11 Feb 4 Steps to Successful Sales Planning in 2018 (Part Two)
Managing a successful sales team all starts with having a successful plan for each salesperson. At the beginning of every period (e.g., year, quarter), the most successful sales managers conduct a business planning discussion with each of their salespeople one-on-one. The purpose is to review the previous period and develop a plan for achieving quota for the next period.
In part one of this article, we looked at how to conduct a formal review of the previous period with the salesperson. In part two, we discuss the importance of communicating market insights and changes in strategy, as well as how to set effective sales targets with each rep.
1. Discuss Market Insights
Any great sales plan always starts with a good understanding of the market you operate in. Therefore, before you discuss sales goals with the salesperson, spend some time educating the salesperson with what’s happening in the market. This includes things like current trends, technological changes, the competition, etc.
By gaining a deeper understanding about the market, the salesperson will be better positioned as a thought leader – especially in the eyes of prospects and customers. In addition, this helps the salesperson understand the key business drivers that are causing your company to adopt new policies and strategies.
2. Explain New Policies and Strategies
The objective for the next part of the discussion is to make sure the salesperson has a crystal clear understanding of any new policies and changes in sales strategies. If the strategies are not clear, then salespeople will tend to follow their own strategies based on what they think is right, most easiest, or most profitable.
A good set of policies and strategies should include: product direction, customer direction, market segment priorities, and priorities for new vs existing customers.
As you discuss new policies and strategies, it is important for you to explain the reasoning behind each change (i.e., the WHY). Communicating WHAT has to happen will get you only compliance. Explaining WHY the changes are taking place will gain you their commitment, rather than compliance.
3. Set Targets for Sales Objectives
At this point in the discussion, you are now ready to focus the discussion towards setting individual targets. This begins with having clear sales objectives.
Sales objectives should be broken down into:
- Customer Targets – To ensure the sales rep is focused on the right types of customers for the company (e.g., number of new accounts, wallet share, revenue per customer segment).
- Product Targets – To ensure the sales rep is selling the products the company wants to sell (e.g., average deal size, revenue by product, number of units sold, cross-sell rate).
- Territory Coverage Targets – To ensure the sales rep is allocating the right volume of effort to engage desired prospects (e.g., % of customers contacted, cost of sale).
If you’re setting annual sales objectives for the salesperson, be sure to break them down into quarterly and monthly objectives. Also be sure to take into account any seasonal variations in your industry, as the targets for each quarter may not be evenly distributed across the year.
By setting the right sales objectives, you provide the focus on where to direct sales activity in order to achieve the desired results.
4. Create a Sales Activity Plan
The best objectives are of no use unless they are translated into sales activities. Since we cannot manage objectives, it’s imperative to plan, manage, and monitor the activities that lead to the results. This involves planning the right activity volume, as well as setting targets for activity quality (i.e., conversion ratio targets).
Plan the Volume of Sales Activity Needed
Step 1: Determine the number of deals needed to achieve quota
Divide the sales rep’s annual quota by his/her average deal size. This tells you how many deals the rep needs in order to achieve his/her annual quota.
Example: $1,000,000 (annual quota) / $50,000 (average deal size) = 20 deals
In this example, the sales rep will need to close approximately 20 deals over the year in order to reach annual quota.
Step 2: Identify the sales rep’s conversion ratios
Calculate the sales rep’s average conversion ratios from one activity (or stage of the sales process) to the next.
Example: 40 calls → 8 opportunities → 5 demos/presentations → 3 proposals → 1 deal
This tells you the amount of effort the sales rep will need in order to win 1 new deal. In addition, it also tells you the quality of the sales activity as this is reflected in the conversion ratio from one stage to the next (e.g., 5:1 call-to-opportunity ratio).
Step 3: Set targets for the activity level needed at each stage
Multiply each activity by the number of deals needed to achieve quota. This will help the sales rep determine how much activity is needed at each stage of the process. In our example, in order to achieve 20 deals for the year our sales rep needs:
800 calls → 160 opportunities → 100 demos → 60 proposals → 20 deals
After coming up with the annual target of activity levels needed, calculate the level of activity needed for each quarter, month, and/or week. Just like before, be sure to take into account any seasonal variations.
Set Targets for Conversion Ratios
Next you should set goals for improving the quality of sales activity by setting targets for conversion ratios. By improving the conversion ratios, efficiency is increased which makes it easier to achieve sales objectives.
In our example from earlier, the sales rep has a 5:1 call-to-opportunity ratio which is a 20% conversion in calls-to-opportunities. We could set a target for the salesperson to improve his call-to-opportunity ratio from 20% to 25%. If this target was achieved (and all other conversion ratios stayed the same), it would mean:
800 calls → 200 opportunities → 125 demos → 75 proposals → 25 deals
From just a 5% increase in call-to-opportunity ratio, the sales rep would be able to bring in about 5 additional deals for the entire year. Small changes can make a big impact.
The more planned out and focused your sales reps are, the higher the likelihood they will achieve quota. It is critical to monitor and measure progress towards targets on an ongoing basis. This will help you and your sales rep identify deficits and make any necessary adjustments. Finally, remember that the goal setting process is always more effective when done in a collaborative fashion with the sales rep.
At this point of the business planning meeting, you and your sales rep have:
- Conducted a thorough review of the previous period
- Discussed market information and explained new policies and strategies
- Set targets for sales objectives and sales activities
The final element of the business planning meeting involves the individual development plan. This involves a discussion on the coaching and development activities that need to take place which will help the sales rep achieve his/her sales goals. Stay tuned for part three of this article where we discuss this in full detail.