Setting the Sales Number | Summary and Q&A

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September 2, 2018
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Setting the Sales Number

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Summary

In this video, the speaker emphasizes the importance of setting the annual sales number for a sales organization. The sales number reflects the company's investment capacity and plays a critical role in planning, particularly for public companies. The accuracy of the forecasted sales numbers greatly affects a company's profitability and stock performance. Sales management and the executive team are responsible for setting the number, considering both bottom-up inputs from the field and top-down factors such as market size and product readiness. The aim is to find a balance between setting achievable targets and ensuring they align with the company's growth objectives.

Questions & Answers

Q: Why is setting the annual sales number important for a sales organization?

Setting the annual sales number is crucial because it determines the amount of investment the company can make in areas like engineering and marketing. It provides a roadmap for allocating resources effectively and ensures a balanced approach to company expenses. If the sales number is set too low, the company might not be able to invest as much as it could. Conversely, if it is set too high, the company may overinvest and run out of funds. Additionally, for public companies, accurately predicting the sales number is critical for planning and stock trading.

Q: How does setting the annual sales number affect a company's planning for a public market?

One of the most critical aspects of planning for a public company is accurately predicting the sales number. This forecast influences subsequent quarters' revenue and earnings, which significantly impact the stock performance. Investor sentiment and the company's valuation are often tied to the ability to meet or exceed the forecasted numbers. Therefore, setting the annual sales number correctly is paramount for the company's success in the public market.

Q: Who is responsible for setting the annual sales number?

The responsibility for setting the annual sales number lies with both sales management and the executive team. Sales management gathers bottom-up inputs from the field, including pipeline numbers, customer count, individual quotas, and sales ramp-up rates. The executive team takes a top-down approach, considering factors such as market size, product readiness, and board input. The collaboration between sales management and the executive team ensures a comprehensive and balanced approach to setting the sales number.

Q: What are the challenges in aligning objectives between the executive team and the board?

One challenge is reconciling top-line growth objectives set by the board with the resources and capabilities of the sales organization. For example, if the board expects a 50% year-over-year growth, but the sales team lacks sufficient salespeople, high quotas, or a deep pipeline, meeting that objective might be difficult. Another challenge could be the product's readiness to hit the projected market size. These discrepancies can create a discontinuity between the objectives of the board and the executive team, highlighting the need for collaboration and finding a feasible balance.

Q: What is the importance of aligning the sales number with the field's perspective?

It is crucial to align the sales number with the field's perspective to ensure buy-in and long-term success. If the field and sales management do not believe in the set sales number, short-term wins may be achieved, but failures are likely to occur in the future. By involving the field in the planning process and considering their inputs, a more realistic and achievable sales number can be determined. This engagement fosters a sense of ownership and commitment among the sales team, increasing the chances of meeting or exceeding targets.

Q: How should the sales number be set relative to the organization's current status?

The sales number should be set with consideration of where the organization currently stands. It should be neither too low, where underplanning occurs, nor too high, where overdelivering becomes difficult. Finding a balance between ambitious growth objectives and ensuring practicality is essential. This iterative process involves normalizing elements such as market size, sales capability, and product readiness to arrive at a sales number that is both achievable and aligned with the company's overall objectives.

Takeaways

Setting the annual sales number is a critical step in a company's planning process. It determines the investment capacity and reflects the company's ability to predict future revenue and earnings. The sales number should be set with collaboration between sales management, the executive team, and input from the field. Balancing bottom-up inputs with top-down factors like market size and product readiness is crucial for setting achievable targets. By involving all stakeholders and aligning objectives, organizations can establish realistic sales numbers and maximize their chances of sustainable growth and success.

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