Setting a sales target can help you gain clarity, maintain focus, and make better decisions. But how to know what number you should aim for?
Today we are going to discuss how to create a winning sales target formula for your business…
Should You Even Set Sales Targets to Begin With?
Okay, so before we get into setting sales targets, we want to encourage you to ask yourself whether doing that makes sense in the first place.
In general, if you are launching a brand new business, then setting sales targets is probably a waste of time. Why?
Because you don’t have any historical data yet which means that you have no way of knowing what can be realistically achieved in a specific period of time.
You’d probably be better off simply putting your offer in front of your dream customers and observing what happens without any expectations.
This will allow you to validate your idea, get market feedback, and collect data that you can then use for setting sales targets in the future.
What Data Do You Need for Setting Sales Targets?
Okay, so with all that out of the way, what data do you need if you want to be able to set realistic sales targets?
Daily, Weekly, and Monthly Cold Outreach Numbers
If you are doing cold outreach, then you should be tracking that.
Say, if you are generating leads via cold calling, then you should know how many cold calls, on average, you make every day, every week, and every month.
Also, if you have a sales team, you should track cold outreach numbers both for each individual salesperson and for the composite “average salesperson”.
Sales Pipeline Conversion Rates
While the exact details may vary from one company to another, sales pipelines are typically structured similarly with a progression from cold outreach to discovery calls to product demos to closing sales.
You should track conversion rates across your entire sales pipeline:
- Cold outreach to discovery call conversion rate
- Discovery call to product demo conversion rate
- Product demo to sale conversion rate
Also, if you have upsells, cross-sells, and downsells, you should track the conversion rates for those too.
What Sales Target Formula Should You Use to Set Sales Targets for Your Business?
There is no one-size-fits-all sales target formula because it all depends on your business model, the structure of your sales pipeline, and the resources that you have at your disposal. That being said…
How to Think About Setting Sales Targets
Here’s the best way to think about setting sales targets:
Step #1: Look at What You Are Currently Doing in Order to Generate Leads
Let’s say that you are using cold email to generate leads and send 100 cold emails every month, which results in 10 discovery calls, which results in 1 new client per month.
Step #2: Ask Yourself How Much More of That Can You Realistically Do
If you are working 5 days a week, you need to send 5 cold emails a day to reach your current cold outreach target of 100 cold emails per month. That’s where you are right now.
Now ask yourself: how many more cold emails can you realistically send each day?
Step #3: Set a Sales Target Based on That
If you double the number of cold emails that you send each month, you will likely also double the number of clients that you get.
So if you go from sending 5 cold emails per day to sending 10 cold emails per day, meaning from 100 to 200 cold emails per month, you will likely also go from getting 1 new client per month to getting 2 new clients per month.
If you believe that you can realistically send 10 cold emails per day, five days a week, amounting to 200 cold emails per month, then setting a monthly sales target of getting 2 new clients per month or an annual sales target of getting 24 new clients in a year seems reasonable. See how these sales targets are based on data as opposed to being entirely made up?
Of course, it goes without saying that if you have employees, several marketing channels, and multiple offers, then working out a realistic sales target becomes much more complicated.
However, the general principle remains the same: if you increase your lead generation efforts, you will likely see a corresponding increase in sales!
But What About the Conversion Rates?
This approach assumes that the conversion rates remain the same despite the increase in your lead generation efforts.
Hopefully, the more practice you and your sales team get with cold outreach, discovery calls, and product demos, the more your conversion rates will improve.
But it’s best to be conservative with your sales projections. Once you actually see an increase in conversion rates, then you can take that new data into consideration the next time you are setting sales targets.
Be Realistic!
When you are setting your sales targets, make sure to consider not just how much you can ramp up your lead generation efforts but also whether you can handle the corresponding increase in sales.
For example, increasing your lead generation efforts by 10x and setting a sales target that is 10x the sales that you are currently making might sound cool. But guess what?
If you reach that sales target, it’s going to be 10x more work, not just 10x more money!
Are you prepared for that?.🧐
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