Work for a startup? Guess what: You’re in sales.
As Y Combinator founder Paul Graham famously wrote:
Being newly founded does not in itself make a company a startup. […] The only essential thing is growth. Everything else we associate with startups follows from growth.
While this growth might be measured in users or sessions or a whole host of other metrics, if you truly want to be successful, the only thing you really need to grow is revenue.
Without growth in top line sales, there can be no bottom line results to speak of.
This isn’t easy. The first few years at a startup, whether you bootstrap or receive funding, are always the leanest. You’re pretty much guaranteed to have too much to do and not enough resources to do it all at once.
You need to find product/market fit, nail your lead acquisition strategy, and design a qualified sales funnel that will turn those prospects into leads and eventually customers.
But you’re ready to go, right? You jumped into this crazy world of startups because you have big ideas and even bigger goals. And that’s great. We all need that passion to fire us up when the hard times come our way.
But when you’re just starting out, setting proper sales goals is hard.
As a founder or sales leader at a startup, it’s your responsibility to set realistic goals—both for your sales team and your investors.
To grow quickly, you can’t just pick a number that sounds good and say "go." You need to set up your team for success—long-term success.
Sales goals that help your organization truly grow live at the intersection of realistic and challenging.
They keep your team motivated, your momentum going strong, and investors and co-founders happy. Sounds good, right?
Let’s look at fvie steps you can take today to set sales goals that will make your company grow!
1. Define what “realistic” means
“When 10%–20% of salespeople miss goals, the problem might be the salespeople. But when most salespeople miss, the problem is their goals,” wrote the Harvard Business Review.
Before you even start thinking about incentives, commission, or bonuses for your sales team, you need to take a good, hard look at your business plan and ask yourself: Is my annual revenue goal realistic?
How you answer this will come down to the research you’ve already done on everything from pricing, the industry you’re in, and how long you’ve been around, to the clients you’ve worked with, number of prospects in your pipeline, and how many new leads come in a day.
Whew. That’s a lot of moving pieces.
To make this task a little more simple, you can start by looking at these three main factors that will determine whether you’re on the right track.
Determine your company’s goals
Start with what you know.
Even if you’ve been in business for just one year, you’ve got enough data and insight to give a pretty good idea of how things should progress in the next 12 months.
Take a look at the number of new customers who bought your product or service in the past year. How much money did they bring in on average? How quickly is your customer base growing? What’s your best-case scenario? And worst?
Looking backwards is the best way to get a baseline idea of where you want to go in the future.
Assess the market potential
If you’re selling water to a thirsty man, you can probably safely increase your sales goals without too much worry. Every market and industry has its nuances and you’ll quickly discover whether or not there’s a need for what you’re selling.
But beyond that immediate need, how much room is there to grow?
Setting aggressive sales goals early on in an untapped market can help you capture a larger chunk before competitors catch on.
Evaluate your sales team
What can you do with the resources you have right now?
If your sales goals can’t be hit by the team you have now, it doesn’t matter how much work you put in. Scaling your team because you’re growing too quickly is a good problem to have. But it also takes time. And money.
Before you start sending out quotas to the team, make sure it’s something they can hit, or at least have an answer as to how you’re going to get there together. A great sales team is built on trust and that starts with you.
Lastly, be conservative. Often times, unless you have considerable experience selling your service, it’s easy to underestimate the length of the sales process.
2. Educate and empower your sales team
Sales can be a battle sometimes and you want your team to have the best weapons tools available to them. This means training and resources around your company’s unique product, but also the ability to see if what they’re doing is actually working.
For example, here at Close.io, we started with the foundational belief that most CRM software platforms are designed to help managers make better decisions, but they tend to be a burden to sales reps. Because of that, we built a tool that empowers the individual sales rep to focus on their most important activity—communicating with prospects to move the sales conversation forward. As a result, our customers close more deals and our entire sales process is constructed around this main value proposition.
For the long-term success of your sales team (and your company), you might have to look beyond just immediate sales goals. Take the time to dig into their personal process and see what’s working and what isn’t. Peter Drucker was right when he wrote: “What gets measured gets managed.”
Here’s a few ideas from Jill Konrath, author of Agile Selling: Get Up To Speed Quickly in Today's Ever-Changing Sales World:
- Connection Ratio: What percentage of calls/contacts turn into initial conversations? The more calls you can convert to conversations, the fewer calls you'll need to make.
- Initial Meeting Conversation: What percentage of your initial meetings have an immediate follow-up scheduled? The higher this number, the fewer prospects you'll need.
- Length of Sales Cycle: How long does it take to close a deal? The longer deals are in your pipeline, the less likely prospects are to do business with you.
- Closing Ratio: How many of your initial meetings actually turn into customers? If you can close a higher percentage of sales, you'll be much more successful.
- Losses to No Decision: What percentage of your forecasted prospects stay with the status quo? Lowering this ratio brings in more revenue.
The best part about digging into this process is that you can sequence them, which is important when it comes to rapidly getting up to speed.
If you’ve got someone just starting out in sales, dig into their Connection Ratio. If they can turn more calls into conversations, they’ll have a more steady stream of prospects coming in.
Don’t just measure volume of calls made or emails sent out. Go deeper and ask, "What percentage are currently converting?" Sometimes a small increase in one part can increase the efficiency of your whole process. You just need to give your team the ability to see where they’re going off track.
Most importantly, drill in the mindset that it’s OK to do things the wrong way.
There’s always going to be a few hiccups as you optimize your own sales process and you can’t have your team afraid to make those mistakes.
3. Properly incentivize your sales team
In the ultra accountable, totally transparent, and excessively experience-driven world of startups, being "salesy" gets a bad rap. Now, we’re not advocating going back to the days of the sleazy, fast-talking salesperson undercutting prospect and colleague alike. Instead, create a culture of friendly competition where it’s in everyone’s best interests to bring in as many sales as possible.
As much as you think your company culture and perks are enough of a reason, the truth is that your salespeople need a reason to bust their asses and hit those sales goals. And making some component of their compensation scale with the number of new clients they sign or milestones they hit is a great way to keep their eyes firmly glued on those numbers. This is the foundation of an organization-wide sales strategy that’ll position you for long-term growth.
Pair that competition with compensation—so everyone knows what the prize is for coming out on top—and you’ve got the recipe for a sales team that not only respects each other and enjoys working together, but who constantly strive to outperform one another.
Define your commission structure from the start
There is no such thing as the "perfect commission structure" for your startup. Just like every other aspect, how you compensate sales performance will change dramatically as you grow and learn. But that doesn’t mean you can’t have anything in place to start. You need to pick something and test it out.
Typically, there are two ways you can go about designing your commission structure:
- Work with your first few sales hires. Tell them you’ll pay a base salary and design a commission structure together as you grow and learn. This won’t be for everyone and you might lose a few good people along the way. But in the end you’ll know that what you have is based on real numbers from real people.
- Fake it till you make it. Come up with a structure and sales goals that are based on what you want (but that is probably just wishful thinking) and go for it.
Whatever path you choose depends on your own personality and company culture. But the important thing to remember is to stay flexible and adapt as you learn more about your business, the market potential, and what customers want.
Reward (realistic) stretch goals
Jim Collins and Jerry Porras’ 1990s business bestseller Built to Last, famously preached the virtue of setting “big, hairy, audacious goals.” In other words, stretch goals or targets beyond 100% for those who achieve excellence.
While these moonshot goals can help foster creativity and innovation, they can also quickly turn your team against you.
As Harvard Business Review writes, while the use of stretch goals is quite common, successful use is not.
The consequences of setting and then missing stretch goals can be profound. Failures can foster employee fear and helplessness, kill motivation, and ultimately damage performance.
So, before you start throwing out Hail Marys, ask yourself two questions:
- Are you coming off a win? Or getting out of a slump? A stretch goal might seem like a great way to inspire salespeople to turn the ship around, but audacious goals set in struggling times can come across as desperate and threatening, or even inspire the wrong types of innovation.
- Do you have the resources? Your sales team needs to be set up to win or else a stretch goal is nothing more than a slap in the face. Nobody can make something out of nothing and the people on your sales team are no different.
If you’re not in the position to set up stretch goals, then look at celebrating small wins while you set aside the resources for your team to go all in.
Implement retention bonuses
A great sales team thinks long-term as well as short-term. The last thing you want is to create a culture of quick turnovers just because your sales team is chasing after new clients only.
Instead, incentivize them to make sure they’re signing the right customers up.
In today’s modern sales world, it’s not about how much value you can take from a customer, but how much you can provide that makes them stick around. The best part about designing bonuses such as these is that they inspire your sales team to think beyond just signing a client and into the whole customer lifecycle.
Here’s a few ideas of when you can reward your team:
- When the clients they sign hit an anniversary. Base bonuses off of when clients hit a 6- or 12-month anniversary. This way sales isn’t just thinking about signing on new clients, but how to keep them around as well. At a startup, customer happiness is everyone’s responsibility.
- When their clients upgrade to a higher plan. Providing enough value to turn a casual user into a die-hard fan is every entrepreneur’s dream. So why not compensate your sales team when they do just that?
- When past clients become repeat customers. Sometimes the nature of your business means you won’t have clients signed on for long periods of time (like when you’re selling a product or one-off service). Instead, you can reward your sales team for when they bring that warm lead back into the fold and sell them a new product or service.
4. Calculate your ideal monthly sales goal
Staying on track with your annual sales goals means keeping a close eye on how they change month to month.
Whether sales go up or down, you want to be able to track that and figure out why that change happened.
Is there a seasonal aspect to what you’re selling? Did you hire a new team member? Or change the product in some way?
To see whether what you’re doing is affecting the top line, you need to know your ideal monthly sales goals. You can find this easily by working backwards from the (realistic) annual revenue target you need to hit as an organization.
Take that number and calculate:
- Company sales goals (monthly)
- Department sales goals (monthly)
- Individual sales rep goals (monthly)
When it comes to looking at the individuals on your sales team, you can’t just divvy up a piece of the pie to each teammate. You need their sales goals to be incentives they can actually reach.
You don’t want people to be discouraged and so you need to look at what’s possible for them based on their previous sales level and skill set.
Look at other factors too, such as their access to leads, what vertical they’re in, and if there are any market forces that might make their goals harder to hit. This way you’ll help avoid setting your sales rep (and yourself) up for underwhelming results.
Don't expect to get your sales goals right on the first try
There are only three components for success in the startup world: Build, measure, repeat. Your sales goals are no different.
As your business and your team change and grow, you’ll need to adjust to real-world results.
If a salesperson hits their stride and starts knocking goals out of the park, see how you can continue to motivate and push them. Similarly, if someone’s having a down month, take the time to go deep with them. Take them aside individually and see what’s going on. Get insight on their approach and give feedback.
And just because something works, doesn’t mean it’s the best process. Once you think your sales goals and process is in a good place, start to lean on it. Maybe your script is clunky and needs some work or your emails could generate a better response rate.
Don’t worry if things don’t work out right away. And if they do, keep on questioning them anyways.
Lack of iteration is what prevents companies from making a good sales process great.
5. Emphasize activity goals
The hardest part about growing sales is that no matter what you do, you can’t force a lead to convert. (After all, it’s not like you’re standing there with Big Al and a baseball bat telling a potential customer it’s in their best interests to sign up for your service.)
You can’t control results. But you can control your actions.
Luckily, your team can still get amazing results by focusing on what they do instead of only obsessing over the results. These are called activity goals—where you focus on the repeatable actions you can take that have landed you sales in the past.
Here’s an example: Think about a quarterback playing in the Super Bowl. When they throw the football, their goal isn’t to win the game. Their goal is to complete the pass.
The trophy may be the motivation that got them to that point, but when they run on the field, their focus is solely on doing every move right. If they do just that, they’ve done everything they can to ensure success.
Giving your team this same mentality can help them hit their goals every single month.
- Identify your average (or target) close rate. Look back over the last month and see how many calls/emails you made and how many sales resulted. If you made 100 and had 4 sales, your close rate is 4%.
- Calculate how many calls/emails it’ll require on a daily basis to hit your new target. So, if you want to hit 6 sales a month, your team will have to make 150 calls/emails.
- Ask if that number is doable for your team.
Now, instead of knowing you need to make 6 sales a week, you know you need to make 150 calls/emails.
Flipping the script like this not only helps reduce the fear of rejection on an individual sale level (because you’re focusing on the conversation, not the conversion), but keeps your sales reps’ stress level lower.
You get great results focusing on the things you can do. Not those out of your control.
And if you’re putting in the numbers and the sales still aren’t coming?
Here’s a few ideas to get you back on track:
- You need more people in the front-end of your pipeline. Work with your marketing team or look for ways to find more prospects.
- Your conversion rate is too low. Dig back into your process and start to experiment where people are dropping off.
- You’re not identifying the best leads. Is there more you can do to qualify the leads you’re contacting?
- You’re not effectively selling your product. Work with your team to understand the benefits of your product more so they can better respond to common objections.
- Make changes to the product itself. Listen to what your prospects are saying. Find out which of their needs isn’t being fulfilled and communicate those needs to your product team.
Bonus: The long-term goals that supercharge growth
We’ve talked a lot about setting up sales goals here, but what about ones that don’t directly relate to revenue? (At least at first.)
For long-term success, you need a committed sales team that will grow alongside you.
So set aside time to set goals around productivity, revenue generation, as well as personal and professional development. Take the time to really get to understand your sales team and what’s holding them back from being top performers. Then, you can start to set goals around the areas that need improvement.
And remember, setting and monitoring goals isn’t enough.
You need to provide guidance and support in helping them achieve these goals. In the end, you’ll not just have an amazing sales team that hits your goals out of the park, but a strong, cohesive group of self-aware professionals who will provide you with the best results year after year.
If you're ready to set revenue-growing goals, we're creating a template for setting sales goals. Sign up now and be among the first to receive it.
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