The Ultimate Guide to Setting Sales Targets

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Sales Management : 8 min read

The Ultimate Guide to Setting Sales Targets

“Morale? Busted. Motivation? Never heard of it.”

— Every sales rep forced to chase after an inaccurate or unrealistic (or in some cases, non-existent) sales target

This is the reality of setting sales targets that suck. They suck alright—suck the life right out your business and everyone working for it.

So let’s go over how to create better ones.

In this article, we’ll cover everything you need to know to set effective sales targets (a.k.a. sales targets that actually make sense), including:

  • What sales targets are and why they matter
  • How to figure out what your sales targets should be (and make sure they’re realistic)
  • How to achieve those sales targets (hint: no “winging it” involved)
  • How to deal with increased sales targets without burning out your team
  • Analyzing your results (and sharing them with your team)
  • The importance of adjusting your sales targets over time

Don’t worry—setting sales targets is a lot easier than you might think.

What are sales targets (and why do they matter)?

A sales target is the number of sales (and resulting revenue) a manager decides the team should hit or exceed in a specific amount of time.

In other words, how much money do you want your team to generate every month (or quarter… year… etc.)?

It’s important to have defined sales targets to ensure you’re generating the amount of revenue needed to meet your sales budget, and frankly, to stay in business. It also provides direction to your sales team as they’ll know how close—or how far—they are to meeting the sales target (y’know, rather than simply coming into work each day and selling as much or as little as they feel like).

Like any goal, having a sales target also makes it easier for you to make an action plan to achieve it. We’ll go more into this later. First, let’s talk about just how to set those sales targets.

How to figure out what your sales targets should be:

Be honest. How well have you been doing so far in the sales department?

If you read that sentence and cringed a little, don’t go in and double your sales targets thinking this will automatically double your sales. (If only it were that simple.)

On the other hand, if the “cool” sunglasses emoji (😎) just appeared in your mind when we asked that question, maybe it’s time to crank your sales targets up a couple notches.

Here’s how to figure out just what your sales target should be:

Step 1: Calculate your average close rate.

Calculating your current close rate for leads is a crucial starting point to figuring out your sales target. Doing this isn’t hard, and you should have all the data needed to do so on hand already.

  • First, take the number of leads you had every month for the last 12 months (or less, if you don’t have that much data available).
  • Second, pinpoint how many of those leads were converted into paying customers.

For example, if your team reached out to 500 leads and made ten sales from those emails, then your close rate is 2% (10 / 500 = 2%).

If this number is low for what you need, don’t panic. On to step 2.

Step 2: Forecast what your team needs to hit.

The number your team needs to hit is the one given to you by the exec team. It’s the minimum amount of money the sales team needs to generate to meet company budget or quota.

For example, if you need 15 sales a month instead of 10, then your sales team needs to reach out to 750 leads a month instead of 500 to meet the sales target (15 / 750 = 2%).

Nice. Quantifiable goals are good.

Step 3: Then add some.

If your boss tells you that you need to make 15 sales a month to hit your budget, and you hit 15 sales, congratulations—you just achieved the bare minimum.

Okay, that was a bit harsh. But our point is, you can do better.

By adding a little bit extra to the amount of sales you need, not only will you be adding some wiggle room to your sales target (better to overperform than underperform) but execs will love that they always get more than they asked for, getting your team massive brownie points. And of course, you’ll be focused on growing your business, not remaining stagnant. It’s win-win… win.

But, there’s a fine line between ambitious and unrealistic. You don’t want to get carried away and make your sales targets unachievable either.

You may want to call a meeting with your sales team and bounce the new sales target you come up with off of them to see if they think it’s realistic. If not, adjust your goal or ask your team if there’s anything else you can do to help make this goal more attainable for them.

Setting realistic sales targets from the start is crucial to keep your team motivated and set them up for success.

Key takeaway: Setting a good sales target is about finding that perfect balance between what you need to hit and what you’d like to hit. Think: ambitious but realistic.

Once you’ve got your sales targets down, make a list of action items to achieve them.

So, you’ve figured out what your sales target should be—but you’re not done yet.

Next, it’s time to break that overall sales target down into smaller, actionable steps. For starters, decide if your sales team will be solely responsible for achieving that target or if other departments will be involved as well.

  • If other departments are involved, how much of that sales target should each department be contributing?
  • If your sales team is split into multiple smaller groups of reps (e.g. SDRs, AEs, outbound reps/inbound reps), how much revenue should each group be generating?
  • Based on these amounts, how much money should each individual rep be bringing in?

Once you’ve answered these questions, you can share these specific goals with their respective owners so each team knows their role in achieving that overall sales target.

How to deal with increased sales targets without burning out your team (or making them hate you):

If this whole sales targets thing is new to your team, or the target you came up with is abnormally high, don’t just hand them off to your team as-is.

The last thing you want is for your team to panic and crumble under the pressure. (Plus, do you really want to be that person?)

Instead, transition them slowly to the new workflow.

One way to do this is by introducing your new sales target as “waterfall goals.” Waterfall goals are set to incrementally get larger until you hit your ultimate goal: your sales target. The point is to not overwhelm your sales team by allowing them to adjust to that more ambitious target gradually.

This type of sales target allows you to build up to your desired target through timed increments.

For example, let's say you’ve figured out your sales team needs to be making 20 calls a day to achieve target, but they’re only making 10. Instead of telling them to start making 20 calls from now on (a.k.a. literally doubling their workload), try building them up to 12, then 14, then keep building until they eventually hit 20.

Of course, there’s also the strategy of adjusting your commission structure. That’s a whole ‘nother topic on its own though—learn more about setting commissions here.

Analyze your results and adjust your sales targets as needed.

It’s super important to stay on top of your numbers and always be in the know about how close (or how far) you are from hitting your sales targets.

The easiest way to do this is to have a “rolling forecast” structure set up within your team, which shows them not only the opportunities for sales, but also when something just isn’t working out, so it can be addressed right away.

This can be set up easily with a CRM.

A good CRM will turn your data input into information that’s actually useful for your sales reps, like suggesting new leads and engagements to help them get the absolute most out of their time on the sales floor.

Some CRMs even go a step further and help you maximize your sales pipeline by giving you critical insights into your leads through data reporting.

For example, Copper lets you filter your leads by opportunity value, their business size, and the source that they’re coming in from.:

lead information in copper crm's dashboard
When setting sales targets, it helps to know everything about your lead at glance.

This helps you sort and prioritize your prospects so you know which ones will get you closer, faster to your sales target.

What you don’t want to do is be one of those companies that only looks at their sales targets once a quarter—or worse—just once a year. It’s a lot better to see right away when you start steering away from your sales target so you can rectify the situation then and there versus a year later (when things are likely irreparable and your sales targets are far from met).

Share your results with your team.

Keeping a tracked visual of your rolling forecasts can also be a great way to keep your sales team motivated and let them see their progress more easily than traditional forecasts.

Copper keeps your team on track by showing them how much they are selling each day, week, and month:

how copper crm breaks down total sales by individual reps' contributions
An example of how Copper breaks down total sales by individual reps

By keeping your team informed on their progress through rolling forecasts, you're giving your business the best shot at hitting your target.

Plus, who doesn’t love watching themselves crush targets? Give the (sales)people what they want!

Start building smarter sales targets today.

So, to recap:

  • Setting good, realistic sales targets is about data and math, not wishful thinking.
  • Defining your sales target isn’t where it stops—you have to make a plan to achieve it.
  • Once your plan is in motion, you’ve got to check in regularly and make sure your team’s on track to hit that target (or identify if things need to be changed).
  • Over time, you may have to adjust your sales targets.
  • Always share the results with your team so you can all bask in the success of setting (and achieving) smart sales targets together.

With a plan in place, it’s easy. (Or at least, easier than it is without one.) ;)

Now get out there and set those sales targets!

LEARN MORE

Hit those targets.

Curious about how a CRM can be used to help set sales targets and forecasts? Check out the free guide.