How to Set Sales Goals for Employees
For small-business owners, working with sales reps for the first time can be a frustrating experience. But establishing expectations early can go a long way toward heading off misunderstandings.
Business owners should be able to tell potential new hires how many prospecting calls they'll be expected to make in their first month, how many appointments they'll be expected to go on during their first business quarter and how long before the new sales representative is expected to start selling. Anyone charged with managing a sales force needs to be able to answer those questions.
Yet, because they aren't sure how to set appropriate sales goals for the new hire, many small-business owners avoid setting any expectations at all. The lack of clearly defined objectives leads to frustration and misunderstandings on both sides. No formula exists for setting these goals -- they vary by industry, product, the salesperson's skills and so on. But that shouldn't stop you from establishing milestones and goals for the new sales representative. Here's a guide to help you get started.
Identifying Your Sales Cycle
Every product or service has a sales cycle. In general, the steps are:
- Introduction or prospecting call
- Conversation with decision-maker
- Product demonstration or proof of capabilities
- Closed sale
Although your company's cycle may have a few more or fewer steps than the example above, some sort of regular process is likely to exist for your product or service. Whatever your sales cycle looks like, use it as the basis for creating appropriate productivity goals.
Setting Productivity Goals
If minimum productivity goals already exist for your sales team, take those goals and divide them into thirds. For the first month, the new hire should be expected to make one-third as many prospecting calls, as a tenured representative. During the second month, the new rep should make two-thirds as many and, during the third month, the rep should be at 90 percent or greater of the required minimum productivity goals.
Dividing the new hire's goals into thirds might seem to make sense -- if you actually have goals to divide. But what if you have no idea what your average sales representative's daily activity level is?
Here's how to set productivity goals from scratch. Write down what you think your sales cycle looks like. Talk to the reps and those who work in other departments to see if your thinking is in line with how they see the sales cycle. Then ask your current sales staff to start tracking their related activities. If you have a sales software system, have them log their activities as they go through the work day. If you don't use a sales software system currently -- and many companies do not -- give your sales staff a worksheet and have them track their activities with old-fashioned tick marks.
After a few weeks, run the numbers. Find out, for instance, how many prospecting calls your top sales representative makes in a week; how many does the lowest-performing salesperson make; what is the average for the group; what number of appointments do they go on each week; how many proposals do they send out? The answers to those questions constitute your true sales cycle.
When business owners do this exercise, their reactions vary from surprised to greatly displeased. Many find the low levels of activity alarming. They're upset with themselves for not paying more attention. Regardless of how they feel, what they have at the end of this exercise are the facts about their sales staff's activity level and a starting point from which to begin thinking about the appropriate productivity goals for the new hire.
Tips for Raising Sales Productivity
If you’re dissatisfied with the number of calls that your sales staff is making, don’t think that you’ll have to use those low productivity numbers as a basis for the new sales representative's goals or disregard them altogether and start with new goals.
If the current numbers are low, you can increase them by a small percentage, then divide the new numbers into thirds for the new hire. As unsatisfactory as they may be, do use the current staff's numbers as a baseline. You can always increase the productivity requirements for the new hires during months two and three based on their performance.
As for your current staff, you'll have a better chance of successfully improving their performance if you increase their productivity goals gradually (say, by 10–20 percent per month for a three- to six-month period). Discuss the issue of increasing the goals before the new hire begins.
Take the time to set reasonable productivity goals and tailor them to new hires. Discuss these goals before their first day on the job. Let them know that there are definite expectations starting on Day One. Those not committed to sales or not money-motivated will find this threatening. Those sales representatives who want to be successful will find this very helpful and use the goals to their advantage.