3 weeks. This is a secondary metric that isn’t often taken too seriously but can indicate the amount of effort that is taken to move all opportunities forward.

Activities Per Month

The sales activities per month of a sales person or team. This may be all activities or specific types of activities. For example, a sales person with a target of 25 customer visits per month.

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