What Are Sales Targets and How Can You Use Them Effectively?
By Indeed Editorial Team
Published June 1, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
People who work in sales typically have certain targets to meet each week, month, or quarter. Companies often set these targets to help motivate team members to increase sales. Learning more about sales targets can help you decide how to set effective ones for your team. In this article, we describe what these targets are, explain why they can be beneficial, explain how to create one, and offer tips for using them effectively.
What are sales targets?
Sales targets are goals that a sales team sets to help them improve their performance. The manager can set a target with any metric that most accurately represents the team's success. Here are some examples of metrics that can serve as a target:
Number of units sold
Amount of revenue
Number of sales
Number of new clients
Managers or executives typically set a target at the beginning of a sales period, such as a financial quarter. They then measure their sales team's success by assessing how close they are to meeting or exceeding the target. Managers typically use data from previous selling periods to guide their goals. For example, if a team sold 200 units of their product in the previous quarter, then a manager may set a target to sell 250 units for the next quarter to encourage growth and account for improved selling processes.
Why is creating a sales target important?
There are plenty of benefits to creating and implementing a target for sales, such as:
Setting targets is a great way to measure progress and success. These targets are typically based on the amount of earnings that the company requires to cover its overheads and production costs while earning a profit. This means that if a team meets their target, companies can easily assess whether they're successfully earning enough to continue operating. Setting and achieving larger goals can then show companies they're earning a larger profit as well.
Reaching a target can help to increase morale among team members, as it shows them that their hard work is contributing to the company's success. This morale can then motivate team members to keep working hard, increasing their productivity as well. Reaching sales goals can also help team members to feel more satisfied with their work, which can make them feel more loyal to the company and keep turnover rates low.
Although a target is typically a short-term goal within a quarter or a year, it can help companies to plan their growth. Companies usually increase their targets each period to work towards long-term goals of increased revenue or large customer bases. This allows for continual growth within the company so that team members can constantly develop and improve their skills.
Setting clear expectations with targets can help employees to become more successful. It can ensure that everyone knows what goals they're working towards so that they can plan their schedules accordingly. For example, if a team member's sales goal is to onboard 20 new customers in a month, then they might aim to onboard at least one new customer each day. Clear expectations can also help employees measure their own success more easily so they can ensure they're on track to meet their goals.
How to create a sales target
If you're interested in creating a target for sales, here are the steps you can follow to do so:
1. Calculate your previous sales
You can use the information you collected about sales in previous quarters to understand the team's productivity. These metrics can help you adjust the targets that you're setting to reflect the needs and capabilities of your team. For example, you can decide whether to increase targets to account for lost revenue in previous sales periods or you can lower the target if it was too high. Your previous sales can also help you set a starting point from where you can improve.
2. Forecast your needs
Targets usually come from budget planning to determine the revenue that the company requires to cover the cost of business for the sales period. Using that number, you can determine each individual salesperson's target by dividing the overall target by the number of salespeople. For example, if the monthly budget forecasts $100,000 in revenue and there are 50 salespeople of equal experience and responsibility on your team, then each person's individual goal is to sell at least $2,000 in that period.
3. Increase the target
You can set a target that's higher than the budget plan suggests. This gives you a goal to work towards so that even if you don't meet it, you can still cover your costs. To continue to foster growth for the team and earn more revenue, increase your sales goal every new reporting period. Increasing the target goal can create momentum to continue increasing sales each period.
Tips for using sales targets effectively
To implement and use your targets effectively, consider following these tips:
Create collective targets
Instead of setting individual goals for each team member, consider setting a collective target that the whole team can work towards. This encourages collaboration and helps team members to build a stronger bond as they're working together rather than competing. While a competition can motivate certain employees, it may not yield the same results (such as increased revenue) as a collective goal.
Set reward targets
Offering rewards to your team for meeting targets can motivate them to work hard and achieve their goals. Consider offering rewards that are proportionate to achievements. For example, if a team member reaches a small goal, such as onboarding a record number of customers that month, then they might earn a small reward, like a gift card. If the team achieves larger goals, like selling double their target, then they might receive a larger reward, like extra vacation time. Offering rewards can improve morale as your team has something to look forward to, motivating improvements in their performance.
Create SMART goals
When creating a target, ensure it follows the SMART method. SMART is an acronym that stands for:
Specific: If you're clear about what you hope to achieve with the target, then this can make it easy for your team to follow.
Measurable: It's easy to measure the progress or success of sales goals as they typically involve numbers. For example, if your target is to earn $20,000 by the end of the quarter, then you know that the team is halfway to achieving that goal when they earn $10,000.
Achievable: It's important for your target to be realistic so that your team can meet it.
Relevant: It's helpful to relate the target to the company's core values and long-term goals.
Time-based: It's useful to set a deadline for your team to reach the target, such as the end of the year or quarter.
Creating targets that meet each one of these factors can increase the chance of the team being able to achieve them. For example, setting a target of increasing revenue is too general. Instead, your target may be to increase the company's revenue by $10,000 by the end of the first quarter.
Set stretch targets
Stretch targets are goals that may take longer or require more work to reach. Stretch targets can act as further incentives for high-achieving members of the team, and you can use them in addition to a regular goal. This can give members of the team something to strive for and make them feel proud and valued when they reach it.
A salesperson can typically achieve a normal goal with ease or speed, but a stretch goal presents more of a challenge. Consider which team members are likely to benefit from the pressure of a stretch goal. For example, a high-achieving salesperson who sold 200 units last period might have a goal of 250 for this period, but their stretch goal might be 300. The regular goal establishes what the salesperson can do, but the stretch goal gives them something to continue to work towards.
Set waterfall goals
Waterfall goals are smaller, portioned goals that build on each other to reach a more ambitious goal. For example, if you have a goal to sell 200 units and are currently only selling 50, you can increase the goal to 100, then to 150, then to 200. This incremental approach can help the team to improve at a manageable rate, which prevents burnout and keeps morale high because team members are improving while consistently hitting their goals.
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