It’s getting near the end of the year and many sales leaders and salespeople are putting together their plan for next year. The CEO typically states that he/she is looking for 15% growth. That seems to be the number that almost every CEO picks because the numbers work out that if you grow 15% per year for 5 years, then you have doubled revenue in that time. That part makes sense. However, everything seems to fall apart after “the goal” is set. Here is why:
The Magic Plan– Setting the goal for increased top line doesn’t make it real. In most cases, just setting a goal for 15% growth (or whatever your goal is) doesn’t change any type of sales behavior. I have seen this play out over and over again. The CEO says “We did $10M this year, so we should be able to do $11.5M next year.” My question is “how?” The sales team doesn’t just have 15% more time to devote to driving more revenue in most cases. Most of them are working hard already just to hit the numbers they hit this year. So, setting a higher goal means that the growth you want needs to come from somewhere else. Will it come from new products or services? Are you adding more salespeople? Do you have a big project or deal that will bring more revenue? Are we concentrating on bigger deals overall? Are you closing at a higher rate? There has to be something that changes in order to achieve the higher number. Many companies fail to take it to this level of planning and are disappointed with the result.
The Spreadsheet Plan - Spreadsheets don’t equal execution – we see CEOs, Executive Management teams and even sales leaders determine how they will grow. That’s an improvement over the Magic Goal. In this scenario, the planner looks at all their accounts to see how much more they can get out of them. They look at size of market and determine how much more market share they can capture. They determine that if each sales person were able to bring on x number of new clients at $y per year, then they can hit the goal. There is careful analysis and assumptions made and the numbers work out to the desired increase. I have yet to see a case where I couldn’t make the numbers work out on the spreadsheet. But again, just like with the Magic Plan, the boss often has not accounted for needed changes. If salespeople are supposed to go find new, then who manages their existing accounts? If we are supposed to close bigger deals or close at a higher close rate, how is that going to happen? How can we get the salespeople to do something different? Again, this is where it falls apart. One common mistake attributing revenue to a new hire. On the spreadsheet, they will start on January 1st and we should start seeing revenue by April 1st. If they close at the same rate as the current team and have the same average deal size. You can probably see where I am headed with this. The new hire doesn’t start until March which throws the plan off. They take 3-6 months to ramp up and aren’t producing much during that time. And even then, they don’t close at the same rate as a seasoned veteran. Too many assumptions in the Spreadsheet Plan and overoptimistic projections combined with few directional changes spells doom for these plans. On the flip side, the Spreadsheet Plan rarely accounts for anyone leaving the company. If one salesperson leaves and it takes three months or more to replace that person, that’s a big hole in your plan.
The Boss Plan - That’s your goal – not mine! I hear this often as well when I ask sales people about their goals or quotas. “I have no idea where that number came from. Every year they raise my number and I am already working my butt off, so I don’t know how I will hit it.” There is a clear lack of buy-in here. If the salesperson sees the goal as unrealistic, they will work hard, but may not achieve it. Then at the end of the year when they know they won’t hit their goal and that their goal will probably increase again, they start sandbagging deals so they can start next year strong.
Then, even with good plans, they tend to get filed away only to be seen again next year when we do the same exercise again. So, what’s that answer? Here are a few suggestions:
Analyze your business to see where growth could come from – where have you had most success? Where have you struggled? What if you made some adjustments to focus? What if you added people? How could you improve close rates? If we made adjustments, how long would it take to have any significant impact? Account for any 1-time events that won’t happen again. Plan for attrition of some customers. Even if you are awesome, some customers go away or get acquired or move to competition. Plan for that. Be conservative in your assumptions and then share your analysis with your sales leader. Be open to their feedback – they are typically closer to the action than you are.
Provide your sales leader and sales team with some guidance and direction based on your analysis, but let them build their own plan for what they can do. I know what you’re thinking – they will all lowball it – but it doesn’t have to be that way. What if you said this “Based on the analysis that [sales leader] and I did, we think we can get growth from [fill in the blanks based on your analysis]. I want each of you to look at your accounts/territory and come up with a plan for how you could possibly achieve 15% growth. Include in your plan what you would need to make that happen. You will be surprised what they come up with. If it’s THEIR plan, they will have buy in. Let them be creative. Now, there is typically a negotiation and some discussions with the sales people. You may need to send them back to the drawing board and you may need to help them find areas of growth, but they will.
Keep your plan alive – take THEIR plan out at least once a month to see if they are executing on the things THEY said they would do. If they are and it’s working – awesome. If they aren’t executing, get them back on track. If they are executing and it’s not working, change the plan. Use this as a tool to keep your team focused.
Pivotal Advisors helps companies with this process all the time. If you would like to learn more about it and some tools you could use with your team, just send us an email. We would love to help.