A large part of your job, as an entrepreneur, is doing a sound budget for the following year. Everybody has such a business process; it may vary from a very informal session to have a rough idea of what to do the year after to a long and careful book compilation.
If your company sells through salesmen who have an almost exclusive relation with customers, a large part of the budget process is defining their sales targets. This article applies to all those business which have many customers with repetitive orders.
- Give the salesman a target. Some think that giving a target make people stop working after having reached it, thus preventing further sales. From a general point of view, unknown goals can’t be reached. Secondly, targets should be hard enough not to generate any relevant setback.
- Do not limit your targets to money values. Your company lives and dies on cash and margins; give the sales force targets aligned with this fact. Force them to sell the right mix, to visit the right customers. Offer incentives for new customers but only if they buys something that makes the customer profitable for you; refuse to pay commissions if they make undeliverable promises.
In other words, makes sure that sales force targets are aligned to your personal targets and not vice versa.
- Give special incentives for cultivating long term relations with customers. You know what a customer should buy to keep sell-in and sell-out alignment. Make sure your salesmen do not oversell just to get little more commissions now.
- Make sure your salesmen do not always milk the same cows but let them work on the largest customer base possible. Give targets in term of active customers.
These are few guidelines to set sales target. The entire job is likely become terribly complex but the right balancing of sales target let you have a firm grasp of your company top line, which is equally important as the bottom one.
See you next time.