How to set effective sales goals with your team [Interview]

We all know how important goal-setting is when planning ahead. For businesses that depend on their sales teams to bring in the cash they need to operate, accurate goals are crucial.

IMPACT's VP of Revenue Melanie Collins explains how proper goal-setting works.

Setting effective sales goals

John: First of all, why is effective goal setting such an important message for sales teams?

Mel: First off, effective has to be the operative word here. You have to set goals that your team will respond to positively, so effective goals are super important. I've seen both de-motivating and unrealistic sales goals over the course of my career, but I've also seen realistic and motivating goals.

In order for a company to have success, they will need their sales team to understand the goals and feel financially motivated by them. 

John: How do you make a goal that's ambitious but still realistic? 

Mel: Here at IMPACT, we just went through this exercise, and it was a lot of fun to get to see how it was all created. We took our company budget for the year and then we looked at each revenue stream that we have. 

So here at IMPACT, we have services revenue, we have commission from vendors, we have our conference sponsorships, other things like that. And then we added some cushion to that number to hit our profitability threshold. 

From there, we broke the goals into the need-to-have number and the stretch number. 

We label these numbers internally. The must-achieve number is “green,” and the stretch number is “super green.” 

What this gives us is visibility. It gives the team and everybody on the team an understanding of, "Okay, I'll be considered a success if I'm within this range, and how far I want to push and overachieve is up to me." 

Our goals are completely based in reality. It's not a pipe dream. And there's a specific reason why the goal is the goal.

Team goals and individual goals

John: Can you talk about the balance between individual goals and team goals or company goals?

Mel: Most businesses will have individual goals, and these should roll up to the team. We have a group of four sales team members, and they roll up to a team goal. They're all incentivized to achieve their green goal, and then they get incentivized even more if they get to their super green goal.

At most organizations, management is typically incentivized on the team goal. So once the team gets to the revenue goal or just above the “green” number, that manager gets a bonus.

In addition to that, here at IMPACT, we have what we call “mini-games” where a team can receive an extra reward for achieving a goal other than a revenue number.

The idea of mini-games comes from The Great Game of Business. They are short-term challenges designed to improve a weakness within an organization, and can also be great culture-building exercises and can quickly promote positive changes and improvements in organizations.

The reward of the game can be simply winning, it doesn't necessarily have to be monetary. It could be a cool prize or a special gift from the organization.

John: How are individual team members involved in the goal-setting process?

Mel: They control the how.  That is, how they will achieve the goal. The company controls what the goal is and helps them understand why the goal is what it is. 

IMPACT has a certain revenue goal because we have a certain amount of expenses. The company needs this amount of profit in order to be able to grow and expand, and so this is the revenue goal. It's up to sales reps to determine what their strategy is to get them to their goal, what their plan is.

John: What happens when personnel changes — if someone leaves, comes on board, or gets promoted?

Mel: You should always have a backup plan for employee turnover. Maybe you have a salesperson in training or a junior level salesperson who could step in for somebody if you lose one of your big players.

Most organizations will have a couple of different sales teams. They might have a whole floor full of salespeople and BDRs who they can promote to backfill other positions. If you don’t have internal candidates that you can promote, then you’ll want to have a bench of candidates at the ready.

The best way to do that is to conduct rolling-interviews so that you’ll always have an A-player ready to step in.

You definitely want to make sure that you're planning ahead in case someone unexpectedly is out sick for a period of time, or they quit. So you should definitely have a backup plan so that you don't have this gaping revenue hole.

The logistics of goal setting

John: Can you talk about your suggestions for goal timeline?

Mel: Again, every company will do this differently. I think that it comes down to what kind of cash runway does an organization have?

Do they need to set a goal that's monthly because they are in dire need of a certain amount of monthly cash to be able to pay their bills? Or can they survive for a quarter, and they set a quarterly goal?

Or maybe a company is so cash-strong, they simply just hand a sales rep an annual number and say, "get there by December 31st." It is all highly dependent upon the cash strength of the organization.

But whatever goal is set, you certainly want to make sure that you have check-in points to keep people on pace toward their goal. 

John: What happens when a salesperson doesn’t reach their goal?

Mel: A manager should always be able to identify underperformance in advance. A manager should be able to look at a salesperson's pipeline and know if they're going to get to where they need to get to or not, and I think being able to identify it early is key. 

If I have a team member that's falling down in a certain area of the sales process, but we're working together, I'm coaching that person on it and I see improvement, then it's okay. 

But ultimately there might just come a time where you have to have a chat. Maybe a different role in the organization would be a better fit. Sales isn't for everybody, and businesses rely on cash, so there's very little room for underperformance.

John: To you, what are the most important metrics to watch?

Mel: Knowing your average deal size, knowing your close rate, and having the activity to keep up with the number of opportunities you need in order to narrow your gap is what will always be important.

I think as markets get more competitive, it's becoming more and more crucial to fill your pipeline with prospects who are bought into the compelling value that you're selling.

If you're competing on price, it's going to be really hard for you to fill up a meaningful pipeline. But if you're offering a compelling value, you're doing something that's truly differentiated within the marketplace, and your prospects have a need for that, then you'll win more. You'll start to build a really great pipeline. 

The trick is communicating that effectively and finding the needles in the haystack.