Setting sales goals is an exercise in emotional uncertainty.
The thrill of victory lies ahead. The agony of defeat looms large.
While actually hitting – or, missing (ugh!) – goals is all about executing solid sales practices, setting goals is a first pivotal piece in the process.
And it presents its own set of challenges and best practices.
8 biggest mistakes to setting goals
There are so many points along the sales journey where something can go wrong. You’d hate to make one mistake so early in the process. Here are the eight biggest mistakes to avoid:
Mistake No. 1: Closing the door
Sometimes sales leaders forget (or choose not) to include all the stakeholders when they’re creating sales targets. But the success of any sales initiative depends on salespeople, leadership, customers and prospects.
Sales goals conversations should involve specific customers and their needs, health of the pipeline, strength of existing relationships, depth and quality of a prospect list and trends in business. Sales reps and leaders, plus marketing and customer success pros – who all know the most about risks and opportunities in the customer base – should be in on goal-setting conversations.
Mistake No. 2: Looking only at history
Sales goals are about looking forward, yet sales leaders sometimes rely solely on the past to set goals. They might set percentage increase in revenue based on last year’s results or increase new account acquisition by a specific number.
Historical performance is a piece of the pie. But trends, demands, industry conditions, team capabilities and potential challenges need to be considered every time goals are set.
Mistake No. 3: Aiming too high
We know – your team is smart. You’re ambitious. You have a proven record. You should be able to smash goals. So you set them high. Really high. And salespeople struggle to meet them in the expected time frame, get discouraged and lose their motivation.
One rule of thumb: Be about 80% confident that the goal can be reached.
And remember: every sales goal needs to follow the old-fashioned SMART tool – Specific, Measurable, Attainable, Relevant, Timely.
Mistake No. 4: Leaving no wiggle room
Sometimes sales leaders set goals so rigid, salespeople feel crushed long before they miss target – and end up falling even shorter than they might have if they’d had some leeway.
As long as you have a specific methodology for adjusting quotas at a specific point, it’s OK to make changes that still encourage salespeople to stretch and cause revenue to increase.
Mistake No. 5: Being too narrow
Sales goals should be about increasing sales. But not entirely. Sometimes sales pros only set goals based on increasing numbers. And they forget about goals based on the activities necessary to achieve those numbers.
Along with sales numbers goals, sales professionals want to set training, reading, networking and personal development goals (that ultimately affect their sales performance).
Mistake No. 6: Being too broad
On the other side of being too narrow, some sales organizations are too broad: They set too many goals, and salespeople don’t know how to prioritize their work or targets. Setting too many goals – whether in one or several areas – won’t allow sales professionals to focus their time and energy on the goals that matter most.
Set quality – over quantity – goals. Focus on the goals that will realistically improve your organization’s health and individual salespeople’s careers.
Mistake No. 7: Lacking change
When sales grow year-over-year, sales professionals tend to set more ambitious goals – and understandably so, considering things have been looking up. But growth doesn’t happen just by working harder. Professionals need to work smarter – and that almost always involves a shift in the ways of doing things to generate more sales.
So if you continue to move the needle, it’s important to also do a gap analysis before setting new, higher goals. Look at the next goal you want to achieve and consider what needs to change to get to the next level. Perhaps it’s a stronger system to generate leads or a new product line. Those things need to be calculated into the cost of raising sales goals.
Mistake No. 8: Lacking accountability
Some sales leaders set lofty goals and never grind down to who’s responsible for what. For instance, the team may be charged with bringing in 20% more new business in a quarter. But salespeople don’t have individual goals for new customer attainment or existing sales growth. Then many people aren’t clear on who’s working toward the group goal and how?
Goals need to include objectives and activity levels – perhaps number of client visits, prospecting calls, speaking gigs, email contacts – and expectations for who’s doing what. Give people some structure and create consequences for not doing what’s expected.
8 best practices for setting goals
Every organization will have different sales needs and goals – and those will evolve over time. So one best practice may fit this year, but not next year. Or a few strategies may make all the difference in motivating salespeople to excel this quarter and leave them bored the next quarter.
Perhaps the best practice of all is to include a regular analysis of your goal-setting to determine what’s working and what isn’t, the strategies that need to be put to rest (at least temporarily) and new approaches you want to try.
Now take a look at these sales goal-setting best practices – some proven by practitioners and some proven by research.
Best practice No. 1: Reward within a range
Define performance ranges and expectations, rather than an exact, single number goal, suggest Harvard Business School researchers. For example, instead of a $1 million goal for a salesperson, create a “success range” – perhaps $900,000 to $1.25 million. You can have smaller incentives start at the low number and the largest incentives handed out if the salesperson hits the high end.
“If you are less confident about your goal setting accuracy, have a larger ‘success range’ with a slower rise in incentive payout,” suggest the research authors.
Best practice No. 2: Focus on activities, not just results
When sales are tough to predict, you might measure and set goals for activities that contribute to landing sales. Or add incentives to the activities in an overall “sales capture goal.” You might include new leads generated, VP-level conversations, pipeline movement and cross-sells, for example.
This approach can also sustain salespeople’s motivation longer in the sales cycle as they get incentives for incremental steps.
Best practice No. 3: Set shorter time frames
Short time frames between setting and achieving goals can help eliminate issues with goal attainment. It’s easier to identify potential shortfalls and correct course when the goal is expected to be reached within a week, month or quarter (depending on your sales cycle).
And if your sales cycle is more complicated and longer, set incremental goals within smaller time frames – rather than one, big end goal – to create momentum.
Best practice No. 4: Cap it
This isn’t the most popular goal-setting standard for top performers, but caps and decelerators can protect against high incentive costs if goals aren’t set correctly.
So this best practice is one that you might want to try short-term – to level the playing field, and get a better picture of who’s capable of what and in what kind of time frames.
Best practice No. 5: Set a rolling forecast
Traditional forecasts are set on an annual or quarterly schedule because they usually coincide with business financial reporting. Sales leaders tend to look at performance evaluation within that same time frame. With a rolling forecast – set a schedule that makes more sense for your industry, organization or sales process – you can evaluate the opportunities and risks in the near future.
This also gives you opportunities to have rolling, one-on-one discussions with salespeople, who can talk about the health of their pipeline and ways to improve it, if necessary.
Best practice No. 6: Put a hold on goals
Setting goals and incentives for reaching them makes sense in most sales situations. But here’s one when you might approach it differently (at least for a short term): You’re moving into uncharted territory. When you launch into a new territory or your sales team is working on completely level ground (every territory has equal opportunity), consider paying on a commission and possibly adding a bonus if the team hits a company-wide goal.
Then, after you see what’s possible, you can forecast better and set sales goals according to a different plan.
Best practice No. 7: Stack goals
You can set up several simplified, yet different types of goals, all leading to same target. Try:
- Waterfall goals. If you want to drastically increase any activity (perhaps, prospecting calls, emails or appointments) or sales result (perhaps conversions, dollars or volume), raise the goal by 5% or 10% per week until you hit the major goal (such as 50%). It’s good for morale because salespeople see incremental wins and they improve performance at a decent rate.
- Sequence goals. Determine which goals bring in the highest value when hit, and focus salespeople on that those goals first. When they accomplish the highest priority goals, they can move to the next set of goals. Point is, they’ll meet the goals that matter most first.
- Stretch goals. When salespeople start to hit sequence and waterfall goals – and you hit the sales results you had in sight – add some stretch goals for salespeople who have proven they work well under pressure. Offer incentives for hitting 125% of a goal, for instance.
Best practice No. 8: Review progress
Goals that are set well have a deadline. But you don’t want to wait until the deadline to check on progress. When setting goals, schedule dates and times to take stock of what’s been done and what’s ahead.
One good way: Set small sub-goals for each check-in. Celebrate successes and dig into what’s not working so you can adjust and stay the course to hit target. And – if you didn’t make Mistake No. 4 of allowing no wiggle room – you can adjust the goal and approach, if necessary.