In this episode, Kevin and Sean discussed the importance of setting appropriate sales goals for a company. They suggested starting with the end goal in mind and then working backward to set achievable but challenging targets. They also advise avoiding pitfalls such as not considering attrition or overstating possibilities when setting goals. Finally, they emphasize the importance of dedicating resources to new markets or initiatives to grow the business rather than only replacing lost customers.
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The following is a transcript of the podcast above. It has been sparsely edited to increase its readability, but many of the idioms and poor spoken grammar have been left in place. Fireflies.ai automatically generated the transcription, and, as capable as that product is, there are times when words are missed or the sentence structure is incorrectly interpreted. We have tried to catch all of these software misses, but we are confident that some still remain. The below text is provided for those that would rather read than listen to a podcast.
00:00
Kevin Lawson
Hello, and welcome to episode two, not eight, of “Two Guys Talking Sales.” I’m one of your hosts, Kevin.
00:10
Sean O’Shaughnessey
And I’m Sean.
00:11
Kevin Lawson
We’re glad you’re here on this Two Guys Talking Sales episode.
This podcast tackles real sales issues, big and small, for salespeople selling situations and sales leadership. We’ve individually built successful sales careers around the problems and solutions in B-to-B selling, from software and services to manufacturing distribution. We have sold to and for many of the world’s most recognized brands as well as some you have yet to hear of. We know LinkedIn says this is a 30-minute time slot. Still, we’ll only take 15 minutes—nothing like under-promising and over-delivering. For roughly the next 15 minutes, we invite you into our world of experience. We’ll dig into one issue. You’ll have a solution should you encounter a similar situation in your career. Let’s dive in.
Sean, let’s set the stage.
01:07
Sean O’Shaughnessey
This topic should be about setting your sales plan objectives for this year.
01:15
Kevin Lawson
Setting objectives for the year. Like not being tongue-tied on a public broadcast. How about that?
01:21
Sean O’Shaughnessey
At least you tried to plan ahead and had it written. Now that’s better than I did. I’m just winging it.
01:25
Kevin Lawson
Our last episode was all about planning your year. Why not have a plan? Well, so you’ll know how you’re doing?
01:32
Sean O’Shaughnessey
There you go.
01:33
Kevin Lawson
Today, we will talk about how to determine company sales objectives. Yes, let’s do that.
01:41
Sean O’Shaughnessey
Great. I’m going to start. Let me talk about what I would advise somebody if you asked me how to do that. I would ask, “Where do you want to be in five years?”
I know the objective is to understand where you will be this year, but you need to start working backward, in my opinion. Let’s talk about five years. Where do you want to be, and how will this year be the first step in that five-year plan? We can go backward. Let’s not say, well, I want to do 10% better than last year because that’s not a plan for getting somewhere; that’s a plan for getting away from where you were. Last year you were X amount of revenue, 10% more. Sure, that sounds great, but does that get you where you want to be?
That’s the first step of the process.
02:30
Kevin Lawson
Completely agree. One of my favorite sales leadership stories is that I was working with the company. I had a group of about seven sales folks at the annual planning retreat. One guy said this was a new practice for them. He was not bad; he was just new at his practice. He says, “I want to grow this product line by 20%.” I said, “Great, 20% is a big growth. I like that. What was last year’s number?” He went, “I don’t know.” I realized this was a key learning point for me. Not everybody knows their numbers right now. That was an egregious example, but it was real. That happened in my life. For somebody who’s never done any forecasting and planning, setting reasonable goals and determining company goals can be a daunting experience. It can be tough to set the sales goal.
For the people who you and I worked with, some really big companies, we’ve been in charge of some big quotas, some big dollars, lots of people to reach those. Missing those dollars can be a big downer culturally. How do you walk that line between: “I’ve never done this before, and I’ve done this, and if I get it wrong, it’s a really high stakes kind of quotation.”
What’s been your experience?
03:47
Sean O’Shaughnessey
Yeah, I’ve worked for public companies, I’ve worked for private companies, I’ve worked for companies that wanted to become public. I’ve done the whole thing a lot of times. Where we are going to go for our sales objectives should be written by the CFO, if you have that role in your organization or definitely the leadership of your company because it is really where do we need to be as a company to support what we’re going to go forward?
The next step is the salespeople, sales organization, and sales team. Your number has to be somewhat larger than that company goal, probably. Let’s pick on a $10 million company; if that CEO says, well, I want to go from $10 million to $12 million, that’s a 20% growth. That 20% that you were talking about. That would mean that I would want my salespeople to shoot for 12.5M or 13M because I need to ensure we get there.
We need to have the plans in place to get to at least 12. I don’t know exactly what’s going to happen in the future. If I am working with a CEO, I’d say, “Let’s shoot high, and let’s figure it out from there.” Let’s drive it from where the company has to be, not just what we think the salespeople can generate. Because once we have selected the number, the VP of Sales or Director of Sales needs to start figuring it out. What kind of organization do I need to have to achieve that objective for the company?
It has to be top-down to what that number needs to be. Not, “Gee, I’ve got four salespeople. I know they can only do $800k; therefore, we will do $3.2 million. That’s all the better we’re going to do.” That’s not really driving the organization forward.
05:39
Kevin Lawson
And it’s interesting. Now when we get into some of that psychology of sales, and on both sides of the fence, you’re going to say you’ll have one person who says, never over-assign quota. For those of you who don’t know what an over-assigned quota is: you’ve got a $10 million quota, which I might go into 12 million, and then you assign out $15 million to individuals to get to the ten or $12 million. We don’t want to do that. That’s a bad practice. What we also don’t want to do is say we need 12 million. Let’s, let’s hit 12 million on the nose. Because then you have a scenario where everything in your world has to go perfectly just to hit the minimum goal.
06:19
Sean O’Shaughnessey
And you know what’s worse? You don’t assign enough quota to the salespeople to hit the number that you want to hit because then you get a bunch of salespeople that made all their numbers. They made their number. You could have every single one of them making their number, but the company didn’t make its number. The company needs to come first in this scenario. A slight overage is probably not a terrible thing. I definitely wouldn’t say, “If my goal is to hit $12 million, let’s give out $15 million of quota.” That’s probably too much, but 12.5M? Yeah, that’s probably not too bad. Maybe, even 13 at the high level is probably not too bad of giving out quotas.
I don’t know. What do you think about that, Kevin?
07:02
Kevin Lawson
Yes. A lot of that will come down to the average ticket size. There are some nuances by industry. Let your conscience be your guide, but base it on data. Make a data-driven decision, not just a gut decision. If you’re in a high growth mode, you have to figure out how you grow sales-wise and how do you support that growth.
If you’re a goods distributor, growth is a cash event. Suppose you need to plan or budget for operational support, customer success, delivery, stock, inventory, or investment. Determining the wrong sales objectives can actually cause you to run out of money while growing wildly.
In our last episode, we discussed why you analyze your sales department. This is a glaring reason because you can actually sell yourself into a really tight cash situation. As a leader, it is incumbent upon you to plan and think through this.
08:02
Sean O’Shaughnessey
You and I did a CEO workshop on supply chain issues and working through a crisis, which is what we had at the beginning of the year. We still have that even now, where supply chains are kind of screwed up. That’s going to factor into what your goals are for your company. You have to be realistic if you have a hard time getting products or if you have to overpay to get raw goods. If you’re a manufacturer, you need to factor that into what you choose for your quotas, both for your company and your individual sales teams.
08:36
Kevin Lawson
Completely agree. Let’s back this train up and talk about some initial best practices. I’m guessing that some of our listeners haven’t done a ton of sales planning or goal setting, and others are very seasoned at it. Let’s talk about some of those fundamental best practices and, in my mind, edit my thought here. Still, in my mind, we’ve got a do more of:
- meaning to do more of this behavior with these customers,
- grow a customer,
- stop calling on customers that aren’t giving you any returns or great returns,
- do more of “start doing something.”
You must start, stop and do more of a kind of approach. You’re thinking about that framework in selling it allows you to at the base level. Basically, we’re just guarding the perimeter base level and determining a building block for a goal-setting exercise.
09:25
Sean O’Shaughnessey
Exactly. I think the easiest way to do that from a CEO or CFO standpoint is to look at your revenue and say, “What portions of my revenue won’t be disruptive without having a sales force at all? I know that I’m going to get so many repair parts. I will have to ship out to my existing install base with broken wheels, broken tubes, broken engines, whatever the case may be if I’m a manufacturer; that’s just a reality of my life. I know I’m going to get that spare parts business. I could stop selling and still get that spare parts business for at least this year.”
What part of that business do you already have locked in, then? What part of their business do you have relationships with customers who continuously buy from you? This is up to whatever you’re selling, the company you work for, the products you make, and the products you sell.
What products automatically go to that customer because you’ve locked them in? They’re a good customer. You still have to take care of them, but they’re already buying from you. What part of your customers are, “I always have to sell or what part of your revenue stream? I always have to sell that revenue stream. I have to spend effort against that.” Get a good idea of your business that can’t go away just because you’ve been in business as that first part, the second part of the business that probably isn’t going to go away. Look at the business you have to drive daily activity on for it to happen. You have to new customers or expand those existing customers. I like to break it up into those buckets, which gives you a good idea of where to look.
Now I can start thinking about what is real and what I can actually achieve.
11:12
Kevin Lawson
Sure. One pitfall or landmine to avoid in this process is not to consider attrition.
Somebody’s going to move, go out of business, get bought, or have a life event in their family. That means they can’t work for six months. These things happen, and they have dollar-sign impacts on your sales. That’s a strategy to avoid their effect.
Another one is on the fun side of this. I love dreaming when we’re setting goals and saying, “What customers do we absolutely want to add to our logos?” It’s great to say, “I would love being a New York Yankees fan.” I know I’m going to lose some viewers just on that right there.
11:59
Sean O’Shaughnessey
Do you know where you live?
12:00
Kevin Lawson
I do; I’m in Cincinnati. But they’re easy to like. I know that I would like to sell products or services or solutions, whatever discipline you’re in, to that organization, just to say, “Hey, it would be really great. That would be really cool. If I got them, I’d be able to pat myself on the back for a while. That would potentially represent a very large dollar figure.” You run the risk as a sales manager or a goal setter of overstating your possibilities.
In the same way, you cannot under-consider attrition; you can also over-consider possibilities of the best-customer-on-earth kind of thinking and what they could do with your revenue. Avoiding those two potholes will actually do you more service than it will cause you headaches.
12:44
Sean O’Shaughnessey
I agree 100%. Remember, we’re going to have an episode in a couple of weeks on setting compensation commissions and your comp plan. This topic tonight will tie into that topic in a couple of weeks when we actually do that because how you figure out where your revenue streams are coming from will start to dictate what kind of compensation plan you need for the upcoming year.
I’m looking forward to that as well.
13:12
Kevin Lawson
Agreed. The spoiler alert, we’ve talked about this before. Salespeople have new sales goals in the same way the company should have new goals every year.
Drive it home. That one will hunt.
I was actually having this conversation today with the guy that this really took him, and I said, hey, you want to incentivize the goals you’re trying to reach as an organization? There’s your best practice there for setting sales objectives. Setting a sales objective at the organizational level means you have to cascade or waterfall those same goals and objectives down to the level where somebody’s doing the work to help you reach those. If you say, “I want to enter a new market,” and don’t assign a quota to it or start working on relationships; it’s really unlikely that you’re going to get there having a plan and working it.
14:05
Sean O’Shaughnessey
It’s interesting you say that. A lot of our customers are smaller companies. They have new markets that they’re always going after or thinking about going after on a regular basis. They go after those markets; they need to think about now that we’re planning ahead for next year, they need to think about, okay, I’m going to dedicate 20%, 10%, maybe 100% of my salesforce to going after this new thing, this new market that we haven’t gone after. Because maybe my stable business is just there. It’s stable. Now I’m going to take a risk. I’m going to roll the dice. So what is that going to do? What’s my upside for that? Worst case, what’s my downside for that? Figure that out. What’s that balance that I have to do with my salesforce? Do I put 100% of my salesforce out going after that new thing?
A little scary. I probably don’t think you and I would suggest that, but do I put 10% going on my salesforce going after that? Do I make a plan to make that happen?
15:04
Kevin Lawson
Yes. Do I support that growth with marketing and resources? Because it’s like every part of your business if you’re a CEO and you’re thinking about how you’re resourcing problems in your business, if your problem is revenue or growth or customer attrition, you need to resource that problem in a way that allows you to overcome it, not just keep it at bay. If we’re just saying, hey, we’re going to lose 10% of our accounts this year, and we’re just trying to replace ten, that’s a very flat line. It doesn’t take that much risk in business to just break even year-over-year.
15:40
Sean O’Shaughnessey
In that scenario where you think you’re going to lose 10%, you’re going to try to catch that 10% up again. Well, that’s not only is it flatline but also there are a lot of risks there.
If you think you’re going to lose 10% or 20% of your business because of attrition, then you need to start thinking about making that up – plus. Because the reality is we need to grow. We must constantly make our company bigger and more productive, more lucrative, and more valuable to our future and existing shareholders. Driving that conversation about, look, if we know we’re going to lose 20% because we always lose 20%, okay, well, maybe we should address that 20% problem. Let’s figure out a plan that will replace that, plus more. I would actually say let’s do both. Let’s figure out how we turn that 20% into 10% and how we turn it into 5%.
That’s one of those challenges that you and I get pulled into all the time: how do we ensure those problems don’t cause bigger problems in the future?
16:49
Kevin Lawson
We’ve covered a lot of ground here. We’ve talked about comp plans. We’ve talked about attrition setting, appropriate goals, and thinking about the longer view as well as the next year’s view.
For people like us, we get this question a lot. You and I talk about this offline. We get the question, “Okay, smart sales guy, what do I do next?” Let’s bring this under the umbrella here. What is the prescriptive and the appropriate or practical approach for somebody listening here? I’ve got a sales goal-setting challenge – how do I start eating this elephant?
17:22
Sean O’Shaughnessey
So let’s boil it down. Figure out where you need to go as a company in the future, then figure out how this year is going to affect that future goal of where you want to be. Continuously work backward through the problem.
Always make sure that you are setting your goals sufficiently high enough that they are going to achieve your company goal. Your sales goals and your sales team’s goals should be sufficiently high enough to achieve that but not so high that your sales team goes, “We can’t do that. There’s just no way I give up today. I’m scared.” We’re going to talk about that in a future episode; I have a feeling. How do we not scare our salespeople away just because we gave them a goal that we thought we needed, but they can’t think they can get it?
18:16
Kevin Lawson
Yeah, and I thought you made a really good point. I want to ensure I hammered home here at the leadership level; whether you’re working with a controller, a CFO, or somebody in a leadership position who understands the finances, you’ve got a baseline. The goal can never be below that. That’s your minimum. You can’t go into the red as a plan. Using that as a baseline, you understand that you’ve got that much of a need existing, and you got a growth goal. We’ve got a what are we going to start with? Where are we trying to ascend? What are we trying to attain or keep or grow? And then what resources does it take? Beginning with the end in mind becomes really important. The number one thing I think Sean and I would say for anybody listening is don’t wait till January or February to set next year’s goals.
This is a critical time beginning of Q4. This is a really busy time of year, and it’s really easy to get caught up in holidays and family time, and Thanksgiving. You’ve got people in your businesses that are relying on you to sustain them. Make sure you go into Q4 with a plan for executing a future planning exercise for all of next year.
19:27
Sean O’Shaughnessey
That’s exactly right. Do you know what my statement is, Kevin? I want to hand my sales team their quota and what they’re going to sell and achieve by approximately December 1. I want to get all of that out of the way. Plus, I want them to know that the money they make now is better than the money they will probably make in January. Hurry up and get those orders in December. An order now is better than an order later. It just is.
19:56
Kevin Lawson
Completely agree. Completely agree.
19:59
Sean O’Shaughnessey
This has been fun.
19:59
Kevin Lawson
It’s been a lot of fun.
20:00
Sean O’Shaughnessey
We’ve taken up all of your 15 minutes, maybe a little couple over. This is a weekly episode that we are going to do. Kevin and I will try to get together, talk about some of our histories, and talk about some of the things we have learned over the years. I’m not going to say it, but I will allude to the fact that we have over 50 years of sales experience between the two of us. That’s a lot of sales experience, and there are some things that we want to share, and that’s the reason we’re doing this episode. That’s the reason we’re going to do all of these episodes. Hopefully, you get value out of this. We really do want to hear from you, though.
Please put a comment in this post. Ask us questions. Ask us about things that we should have covered. We’ll expound on those things in a later episode. Could you send us a note? Kevin and I are on LinkedIn often; send us a note and drop us a question there. We’re happy to do that. You can drop us a note at our email addresses as well. We really do appreciate you being on, and we hope to catch you next week as you’re driving home from work.
Thank you, Kevin.
21:12
Kevin Lawson
Happy selling.
