Article about basic guidance or tutorial for sales managers to make proper sales targets and less risks of unachieved sales target

1. 6 Steps to Set Company’s Sales Target
By M. Nino Mayvi Dian
The major reason for writing this article is based on my concern about small medium and size
companies mostly set their sales target with less proper preparation and not based on specific
benchmarks or measurement. According to my experiences, most companies which I’ve been
worked for were set their target only based from past or historical performance and adding it up
with some growth rates according to the board of management expectations.
Basically, I can’t argue with it, because board of management has shareholder’s expectations
that must be fulfilled. But, what’s the point if the company can’t achieve the target that set with
improper preparations and measurements. The goals possibly won’t be achieved and everyone
will be disappointed. We don’t want it happen, because the consequences of unachieved goals
could be enormous, such as someone may loose their jobs, company suffers financial losses,
and the most important thing is probably your people will loose their trust and confidence in you,
as their leader, and the company.
These steps I’ve made are based on my experiences and observations during my services in
the companies that I’ve been worked for. Well, it’s not perfect and guaranteed to be successful,
but at least it will give simple guidance to make better preparations before setting up the sales
target and minimizing the risks of unachieved sales targets.
These are the 6 steps to set up company’s sales target:
1. Collecting historical sales data. First, collect the company’s historical data of sales
revenue achievements. Preferably to have historical data for more than 2 years, in order
to make trend calculation will be more accurate. There are no absolute theories to
support on how many historical data must be collected to make accurate trend
calculations. But, more data is good to minimize bias in your analysis later on. If your
company is a start up company, you can bypass this step and I’ll explain the step later
on.
2. Make arrangements of the historical sales data, and it should reflect figures as follows:
a. Sales actual achievement Vs Sales target
b. Sales actual achievement from each market segments. This data will be
available, if only you already divided your company’s target market into several
market segments. But, if you didn’t divide it, I’ll explain later on the next stage
what’s the importance of determining your market segment.
c. Sales actual achievement from each products or services sold. This data will be
available, if your company sells multiple products or services.
d. Sales actual achievement from each sales territories. This data will be available,
if your company already applied territorial sales.

2. 3. Create charts and trend lines. After you’ve arranged your company’s historical sales
data, you should make simple charts and trend lines. These charts and trend lines
should reflect the sales growths or downward year by year. If the data tabulations are
arranged correctly, you should be able to generate trend lines from it.
a. For start up companies, they should be able to create these charts and trend
lines not from their internal data, but from external market data, which these data
are most likely available from Government Bureau of Statistic, or any other
trustable sources(nowadays, there are many research companies offering this
kind of service). These charts and trend lines should reflect the figures of
country’s overall market performance, which your company wants to penetrate.
b. For established companies, they also required to make charts and trend lines
from external market data. They have to do it, because established companies
should know where their current market position and overall market conditions.
4. Generate analysis. After you make all the data tabulations(internal and external data)
and generate trend lines from it, you should be able to generate analysis as follows :
a. For established companies,
i. You’ll be able to determine which your company’s major sales
contributors, by market segments, type of product or services sold, and
sales territories. This analysis will be used later to determine sales
revenue target for each market segment, product or service, and sales
territory.
ii. You’ll be able to see the sales performance trends year by year, whether
it shows growth or worse, it shows downward. When it shows growth, you
could make growth rates forecast based on the trend lines shown, and set
the sales target values based on that forecast. But, when it shows
downward, you still have to set growth rate forecast, and mostly you’ll be
expected to set very optimistic sales targets that can make turnarounds
for the company.
iii. External market data analysis will act as benchmarks to show how good
or bad your company’s sales performance compare to the country’s
overall market performance. And also, you’ll be able to see whether
growth spaces are still available in the market. These are the importance
of making tabulations from external market data for established
companies.
b. For start up companies, this external market data analysis will enable you to see
whether spaces for your newly established company are still available in the
country’s overall market. Also, you’ll be able to see the overall market growth
trends, which it will affect on the sales strategy to enter the market.

3. 5. Set the sales targets based on the analysis. Analyses generated from tabulations and
trend lines will be used for setting up the sales targets. But, not only based on the
analyses, setting up target should be based on basic and universal principle used for
target setting, which is S.M.A.R.T (Specific, Measurable, Achievable, Realistic, and Time
Framed). I’ll explain this basic principle according to my own opinions:
a. Specific, it means that we have to set the target as specific as we can. More
details are good and reduce risks of unachieved targets. Paul J. Meyer said that
word ‘specific’ contains 5(five) ‘W’,
i. What do you want to be accomplished (your company’s sales revenue
targets),
ii. Why do you want to accomplish the goals you’ve set (benefits and
purposes for the company and all of its team members by achieving the
sales targets),
iii. Who will be involved to accomplish your goals (people who will be
involved working on the sales targets in your company),
iv. Where to accomplish your goals (targeting on specific market segment
locations, divide the sales locations into several territories, determine the
type of product or services sold for each market segments and sales
territories),
v. Which requirements are needed to accomplish your goals (determine on
how much capitals/investments, which kind of infrastructures, and all
supports will be needed to achieve the sales targets). As I’ve already said
before about the importance of dividing your sales performance by market
segments, for those who didn’t divide their market segment in details,
they should do it. Because your company’s won’t have abundant
resources to acquire all market segments. Focus your limited resources
to grab on market segments that your company’s have the most strength.
b. Measurable, it means that every targets or goals must have quantitative
measurements, sales targets must be in measurable values, such as annual
sales target is USD 25 millions. There’s no sales targets or goals can be
measured by qualitative measurements, because the measurement will most
likely to be subjective and can’t be used as valid benchmarks. Even if you set the
targets for your HR department, you’re still be able to make quantitative
measurements, such as how many percentages of annual employee retention
rate/employee turnover, how many employees are promoted within a year, how
many backups/pipeline candidates for new employees, etc.

4. c. Achievable, it means that the targets should be achievable for your company. It
doesn’t mean that you have to set the targets too low or below management
expectations. Therefore, you’ll need to have benchmarks generated by data
tabulations analysis which I’ve already explained in the previous step. If your
company still has rooms or spaces for growth compare to the country’s overall
market, then you should stretch your targets upon it. BUT, before you do it, let
me remind you that it will directly correlate with the company’s abilities to provide
supports to achieve the goals, such as working capitals, infrastructures, etc. So,
don’t make goals or targets beyond the company’s abilities, otherwise it will
become dreams only and won’t be actually achieved.
d. Realistic, it means that the targets should be relevant or realistic compare to the
company’s internal and external conditions. For example, if the company is still
struggling on fulfillment of adequate working capital, or maybe lack of
infrastructures, then don’t set sales targets over the limits of the company’s
working capital capability. Thus, your targets should be focused on how to
strengthen your company’s financial capability to fulfill working capital
requirement, rather than fulfilling ambitious sales goals.
e. Time frame, it means that every goals or targets you’ve made must be bounded
by time frame. It should have deadlines to achieve it, such as company wants to
achieve sales targets in several million dollars at six months time. Time frame is
intended to establish sense of urgency to achieve the goals. Why targets or goals
must be bounded by time frame? Because time is extremely limited resources,
we can’t reverse or make time running slower. We only have 24 hours a day, and
the question is what will you do and achieve during your 24 hours time in a day.
The targets that you’re going to determine must reflect the S.M.A.R.T principle and I will
give you the examples on how to set it step by step later on.
6. Share the sales target to your team members. The final step of setting up of your sales
target is ensuring that all of your team members must understand about it and working
on it. How to ensure your team members understand about the importance of sales
target? Continuously announce it, socialization is must be conducted consistently and
repeatedly, don’t just say it in the beginning of the fiscal year, but it must be evaluated
periodically, monthly, quarterly, half yearly, and every seconds you have must be spent
to socialize it to your people. It’s not only about the numbers, but it is more about sharing
your visions and the importance in long term why the company should achieve the
targets. After all, your works will be fulfilled most part of your life (Steve Jobs), and it
must have precious meaning in life, not only for your life, but also for your people’s life.
When you do these steps, you’re not supposed to do it by yourself. Group discussions with
your superiors, subordinates, and cross-functional departments, are highly recommended to
make the targets more comprehensively related to overall company’s objectives. In the end,
sales target is just one of the objectives that company must achieves, and shareholders
won’t be pleased if the company only achieves sales targets but not overall company’s
objectives.