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Set Sales Targets with Confidence

by Steve Rietberg  |  July 15, 2019  |  Comments Off on Set Sales Targets with Confidence

As a sales operations leader, determining sales targets is one of your most important responsibilities. When sales targets are set correctly, sellers carry challenging but attainable targets that drive them to meet revenue expectations. When set incorrectly, sellers receive targets that fail to drive productivity or are unattainable and demotivating.

There are multiple ways that you may approach goal setting and quota allocation. Many organizations choose a top-down process to determine or validate sales targets. In this approach, you first set a target for the CSO, then divide that target among leaders in each successive layer of the organization.

In a top-down approach, sales operations should lead the process by drafting sales targets for each level of managers. You should collaborate with these managers to finalize their teams’ targets using objective metrics. This practice will instill confidence with each manager that their targets have been optimized.

As you review targets with sales managers, consider these three metrics to inspect continuity, capacity, and equitability.

Continuity (Mix of Sales Target vs. Historic Revenue)

Gather revenue results for an appropriate time frame and determine the average mix across regions or territories. Compare that historic revenue mix to the relative mix of proposed sales targets across those same regions. For each region or territory, note any significant shifts in mix between past revenue and proposed sales target. If any such shifts are unintentional, adjust sales targets to minimize or eliminate them.

Sales Target vs Historic Revenue

source: Gartner

Capacity (Sales Target vs. Forecast Capacity)

Project the capacity of the direct sales team by understanding the planned headcount and the target individual productivity. Planned headcount must be weighted to account for hybrid sellers (not totally dedicated to a direct selling role), mid-year hires, and the partial productivity of new hires.

To confirm that sales targets are realistic, compare proposed sales targets with the projected capacity of each region or territory. Set sales targets close to, but not higher than, sales capacity. Agree on the desired range with your CSO. You’ll want to provide sales some buffer to protect against the unknown, such as unplanned attrition or product delays.

Sales Target vs Forecast Capacity

source: Gartner

Equitability (Sales Target Growth)

Finally, confirm that the expected growth in each region or territory is equitable and consistent with strategic plans for the year. Strive for roughly equal growth over prior year revenue for all regions or territories within a given line of business or customer segment. Be prepared to justify any material variations in sales target growth with expectations established in your annual plan.

Sales Target Growth

source: Gartner

Use all three metrics with managers at each level of your organization to validate the targets you propose for their teams. In addition to improving the quality of your results, this collaborative process will strengthen your managers’ sense of ownership and confidence in the final sales targets.

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Category: sales-operations  

Tags: quota-setting  sales-analytics  sales-capacity  

Steve Rietberg
Sr Director Analyst, Sales I
1 year at Gartner
25 years IT Industry

Steve Rietberg is a Senior Director Analyst in Gartner's Sales practice.Read Full Bio

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