Annual sales planning is particularly difficult for 2021. The key to arriving at an achievable annual goal for 2021 is to use third-party data to justify the outlook, and establish a solid sales planning process that gets buy-in from key stakeholders.
2020 has been a challenging year for a myriad of reasons. Sales leaders should make sure that they don’t make 2021 even worse by agreeing to an annual number they have no chance of achieving. The costs and consequences of a sales leader committing to an unrealistic annual quota are enormous to them, their sales teams, and the company: Reps end up with unachievable quota targets, so they leave. The sales leader consistently misses quarterly goals and is fired at the end of the year, leaving the company stuck looking for a replacement.
CEOs and investors will naturally try to push sales leaders to sign up for the most aggressive growth goals possible, as company valuations are based in large part on revenue growth rates. But just because a CEO wants a certain growth percentage doesn’t mean it can actually happen, even with flawless execution. To that end, our research shows that 48% to 79% of a company’s growth is due to overall market growth, whereas only 12% to 34% is due to competitiveness and efficiency. Sales leaders need to find that delicate balance between intentionally not understating what they believe that they can achieve (i.e., being a “sandbagger,” which ends up hurting a sales leader’s credibility) and being hopelessly optimistic in their prognostications (which can get them fired).
Let’s face it, forecasting the annual plan for any fiscal year is tricky business. For 2021, the impact of Covid-19 has made it doubly difficult. So, how do you as a sales leader arrive at an annual growth target that satisfies the CEO and investors — and is one you can actually meet? Here’s how to ensure that you negotiate a number that sets you and your team up for success in 2021:
- Arm yourself with third-party economic and budget data to justify your outlook. Relying solely on bottom-up rollups from reps and gut-based approaches to negotiate the right number might have worked in years past, but given all the uncertainty, that approach simply won’t cut it for 2021. To justify your outlook, you should use third-party data about the impact of Covid-19 on economic and market growth, along with expected technology budget spend by category, geography, and industry. This will give you insights into what is expected to happen in the market from which you can base your assumptions.
- Start annual planning early. It’s difficult to initiate and complete the sales planning process, given the demands of closing the fiscal year while preparing for the next year’s launch, so the planning process should begin before the fourth quarter starts. According to SiriusDecisions’ 2017 Sales Planning Survey, only 35% of respondents do this, and only 55% of sales plans are delivered before the start of the fiscal year. Adjusting quotas, territories, and account assignments is disruptive and results in a slow start to the year. Additionally, 32% of sales organizations estimate they lose at least one month of productivity reevaluating account and territory assignments.
- Utilize a structured planning process. When a consistent planning structure is established, the annual sales planning process can be transformed into a powerful catalyst for change. Conducting a comprehensive business assessment; establishing a planning foundation based on strategic clarity, alignment and action; and focusing on a concise, measurable set of priorities can result in plans that empower and motivate sales reps and leaders throughout the organization.
- Engage stakeholders in planning. Sales leaders should encourage cross-functional collaboration on the sales planning process to get key stakeholders to contribute to the outlook. CFOs can be helpful allies in the planning process if they’re engaged early and you are transparent with them.
One of the most important responsibilities of a sales leader is to negotiate a realistic and believable number for the upcoming fiscal year. The time and effort spent planning to arrive at the right annual target is well worth the effort. An achievable goal means a sales leader and their team have the potential to enjoy a successful year, whereas starting 2021 with an unachievable goal means a year filled with pain and disappointment.
You can download Forrester’s Chief Sales Officer Planning Assumptions 2021 here.
This post was written by VP and Group Director Phil Harrell, and it originally appeared here.