Sometimes, you have to work backwards to go forward.
It might seem counterintuitive to start with the end product and figure out the process for getting there, but that’s what reverse engineering is all about. In fact, reverse engineering has unearthed some great innovations in science and technology, offering more optimal solutions. Similarly, working backwards is the best way to set appropriate sales activity goals for your entire sales team.
(Note: This blog post will address setting sales activity goals at a team- or company-wide level. We will address best practices for setting individual-level goals in an upcoming blog post.)
What are sales activity goals?
Every sales rep on every sales team in any company should have sales activity goals. This should not be confused with bookings quotas, i.e. how much in dollars a rep has to book each month. Rather, sales activities focus only on activities – the input-based effort each rep is held accountable for. Regardless of what happens on the output, each rep should have no trouble hitting these input-based goals of hitting a certain number of calls each day, week, month and quarter.
But just how many activities is the right amount?
This is where things get tricky. As a Sales VP, you want to set a standard, a bar that you expect your sales reps and team to reach and surpass. You want to make this a stretch goal, but also one that is eminently doable. This is where reverse engineering comes in.
Start by determining your team’s target – What do you want to achieve this quarter? Do you want to do 200 sales at an average sale price of $5,000, for a sum total of $1 million? Work with your CEO to determine the bookings goal for this quarter, before figuring out what you have to do to reach those goals.
Look at historical conversion ratios – Once you have that bookings goal, look at historical conversion ratios to determine how to reach that bookings goal. What have you needed to do in the past? This should take into account your pipeline coverage ratio: how much pipeline do you traditionally need to reach quota? Is it a 3X sales pipeline-to-quota ratio (the industry-standard), or is it something else? Getting an accurate pipeline coverage ratio is critical to understanding how to achieve your goals. You must know how many of your opportunities you typically win to figure out how many opportunities you need, and therefore, how to generate those opportunities.
Examine your sales activity ratios – This report tells you what the efficiency of your activities are, i.e. how are your activities converting. Take a look at this report below.
This visual report tracks the success rate of your team’s activities – in this case, calls.
The blue line tracks the ratio of calls : connects, i.e. how many dials a rep has to make before having a successful connect and a productive conversation.
The teal line tracks the ratio of connects : meetings scheduled, i.e. how many of these productive conversations take the next step, in this case, a scheduled meeting between your rep and a buyer with decision-making authority.
The green line tracks the ratio of meetings scheduled : opportunity sourced. A high ratio here means that your scheduled meetings are doing a great job in convincing potential buyers to keep on progressing down the sales funnel, all the way to a closed-won deal.
Let’s say, hypothetically, that your team wins one out of every three opportunities. This means that to reach the goal of 200 deals won, your team will need to generate 600 opportunities. Now, you know how many calls your team needs to make to generate one opportunity. Multiply that number, 90, by 600 and you get 54,000 calls that your team needs to make this quarter to reach your bookings goal.
But don’t stop there! Keep drilling down to really get specific with your sales activity goals. If there are 66 selling days this quarter, you can figure out that your team needs to make roughly 818 calls each day.
How many sales reps are on your team? 10? Well, now you know that each rep should be expected to make 81 calls each day, in order for the entire team to hit their goals. This is a general sales activity goal for the team – in an upcoming post, we’ll discuss how to create specific activity goals for different levels of your reps, between high-achievers and relative newcomers. But assuming that all your reps are relatively equal, you can now feel good in holding them to this bar of 81 calls per day, in order for the team to hit its bookings goal.
Starting at the end and working backward can provide clarity into your sales process and help you set more accurate sales activity goals. Don’t just set random goals or rely on industry standards – work backwards through your historical conversion rates to come up with a goal that is truly representative of what your team needs to achieve.
How have you traditionally set sales activity goals for your team?