The time has come to set next year’s annual revenue goal for the company. More often than not, the revenue exercise is focused on the current salespeople on the team, their historical revenue contribution and their expected performance in the upcoming year. The revenue numbers are set in stone. And then it happens… One of the expected major contributors for next year quits. The seemingly realistic revenue budget has quickly become a fairytale.
As you set next year’s revenue budget, don’t limit your analysis to your sales personnel, but rather take several looks at the numbers. For example, if you expect $10 million in revenue next year based on the sales team’s contributions, model that figure by new versus renewal business; by product type and mix; and by vertical markets you serve. Then, challenge yourself with some uncomfortable questions...
• What happens if we lose some of our key salespeople?
• Which current accounts are we at risk of losing?
• Has there been price erosion that could lead to a reduction in revenue per client?
• Has there been change in the competitive landscape that impedes our ability to get to our revenue target?
• What external factors could cause the revenue budget to become unrealistic?
Companies that solely base their revenue budget on their current sales personnel, more often than not, are disappointed. Take several looks at the numbers and ask the tough questions so that you position your team for success.
See you next time on the Sales Management Minute.