As the 2010 budgets and business plans get put to bed, it’s time to finalise the forthcoming year’s sales targets. There’s often the temptation to think that once the revenue and income targets have been finalised the work is done and it’s back to business as usual. Of course it’s only just beginning and, in fact, it’s the quality of the sales plan that will determine how well you hit that top-line revenue target. Frankly, if you don’t have at least the first draft on the table now, you’re already behind the eight ball, given the lag it takes to convert sales to revenue. At its most fundemental, the sales plan encompasses many of the tactical options needed to fulfil the business plan’s overall strategy.
There are 5 simple rules to ensure your sales plan is solid while still offering flexibility to adapt to sudden changes. These rules apply regardless whether you’re major international player with a large percentage of centrally generated business or a sole market specialist with your own niche and select competition.
- Secure the Base:-Don’t assume that because you’ve got 2-3 months revenue stock (aka sales in advance/revenue on hand) that you’ve already got a chunk of the target. Revenue generation is a continuous non-stop journey; you always need stock to kick off the following year.
- Cycle Time Adjust:-Match your sales generation to your revenue by taking into account your typical cycle times. In other words if you have June as a high revenue month, you’ll need higher sales around March/April, depending on your product and client mix. Many companies have a ‘hockey stick’ revenue plan, with Q4 the big quarter, so Q3 has to be where the big sales effort comes in (notwithstanding the holiday periods and, in the multinationals’ case, 2011’s budget rounds!)
- Prepare for ‘Shrinkage’:- Remember, there are always cancellations and delays, so generally your sales target needs to be above revenue by around 5-10% again depending on circumstances.
- Refine your Focus:- Avoid the temptation of applying the budget revenue increase uniformly across all clients. Some clients will spend more and some less due to their specific trading conditions, to cyclical spending patterns, to internal re-organisations or external merger and acquisition. Instead, review recent historical patterns to get a better fix on growing, declining, lapsed, and new client movements. This is especially important if you’re dependent on a few large clients for the bulk of your revenue.
- Plan the Unexpected:- Be aware that a certain percentage of your business will be unplanned and come ‘in through the door’. Often building bottom-up sales planning generates targets that are too low to meet revenue demands as they tend to be built from recent clients, and usually a few of those have been targeted to decline (for reasons given a point 4). However, especially in the case of agencies with a high ad hoc share, a certain amount of business comes from unplanned ‘new’ or long term lapsed former clients. To get a fix for your business, look at the percentage of sales you got last year (and the previous) from clients who had not spent with you in the previous two. I am prepared to bet it will be around 10-20% of sales so you need to build that number into the target.
If you follow the 5 rules above, you will increase your chances of hitting or exceeding your 2010 top-line. In the next blog, I will focus more on the ‘quality’ of sales. These are the sales that will help you better achieve you bottom-line margin goals and keep your business more robust to future market challenges.