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Monday, 17 January 2011

Setting Stretch Sales Targets for 2016



One of the measures we use at BMAC is a firm’s “Maturity”,

their ‘Sales’ maturity is WHEN and HOW they use:


‘Stretch Targets’

  


Firms that use “stretch targets” outperform
their expectations and outperform their competitors. 

They are High Performing Companies.

 

Our measurement is M1 through M4,
based on Ken Blanchard’s “Leading at a Higher level”.

 

What is a “Stretch” Target?

Simply put it: It is what you NOW believe Sales can achieve,
based on the ACTUAL Sales Velocity or Run Rate.


A Stretch target recognises that ‘Forecasts’ are just predictions.
That things like Markets, Products and Competitors change;
as do the Economy, Laws, Technology and Fashions.

Therefore, “Forecasting” and “Targeting” a year ahead is often inaccurate.

Within my Clients over the last twenty years,

I have seen from 50% to 200% variation from forecast.


profits graph

Then, is it their forecasts that are wrong?


By their very nature, forecasts are unstable.
You predict in December the result
for December of the following year
...no mean Task.

It is far easier to predict NEXT MONTH,
based on the last 3 months,
still prediction, NOT certainty.





 

How then do I use the M1-M4 scale, and what do I do with it?

 

What is the involvement of the sales people in setting Sales Targets?

 

  • M1: the least mature Firm’s 12 months forecast,
    set the Sales Target then divided it amongst the Sales people
    and they NEVER modify it.
    They congratulate themselves for achieving any monthly, quarterly or annual milestone,
    and blame any salesperson who does not.
    There are three failings inherent in this system.
    • It de-motivates sales people
    • It is sub-optimal in that it accepts the Target as success, rather than overachievement
    • It has no strategy for failure, it simply repeats month after month
  • M2: set a 12-month Goal, based on a 12 month Forecast,
    divides it amongst Sales Managers,
    who accept the Target after Consultation and ask for the resources to achieve the Target. 

    The Sales Managers seek to aggregate their salespeople’s results to achieve their Target.
    This can produce either a Coaching Culture’ or the ‘Blame Game’. There are still three in inherent failings at this level of maturity.
    • It continues to be sub-optimal in that the target is success,
      and any combination of sales result that meets Target will do.
    • Sales are composed of ‘motivated winners’ and ‘de-motivated losers’.
    • The Strategy for failure is to focus resource on winners and ignore losers
  • M3, the Goal is set based on the Forecast and ‘deep dialogue’ with Sales Managers,
    which is then agreed by consensus amongst their salespeople.
    The VP of Sales owns the overall Sales Target; it will not be simply divided out,
    but will be apportioned according to the Consensus of the entire sales force. 
    It is based on an optimal result.


    The VP of Sales is tasked with using the resources in an optimal manner,
    reviewing Strategy on a Monthly basis:
    optimising People, Accounts and Opportunities into a ‘most likely to succeed’ scenario.
    • The major drawback at this level is finding a VP of Sales with the skill set of:

      Leadership, Creative Thinking and Sales Management,
      who is both capable AND motivated to do it.


  • M4 the goal is to “Sell As Much As Is Profitable.” 
    Forecasting and Targeting are for planning purposes only,
    in execution each person within Sales
    from VP to a Sales Rep is fully engaged on “Sales Optimisation”. 
    The true M4, in fact, everybody is involved in Sales Optimisation. 
    [Usually, you only find M4 in Professional Services:
    Legal, Accounting, and Management Consultancy.]

You would do well to look at them.

In Ken Blanchard’s Book on Leadership,
his basis is give the people (or the firm) the Leadership they NEED”.


However, in Sales, we tend to get the Leadership they HAVE, especially from the CEO.
Hence, most Sales Firm’s have the Maturity Level of their CEO’s Leadership Style.
The Forecast, Targeting and Goals, which is the CEO’s ‘preferred’ style.

This may disconnect Sales from the Market reality;
instead Targets are based on the Risk Aversion,
Control Requirement and the “People Outlook” of the CEO.

    • Set Sales Targets 15% higher than aggregated Managers targets
      and then aggregated Managers Targets at 115% of the Firms targets”
      (Planning for Failure)
    •  “Put up all their targets by 15% every year.”  ( High staff Turnover)
    • “Set the targets low in order to meet them.” (No shareholders)
    • “Set the Targets just out of reach, so we minimise bonus payments.”  (when the CEO listens to the CFO)

      or
    • “Let’s go for it!”

How were your sales targets set this year 2015?

Targets graph

Based on the Market reality under an Umbrella Sales Strategy
with every Salesperson’s buy-in and commitment?


Or, were they dealt off the top
of the “Target Pack” after a shuffle.

 

Will you be happy to achieve ‘Target’ in 2016 or will you :
“Sell as Much as You Profitably Can”



BMAC Consultants offer a free Diagnostic Pack

“What is your Sales Maturity and
  What is your Sales Leadership style?”

Contact brian.maciver@googlemail.com


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