Today's guest post is from Robin Suomi, MBA, Owner of Startup to Growth, LLC.
It’s not about ideas. It’s about making ideas happen. - Scott Belsky
Ideas are a dime a dozen. Your world changes when you make ideas happen. And in the for-profit business world, that means sales.
Do I Really Need a Sales Plan?
Yes. You start your business because you have great ideas. When you grow your business through sales, you are getting your ideas out there to a bigger audience, making an impact, realizing your dreams, changing your world and the world of others. You are, in Belsky’s words, “making [your] ideas happen.” You are also reaping the rewards you envisioned when you started your business.
This only happens through sales planning. Many small business owners FEAR sales…and I mean REALLY FEAR sales. They think if they do enough marketing activities they will miraculously grow their businesses and be profitable, and therefore they won’t have to “do sales.” Marketing will grow awareness of their business, which is very important. However, they must also…actually…sell.
To increase sales without feeling like a hamster running in endless, no-destination circles on a wheel, you need a sales plan, which is included in your business plan. You need to decide 1) what level of sales you want to achieve, 2) how you will make those sales happen, and then 3) how to execute your plan. Along the way you will constantly measure, evaluate and revise your plan!
Sounds like a lot of work, right? Actually, it’s not, with the right planning and support. In this article, we will stick with the basics of making realistic projections and ensuring your team can handle the activity to support those projections.
Sales Projections and Activity
I am assuming you have projected your annual expenses for your company for the next 12 months and the amount of profit you want to make in the next year. Add those two figures together for your Annual Sales Goal. Divide that number by 12 for your Monthly Sales Goal, and divide the result by the number of people on your sales team. That is your magic Monthly Sales Goal (per sales person). In your business, you will break it down further into weekly goals. Here, to simplify this, we’ll keep it at the monthly level.
Let’s say your Annual Sales Goal this year is $360,000 and you have 3 sales people. Each sales person will need to sell $10,000 per month to reach your goal (360,000/12/3). Is that realistic? First, you need to know a couple of numbers. Let’s start with your historical data.
1. Average Sale Per Client: Let’s assume your revenue for the past 12 months was $324,000 and you had 162 sales. Your average sale/client was $2,000 ($324,000/162).
2. Conversion Rate: If on average your sales person makes 50 calls and they result in 2 sales, then your conversion rate is 4% (2/50).
3. Activity Goal: Using these numbers, if your sales person makes 125 calls per month, they will close five sales (125 X .04). With five sales at $2,000 each, they have reached their monthly goal of $10,000.
Are These Realistic Projections?
Now, back to our basic question about whether these projections are realistic. It depends.
You used historical data and math to calculate your key metrics. Good so far. But let’s dig deeper. Using our example:
• Do you have systems in place so that each sales person will have 125 solid leads to call each month?
• Are your sales people properly qualifying those leads? This is a great area to delve into, so you can achieve higher conversion rates (more sales!)
• Are your sales people looking for opportunities to upsell?
• What is your client retention rate? To dig deeper here, ask yourself:
o Are you in a constant state of client churn? How can you change that?
o Are you reaching out to existing clients on a regular basis?
o Are your sales people engaging in conversations with their leads, creating relationships, or are they simply being transactional? Does this fit your business model?
• Are you receiving word of mouth leads from existing clients and referral partners?
• Are you using the new technology that is available to you (there is always new technology!)?
• Have you hired new sales people? Have you given them the proper tools and training to help them be successful?
o Have you included time in your projections to get them trained and up to speed?
• Do you have any seasonal fluctuations in your sales? Have you adjusted your projections for that?
• Are things changing in your business or your industry? (Automatic answer: Yes.) How is that impacting your sales?
• Are there new competitors in your space? How are they impacting your sales?
By answering these questions, and continuing to analyze your Average Sales Per Client, Conversion Rate and Activity Goal numbers, you will know if your sales projections are realistic. Can your sales people truly make that many calls per month plus do all the follow-up emails, meetings and demonstrations that are required to make that sale? If not, it is time to change your sales plan for success!
If you have any questions or comments about this article, of if you would like to schedule a free consultation, please contact me at email@example.com. Together, we’ve got this!
About Robin Suomi, MBA, Owner of Startup to Growth, LLC. Robin is a small business coach, consultant and trainer who has worked with thousands of small business owners for over 10 years, helping them start and/or grow their small businesses. She combines her solid technical knowledge with her coaching and listening skills to help clients achieve their goals. In addition to teaching business courses as an adjunct professor, she created her own Business Plan Boot Camp for her clients. Today, she delivers most of her coaching/consulting/training services to clients across the country through a live, video meeting platform. She has also created an online small business training and professional development video Library, where experts in the fields of marketing, sales, insurance and law, to name only a few, present their expertise to Library Members 24 X 7 X 365 by a recorded video format.