What is a sales goal?
Sales goals are broad goals for your sales organization to increase the revenue, performance, efficiency, and productivity to promote business growth. They provide direction for your sales team and help prioritize what’s important.
Sales goals are crafted in alignment with the overall business goals of an organization. For example, you can set sales goals for revenue, customer acquisition, churn, and more.
What is the difference between a sales objective and a sales goal?
Sales goals and objectives are sometimes used interchangeably. However, there’s a difference. Sales objectives are actions each sales professional must take to achieve the overall sales goal.
Here’s an example. If your annual sales goal is to increase the overall revenue by 20 percent, a sales objective for this goal could be increasing the average deal size by 50 percent within the first two quarters.
Let’s look at the key comparison between sales goal vs. sales objective:
- A sales goal is a long-term, big-picture outlook dictating the direction of your sales team. It can be broad and applies to an entire sales organization.
Example: Generate 120 percent of the previous year’s revenue in this financial year.
- A sales objective is specific and for the short term. Meanwhile, a sales goal can have several smaller, targeted sales objectives, which can be defined for sales teams and individual sales reps.
Example: Close 10 high-value accounts with an average deal size of $50,000 in Q1.
What are the types of sales goals?
Sales goals can be:
- Time-based goals: You can set annual, quarterly or monthly sales goals, depending on the average length of your sales cycle.
For instance, if you’re in B2C, your sales cycle can be less than 30 days, and as such, you can set monthly goals. However, an annual sales goal might work better if you’re a B2B business with sales cycles lasting several months and involving multiple decision-makers.
- Activity-based goals: You can use the actions your sales organization takes, such as emails sent, demos scheduled, or conversations started, to set goals.
Activity goals help improve the overall performance and efficiency of your sales team. This approach is practical when you can’t set specific sales goals, but can identify activities contributing toward sales and find ways to optimize them.
- Stretch goals: Stretch goals are a way of motivating your sales team to exceed its quotas. For instance, if the goal is to grow revenue by 10 percent in Q2, an 11-12 percent increase would be a stretch goal.
It’s essential to note that while stretch goals challenge your reps to achieve more, they shouldn’t be unrealistic.
- Waterfall goals: Waterfall goals build up over time — going up each week or month. Let’s assume that sales reps have to close ten high-value deals in Q3 to meet their sales quotas. Here’s how the waterfall goals would work — one new deal in the first three weeks, followed by two deals in the next three weeks, and so on.
Such goals help your team develop a sound strategy, hone their techniques, and meet their quotas gradually without experiencing burnout.
- Process-oriented goals: Process-oriented goals focus on optimizing your sales processes for greater efficiency. You have to inspect your existing processes and spot aspects to improve.
For instance, if your average cycle time — the time your reps take to convert leads and close deals — is 90 days, you can aim to reduce it by 5-7 percent, helping your sales team close deals faster.
Besides the above types, sales goals can be individual or for an entire team. While individual goals help your reps level up, team goals help foster teamwork, collaboration, motivation and a sense of community.
You can also combine the various types of sales goals to develop a model that best suits your organization.
What are some sales goals examples?
You can set sales goals using the most common sales metrics, such as:
- Revenue (monthly, quarterly or annual)
- Customer churn
- Average deal size
- Customer lifetime value (CLV)
- Win rate
- Conversion ratios (Prospect to product qualified lead, qualified lead to customer)
- Acquisition costs
Let’s look at some examples.
You can set a time-based sales goal to increase the annual revenue by 12 percent. You can set activity goals — demos scheduled, email follow-ups done, virtual coffee chats set up, high-quality leads prospected — to define the milestones that will help you meet the overall revenue goal. The activity goals also act as small wins and keep your team’s morale and motivation high, which is essential to achieving a long-term goal.
You can also combine sales goals. For example, you can set a goal to increase the CLV by 10 percent in Q3 while bringing down the monthly churn rate to 2 percent.
Increasing CLV might require adding up-sell or cross-sell options to your existing offerings. Since you also aim to reduce churn, developing new and enticing offerings can help you bring in more revenue per customer while boosting your retention rates.
Here’s how HubSpot puts it: “Customer churn is the rate at which customers stop using your product or service. So the higher your churn rate is, the more likely your business has room for improvement to delight customers.”
Why are sales goals important?
According to Harvard Business Review: “Teams cannot be inspired if they don’t know what they’re working toward and don’t have explicit goals.”
HBR also highlights the importance of goal setting in directing and motivating sales teams, while controlling sales compensation costs.
Sales goals play an important role in helping your sales team prioritize better and work toward a common purpose. The main benefits of setting sales goals are:
- Setting clear expectations for the sales team
- Keeping the sales team motivated and engaged
- Promoting teamwork, collaboration, and healthy competition within your team
- Helping your reps continuously improve their performance and efficiency
- Ensuring that your company meets its business goals — revenue, growth, market share, profit margins, and more
What are some best practices to set effective sales goals?
Here are some best practices to ensure that your sales team meets its goals:
1. Understand your business operations
Having a clear understanding of your business, its historical sales performance, current market trends and fluctuations, and future growth potential is critical for strategic decision-making.
So, before mapping goals and charting out a comprehensive sales plan, it’s crucial to get a clear picture of your industry’s market landscape, the competitors, and your organization’s performance.
2. Identify the primary sales outcome to set a collective goal
The collective goal that you set for your sales organization should resonate with your organization’s business goals. For most organizations, this involves cutting costs, growing revenues and profits, and improving productivity.
Knowing what to target makes it easier to develop a comprehensive sales plan and set a common, meaningful purpose for the sales team.
According to McKinsey, aligning what the organization as a whole wants to achieve, given its larger business context, with what the people who work for it want to accomplish every day is vital to delivering lasting value.
For sales reps, understanding how their sales activities contribute to a larger purpose and fit into the big picture helps improve their performance and efficiency and provides motivation.
3. Understand your sales process
Every organization has a unique sales process with varying sales cycles. Understanding the sales process is crucial to know whether it can be improved to help you achieve the main outcome.
End-to-end visibility and understanding of the sales process is crucial to setting the right goals, choosing proper metrics, hiring the right people, and selecting the relevant tools.
4. Map the metrics to be measured
Before setting goals, it’s vital to know what needs to be measured and how to ensure accountability within your sales team. So, find the right metrics for your organization and map the data points you’ll need to capture this information.
Popular sales metrics include:
- Sales cycle length
- The total number of qualified leads
- Average deal size
- Win rate
- Lead-to-close ratio
- MQL-to-SQL ratio
- Churn rate
It would help if you also established rewards — a form of recognition — for reps when they hit their sales goals or exceed their sales quotas.
5. Set SMART sales goals
Every business goal should stick to the SMART framework — specific, measurable, attainable, relevant and time-bound. Even though goals can be broad, they shouldn’t be vague.
So, it’s important to set expectations, know what to measure and the timeline for achieving the goal. It’s also crucial to ensure that the goal is realistic and contributes to one of the larger business goals of your organization.
Here are some examples of SMART goals:
- Instead of saying increase the annual revenue, you should make it specific. If your yearly revenue has been growing by 10 percent for the past three years, then a SMART goal would be to grow your annual revenue by 15-18 percent in 2023.
- Another example is the total number of accounts closed. Let’s assume you’ve been closing 100-150 accounts for the past two years. Rather than saying close more accounts, you can say, “close 200 accounts in 2023 with an average deal size of $50,000”.
6. Set up a sales stack to collect, analyze, and manage sales data
Everything from getting end-to-end visibility of the sales process to tracking the right metrics needs data. That’s where conversation intelligence platforms can come in handy.
Using these platforms, you can:
- Track relevant sales data points
- Perform granular analysis of sales calls
- Extract valuable prospect information and critical metrics
- Get insights into the performance of your sales reps
- Integrate seamlessly with the remaining tools in your sales-marketing stack
7. Offer sales coaching to keep building on the sales momentum
Tracking the right metrics and having end-to-end visibility of the entire sales process also gives sales managers a snapshot of their team’s performance. Meeting ambitious sales quotas and goals requires sales reps to improve their performance and productivity constantly.
Using the sales data captured, managers can offer meaningful insights and feedback to coach their reps as and when needed. Managers can also use that data for sales enablement and building better playbooks that close deals faster.
Sales goals play a vital role in ensuring that your sales team heads in the right direction. As we mentioned earlier, it’s crucial to understand your business operations, sales process and cycle, past performance, and other such aspects to map aggressive yet practical sales goals. That’s where data plays a pivotal role.
Clari’s revenue platform can help you bring all sales data regarding the past, present and future in one place. Clari makes it easier for you to meet your sales goals and continuously empowers your sales organization.
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