How to Set Business Sales Goals?
Growth in sales is crucial to the sustainability of your business. For your business, you should define revenue goals on a monthly, annual, and even more frequent basis. Communicate business sales goals to your team members so they can devise easy ways to achieve them.
Some key factors need to be considered when setting sales goals. Sales goals must include SMART elements.
In this article, we’ll help you understand what a SMART goal is in business, and we’ll show you the necessary steps to follow to set a SMART sales goal for your business.
What is a SMART sales goal?
The concept of SMART sales goal is characterized by elements of reality and achievability. Your sales goal will be easier to achieve if you analyze it scientifically. Thus, you should consider whether your goal is SMART.
In simple terms, SMART stands for:
Specific – A business sales goal is specific when there is no element of ambiguity in its definition. You should endeavor to communicate the sales goals “5 Wh-questions” to the team members. It will give them a fundamental understanding of what the sales goal is all about. The 5 Ws are;
- Where is this sales goal to be achieved?
- Who is involved in the sales goal?
- When do I want to achieve this sales goal?
- What do I want to accomplish with this sales goal?
- Why do I want to achieve this sales goal?
Measurable – A smart sales goal must have a means of tracking its progress. You can devise a means by which you can estimate how far your team has gone in achieving the sales goal. You must communicate clearly to your team the amount you are planning to reach and the total number of products the team needs to sell to reach the goal line to the team.
Achievable: The achievability of the sales goal lies within the amount of work that would be invested into it. When setting a sales goal, try to analyze the figure to see if it is achievable before communicating it to the team members. You can ask yourself the following questions in the process of setting the goal:
- Has the sales goal been achieved before?
- Are there enough resources to achieve it?
Realistic – You must set a realistic sales goal for your team. Before setting a sales goal, you must consider the available resources, time, and workforce strength. If the goal is realistic, it will encourage the team members to work towards its accomplishment. You can even set a stretch sales goal. Although a stretch sales goal may be challenging, it can be achieved if your team members are inspired. Your stretch sales goal is realistic when;
- The goal is within reach and not too frightening to achieve.
- The goal is based on the available resources, time, and workforce.
- Your team members are motivated and committed to achieving the sales goal.
Time-Bound – Your sales goal must be timely. It means that it must have a start and a finish date. The sales manager must set team goals within a particular timeframe. You could have a monthly sales goal, an annual goal, or even a longer-term sales goal. The element of time-bound in goal settings allows your sales team members to intensify their efforts in the sales process and meet the time-set.
How To Set A SMART Business Sales Goal
Revenue targets are crucial to keep a business alive and compete well in the labor market. A good product or service is not the only thing required to make your business successful in today’s competitive market landscape. Aggressive marketing by your sales team would increase the reach and the sales scope of your products or services. Thus, it will help if you consider regular goal setting for your team.
Set a long-term business sales goal that is further condensed into short-term objectives. By this, you can set annual revenue of “x,” which can be further reduced to the daily objectives of “y.” Reducing the business sales goal into actionable objectives will make it easy to track and realistic to achieve.
The following steps are what you can adopt in your business to set SMART business goals:
STEP 1: Educate and empower your sales team
In setting sales goals, you must discuss or meet with your sales team and ask their opinions and advice about the previous sales milestone and the improvements to be made on products or resources going forward.
You can do this by appreciating your sales team efforts and contributions to the performance of the previous sales goals, and discussing their strength and weakness for improved performance towards the new sales goal will help. This exercise could help boost their confidence and sense of belonging to the strategic decisions made by the management.
You should also hold a training session where you will thoroughly coach the sales team about the usefulness of the products or services rendered, customer relationship and retention, sales plan, sales cycle, and overall sales approach. Once they are familiar with all these, it will empower the team to meet the sales target.
STEP 2: Calculate your ideal monthly sales goal
A good sales manager works with the data and records of past achievements to determine new ones. You can do this by analyzing fifteen-to-twenty-month sales backward. It will give you an insight into what your ideal monthly sales figure would be like.
Except for rare cases like festivity, irregular demand, or seasonal demand, there will likely be the regularity of sales figures. Therefore, you can rely on these data to draw a sales goal that will not be hard for your team to achieve since it is still within their usual sales cycle.
It will be good to consider using your ideal or regular sales figure to set a monthly sales goal. The ideal sales will make sales activities to be encouraged and enthusiastically approached by the team members.
STEP 3: Determine your break-even point
You must calculate your break-even point at the start of your business or before launching a new business. It will give you and your team members a foresight about revenue targets. By this, you will know when you start making a profit.
The Break-even point is the point at which the business sales equal the business expenses. This analysis would help you properly plan what needs to be done to set a realistic sales goal. It is the point at which you neither make a profit nor record a loss in your business. Sales made after the break-even point is the bottom-line you can count to be your profit.
To determine your break-even point, here are the key variables to consider:
- Fixed costs – It is the amount of money incurred in the process of setting up a business. It does not fluctuate according to the units of products sold. Fixed costs include the cost of rent, online store, or power generators. They are expenses made for efficient operations of the business activities.
- Variable costs –This is the amount of money expended on the materials needed to manufacture your products. This cost fluctuates according to the number of products sold because you need to buy materials for production. It is needed to sustain the operations of your business.
- Unit sale price – It is the retail price that is tagged to each product. The unit sales price is usually the unit selling price of all the varieties of products you offer for sale in the store.
- Contribution margin – This is the amount of money generated from the difference between sales and the variable costs. You can calculate this by subtracting the variable costs from the sales price.
- Profit and loss – This is the total amount of money generated after the break-even point has been reached. Profit is recorded when the sales activities have surpassed the break-even point, and loss is recorded if the break-even point is not reached.
To determine the break-even point, use the calculation given below:
Break-even point = Fixed Cost / (Unit Sales Price – Unit variable cost)
The break-even calculation above will give you an idea of whether you have reached the bottom-line threshold for your business or are still struggling to meet the break-even. You can speed up the sales process by setting stretched sales goals for your team members.
STEP 4: Set Sales Objectives
It is important that you reduce your sales goals into smaller achievable objectives. From there, you can easily track the progress of your goals.
Setting sales objectives is a good way of giving your sales representatives a sense of direction and clear vision. By this, they know the sales tactics they must use daily to meet their target. It is a simple way of achieving the sales goal in a sales organization. You can draw up sales objectives on retention rate, revenue generation, reducing churn rate, profit margin, and productivity.
Like your sales goals, your sales objectives must be specific, measurable, attainable, realistic, and time-bound. While a sales goal is a long-term vision, a sales objective is the short-term version of your set sales goals.
STEP 5: Communicate Sales Goals
Communication is the key to improved performance. You must keep your sales managers and representatives informed about your business’s sales goals and other sales activities. It will help boost your sales team’s confidence because it shows that you trust them.
This step should be the final step in setting sales goals where their feedback would be collected and given consideration. After the meeting, you can then analyze their feedback on the reliability of the sales goal while making appropriate adjustments where necessary.
You can communicate your sales goals through physical meeting sessions, newsletters, and virtual means, among other ways. In the meeting, you can inform your team about revenue targets, monthly sales goals, revenue goals, or annual sales goals. Once the team is familiar enough with your sales goals, they are more likely to devise practical ways to meet and exceed the goals as quickly as possible.
Tools For Managing Sales Goals
A sales management tool is a device or software that is used to automate sales activities and the sales funnel. In addition to managing the sales cycle, these tools help sales professionals keep track of the technicalities involved in the sales process.
Your sales managers and representatives can accomplish their sales goals with ease by investing in some of these tools to manage the sales goals. Sales staff will find these tools easier to use since they are based on automation.
Below is a list of some of the most commonly used tools in sales organizations that you can leverage to manage your sales goals:
- Aero leads: This tool helps the sales team generate customers’ contacts and email worldwide. Within 48 hours, you can generate quality customers with easy-to-use sorting options based on age category, gender, and location. This tool is available on the Google Chrome extension.
- Ambition: This tool helps manage the sales activities of all the sales team members. It has a functionality that allows you to create a dashboard for the team members and track their sales activities.
- Hubspot Sales Platform: This free tool allows sales representatives to make sales faster in one integrated suite. You can also use it to schedule meetings with your team members and customers.
- Deeploop: This is a paid tool you can use to communicate with clients. It also helps to sell and attend to customers when you are offline. Because of its complex functionalities, it comes in different paid plans.
- Pipeline Manager: This tool also helps sales representatives in planning sales processes. Its functions allow you to plan, learn and coach. It is a multipurpose tool that sales managers can use to hold sales meetings with other team members.
There are some insightful points in this article about setting sales goals for your business. Also included is an explanation of how to set business sales goals for your business, as well as how to ensure that the goals are met and exceeded.
Whether you’re having difficulty setting SMART sales goals for your sales team or just looking for ways to improve the performance of your sales goals in general, you can apply the steps in this post to set a sales goal for your business that is SMART.
Interested in learning more about scaling your sales team while successfully maintaining your conversion rate, team motivation and engagement? At SaleDeck, we provide you with tools and resources to improve the efficiency of your sales team.