Sales Target

What is a Sales Target?

A sales target is a quantifiable, time-bounded goal a company sets for its sales force. It represents the number of customers or amount of revenue a sales rep or department should reasonably be expected to generate over the span of a month, quarter, or year.

Sales targets are usually based on wins or revenue.

• Looking at deals won is helpful when a sales org wants to improve sales volume or efficiency.
• Setting goals for revenue adds context to closed deals by taking into consideration the size of those wins. An example of a revenue goal would be “$100,000 in total deals per quarter.”

Companies track revenue and deals won when evaluating sales performance.

Revenue is the more important metric for forecasting and long-term planning because it conveys the bottom-line impact of their sales efforts. This is especially true for organizations with a long sales cycle and high average deal size, like enterprise SaaS companies. When deals take several weeks or months to close, it doesn’t make sense to judge a sales rep on their total deal count alone.

That said, closing more deals in the same timeframe is a sign of increasing sales efficiency. So, to drive more revenue faster (the ultimate goal), every sales organization also looks for ways to win more deals within the timeframe of their sales target.

Synonyms

• Sales goal
• Sales target strategy
• Sales quota

Why Companies Set Sales Targets

There are five main reasons companies set sales targets:

• Give employees and the business a general direction. From a business standpoint, quantifiable goals provide direction. For employees, they’re a motivational tool that improves focus and encourages accountability.
• Continuously improve sales output. As you grow your customer base and learn how to sell more effectively, your sales figures will gradually increase over the same timeframe. From one quarter/year to the next, you’ll use past sales targets as benchmarks for improvement.
• Gauge sales team performance. Sales is right next to the money. Effective sales input directly translates to higher revenue figures. So, the best way to understand how effective a sales professional or team is, is to look at their record of hitting (or missing) targets.
• Achieve profitability. Setting realistic sales goals is the most important part. So, younger companies might not be able to run a profitable sales force right away. But, part of the (complicated) equation for setting a sales target is considering the revenue your business needs to stay afloat.
• Understand sales potential. Chances are, you won’t set a reasonable sales target on your first try. It normally takes companies several months (or years) to figure out what a good goal is for their business. Even failed targets are a learning lesson. If you set it way too low, you underestimated your product’s and sales team’s potential, and vice versa.

Benefits of Setting Sales Targets

When sales leaders set targets, they’re setting an expectation for their reps to strive towards. For them, their team members, and the business as a whole, working toward a tangible goal offers untold benefits.

Sets expectations for sales team members

For sales leaders, unclear expectations from the exec team are the number-one challenge. This trickles down to reps, creating a disconnect. According to insights from Indeed, two of the top reasons for sales rep turnover are inconsistent management practices and incompatibilities between leaders and team members.

By setting a sales target, you’re creating consistency and transparency across the sales organization. You’re setting expectations that enable employees to do their best possible work (and show them exactly what “best possible work” actually means).

Helps companies plan for future growth

Experts agree that 60% to 70% of your sales team should hit their goals. When you set realistic sales targets, you can start to reliably forecast your revenue growth. That way, you can make informed decisions on hiring new reps, spending money on marketing campaigns, and other important business initiatives.

Improves employee performance

When employees have a clear understanding of what they’re expected to achieve, it’s easier for them to plan their own workday and create a strategy to hit that target.

On top of this tangible benefit, sales targets also have a positive impact on company culture. Setting a target makes it easier to identify what reps are doing well (and not so well) throughout the sales process. If a rep consistently fails to hit their targets, it’s pretty clear that there are some problems in their workflow that need to be addressed.

When this is done in an open, transparent environment, it can help create a culture of continuous improvement within the sales team.

Creates competition and promotes growth

Healthy competition in the sales team is essential for motivating reps to do better. When a sales rep sees their colleagues hitting targets, they’re more motivated to push themselves harder.

This creates a positive domino effect on performance because when one person hits target, others are inspired to try harder too. New reps can also look at what their coworkers did to achieve their goals and apply those same strategies in their own work.

Challenges in Setting Sales Targets

The effectiveness of a sales target depends entirely on whether the company sets it effectively. It’s a balancing act. If the goal is too easy to achieve, it can cause reps to become complacent and reduce motivation. If it’s too hard, morale can suffer.

Unrealistic or inaccurate expectations

Sales targets are based in reality, but sometimes they’re unrealistic for your organization. If you missed your last quarter’s target by 20%, setting a target that’s 20% higher for the next quarter probably isn’t achievable.

As a general rule of thumb:

• If a few team members don’t hit their targets, it’s a problem with their skills, productivity, motivation, or overall sales strategy.
• If most (or all) of the team isn’t hitting them, it’s a problem with the target itself.

To set realistic targets, it’s important to consider historical data and current market conditions. Over time, you’ll need to look at previous revenue performance and how accurately your goals matched it. That way, you can have confidence your target is attainable.

Lack of clarity and alignment with business objectives

There generally isn’t any discrepancy as to how you’ll measure your targets.

1. A seller closes a deal.
2. The deal goes through the CRM.
3. The seller marks it as “Closed Won.”
4. The value of the deal is attached to the seller’s name.

What’s unclear is how the target is set and how it relates to business objectives. How does the number you arrived at (either through financial analysis or historical data) translate to the overall growth of your company? If you can’t explain this, your reps won’t have a clear understanding of the ‘why’ behind their daily tasks and may not be as motivated to hit their targets.

You’ll also have a hard time managing performance if you don’t have a solid sales motion. If your sales process and methodology aren’t clearly defined, you’ll have a hard time identifying what reps are doing well (and not so well).

Resistance from sales team members

Resistance from your own employees might be the biggest challenge in setting targets effectively. It could stem from:

• A lack of clarity about why the specific targets exist.
• Accountability and tracking metrics for reps.
• Expectations that don’t align with what’s possible.
• Sales managers overreliance on numbers as a form of performance tracking.
• Lack of support from sales management in helping reps reach their targets.

To get around this, leaders should involve reps in the goal-setting process. They should also hold regular sales meetings and weekly/bi-weekly 1:1s to discuss progress and identify any roadblocks preventing reps from hitting their targets.

Tracking the right metrics

Beyond revenue, there are tons of sales metrics you need to track. This is what helps you understand the team’s overall success and diagnose problems within the sales force. It also helps you identify issues with the target itself.

For example:

• The closing rate tells you how well your sales professionals convert qualified leads into customers. If this number is low, it could mean that your salespeople are having a hard time closing deals.
• Sales cycle length is a telltale sign of your team’s efficiency. You can improve your closing rate and total revenue for the period simply by improving sales velocity.
• The average deal size reflects the value of each sale. You can use this metric to diagnose problems with your product pricing or identify top-performing reps who are consistently closing larger deals.
• Your churn rate and MQL:SQL conversion rate speak to the quality of the leads you’re bringing in (and ultimately selling to) from sales prospecting and marketing campaigns.
• Lead response time tells you how quickly a rep responds to leads — particularly valuable for sales teams doing inside sales or calling.

By taking initiative to improve smaller sales metrics like the ones above, you’ll notice an overall improvement in top-line revenue growth from your sales team’s efforts.

Types of Sales Targets

There are several ways to meet your annual targets. The ones that work best for your sales organization will vary, depending on its size, focus, budget, and sales process.

Monthly Sales Goals

Monthly sales goals are easy to understand (though be careful not to let them plateau). Calculate monthly sales targets by working backward from the company’s annual revenue goal. Then, break down the monthly goal on a department, per-team, and per-employee basis.

Also consider seasonal or staffing changes (e.g., layoffs or bringing on a new sales cohort). Onboarding a dozen salespeople this fall will probably impact Q4 goals — staff will be occupied with training. However, by planning ahead, you can adjust your goals and push harder in Q3.

Example: From April 1st to May 1st, each of our three sales teams will close $200,000 in business.

Waterfall Goals

Waterfall goals are like a series of mini-goals, where completing one goal automatically triggers the next. Each step gets your salespeople incrementally closer to their final annual target. These types of targets are great for employee morale because they eliminate some of the stress of looking at one big number. Instead, they’ll have time to gradually ramp up.

Example: In Q1, reps will generate $10,000 in new revenue. In Q2, they’ll do $15,000. In Q3, they’ll do $20,000.

Activity Goals

Activity goals look at specific data points (e.g., calls made, meetings attended) to gauge sales productivity. You can also look at macro-level performance indicators to help understand the data (e.g., closed won deals, qualified leads).

Activity goals are great for measuring individual performance. If a rep meets their activity goals but doesn’t hit their target, it could indicate an issue with their execution on those specific activities.

It’s important not to rely too heavily on activity goals. Every sales rep will have a different way of doing things. You wouldn’t want to punish your top-performing rep who can convert more deals off 20 calls than 100.

Example: Our reps should make 50 calls per day, have 5 meetings per week, and send out 100 prospecting emails each month.

Sequence Goals

When you set sequence goals, you’re essentially saying, “Complete X, then Y, and Z follows.” This type of sales target relies on your reps to complete a series of tasks rather than focusing on a specific outcome (e.g., revenue amount).

The idea behind sequence goals is to focus on a specific activity that’s tied to revenue. That way, a rep who misses a few targets might still end up meeting their revenue goal.

It’s similar to an activity goal. Like activity goals, it’s important to consider factors other than the activity that could impact revenue performance.

Example: In Q2, reps will book 10 new meetings each week. By Q3, an Account Executive will have converted enough of them for those reps to meet their revenue targets.

Weighted Sales Targets

A weighted pipeline recognizes not every lead is created equal. Some leads are more likely to close than others, and this should be reflected in your targets.

For example, if a deal has an 80% chance of closing, it’s probably not smart to count the entire value of that deal towards a rep’s target. If you create weighted sales targets based on the likelihood of deals closing, reps can focus on the right deals and have a better chance of hitting their goals.

Ranked Sales Targets

Ranked sales targets are similar to weighted sales targets, but they’re based on a sales rep’s subjective ranking of certain deals, rather than objective probability data. This type of target relies on a sales rep’s intuition and experience.

When forecasting sales using ranked targets, you’ll add up the value of your pipeline according to your rep’s ranking. This method gives you a sense of how much revenue your team expects to close, but it isn’t as precise as weighted targets.

How to Determine Smart Sales Targets

1. Review last year’s sales performance.

After Q4, look at how your sales team performed against their annual targets. If performance as a whole lags behind, there’s probably a problem with the current market or the target you set. If they’re easily beating targets, you should be more aggressive in setting targets for the next year.

2. Account for external factors.

Several external factors might impact sales team performance in the coming year. We can break these into four basic categories:

• Resourcing. If you increase headcount, you’ll have multiple reps vying for potentially the same customers. If you decrease it, you’ll have the remaining employees juggling more tasks.
• Onboarding. New employees generally take a couple of months to hit full productivity. If you’re hiring, you’ll want to adjust your targets accordingly until then.
• Product changes. Rolling out new products/features or updating existing ones might impact your salespeople’s ability to sell. And there will be a learning curve with product knowledge.
• Economy. Some things (like an economic downturn, legislation, or a massive innovation) are out of your control.

3. Assign specific targets to each sales team.

If your company has multiple business units or sales territories, you’ll need to assign goals that are specific to each one. Some will be larger than others, so you’ll need to adjust targets based on the market potential and resources allocated.

4. Allow for growth within your targets.

Your sales team will likely see growth in their skills and experience throughout the year. You should set targets that are slightly higher than what they achieved last year to account for this growth potential.

While keeping things attainable, it’s good practice to give your target a 15% to 20% increase, although this varies wildly depending on your company’s size and maturity. Younger companies might see exponential growth incremental growth is more typical for large enterprises.

5. Assign territories based on team targets.

Sales territory management is where things start to get serious. Based on each rep’s experience, past performance, and expertise, assign them to a particular territory that makes sense for them.

It’s important to consider the potential revenue in each sales territory. Assign your best or most experienced reps to the most high-stakes territories.

Example Sales Targets for Sales Managers

Sophia, CloudTech’s CRO (Chief Revenue Officer), eyed ambitious growth after a 12% sales increase last year, leading to $3 million in revenue. In a strategy meeting with Alex, the COO, she proposed a bold 25% sales boost for the next year. However, Alex, aware of a recent market slowdown and challenges faced by two new sales reps, urged caution.

Examining past data, they noted that while the veteran reps consistently achieved 14-15% growth, the newer reps’ onboarding phase impacted overall sales momentum. Taking into account the industry trends and team capabilities, they jointly decided on a 16% growth target for the coming year, balancing optimism with realism.

Example Sales Targets for Sales Representatives

Last month, Jake, an SDR at StreamTech Corp., contributed to $50,000 in closed deals. Feeling ambitious, the VP of Sales, Karen, set a new challenge for Jake: achieve $65,000 next month.

To reach this, Jake shifted his focus to high-value leads — particularly, scaling tech startups interested in StreamTech’s advanced analytics module. He tailored his pitch, ensured follow-ups, and organized personalized demos for potential high-value clients.

His strategic approach paid off. By month-end, the leads Jake nurtured resulted in deals totaling $67,500, surpassing the ambitious target. Jake’s success underscored the importance of determination and understanding customer needs in achieving revenue goals.

Strategies for Reaching Sales Targets

Here are the most essential tactics for reaching those sales targets within the set time frame:

• Use sales forecasts to set targets that are within the realm of possibility.
• Regularly review and update your sales process to ensure it aligns with customer purchasing habits.
• Use a sales qualification framework like MEDDIC or SPICED so you’re only pushing quality leads through the pipeline.
• Implement lead scoring so your reps know who is worth prioritizing and moving through the funnel.
• Speed up the sales cycle and drive buyer engagement using CPQ software, sales enablement tools, and digital sales room technology.
• Invest in ongoing training and development to enhance your sales team’s skills and knowledge.
• Gamify the process by rewarding team members who reach smaller, shorter-term goals with a cash bonus.
• Use social selling to connect with active prospects and build relationships with potential customers.

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