“If one does not know to which port one is sailing, no wind is favorable” — Lucius Annaeus Seneca, Roman statesman (4 BC- 65 AD)

To achieve smooth selling a company must align sales and marketing efforts to improve sales performance. In brief, the goal is sales optimization. In my experience this means seeking to optimize systems in eight areas. Today we are focusing on creating a system for goal setting and budgeting.

Goal setting and budgeting require serious conversations and then memorializing the results of those conversations in writing. A company should have standardized worksheets for documenting goals and action plans for the year. Once a goal is determined, then begins the process of thinking backward to determine the necessary action steps required to reach the goal.

Setting quotas and expense budgets requires constructing a mathematical formula based on several variables. These variables include:

  • Target revenue
  • Average deal size
  • Number of deals needed
  • Opportunity-to-close ratio
  • Total opportunities required
  • Hours needed by rep per lead generated
  • Total hours of work per rep for lead follow up
  • Total hours needed to close an opportunity
  • Length of time to close an opportunity
  • Rep productivity percentage
  • Selling hours available per rep
  • Closed deals per rep
  • Fully loaded cost per rep

Time assumptions also must be figured into the equation. These include non-work days in a year, vacation/sick/holidays in a year, total work days, hours per day, hours per year. Like a complicated word problem from math class, the quota setting process reveals how many reps are required to reach the desired revenue, the quota needed per rep, and how much it will cost the company to obtain the desired revenue.

Once quotas are assigned, then the sales activity necessary to achieve the assigned quotas can be calculated using simple math. This helps a company know what its numbers should be on a daily (based on 240 work days), weekly (based on 48 work weeks), monthly, quarterly, and annual basis. The elements of these calculations include:

  • Assigned quota
  • Average revenue per sale
  • Opportunity-to-close ratio
  • Number of sales calls required to close a sale
  • Number of prospecting calls needed to identify an opportunity
  • Average opportunities per account

What variables do you consider when setting goals and budgets for your sales teams?

To find out how to implement smooth selling techniques at your company check out my new book.

Smooth Selling Forever enables small and mid-size business leaders to generate significant, predictable, and sustainable sales growth. Based in the science of selling, when applied correctly and managed vigilantly, smooth selling produces revenue results in a systematic fashion.