“The only real mistake is the one from which we learn nothing.” (Henry Ford)
Without revenue targets, businesses are unable to measure their performance against past years, reward employees, or accurately forecast and plan. Targets set by leaders for individuals or teams can shape morale and expectations for employees and bring accountability to team actions.
But it doesn’t always work like this. You might have found yourself in the unenviable position where your targets are consistently being missed – despite your team leaders reporting that their teams are giving it everything they’ve got. Here are four reasons why this may be happening – and what you can do about it.
Reason 1: You set the wrong goals
For many leaders, revenue targets are calculated by simply adding a percentage to the previous year’s turnover to show growth. While this system may seem sensible, it’s actually very wrong.
When setting revenue targets, you must consider a number of factors that go beyond the achievements of the previous year (or quarter), and the current inflationary environment. Consumer behaviours change; sometimes overnight. The market adjusts and new competitors are always springing up. What’s more, a new technology could arise, bringing new challenges or rendering one of your products or services obsolete.
The first step to setting accurate revenue targets is gathering all the data. Once you’ve done a thorough analysis of the market, competition, and consumer behaviour, you should look at each product or service you offer and evaluate its existing sales and potential for new sales. Setting individual targets should result in much more realistic numbers.
Reason 2: Short-term thinking
Pressure to show growth can cause you to rely too much on channels that deliver speedy growth. It’s easy to fall into the trap of doing things for short-term benefit, rather than building your business one brick at a time. Loads of things that are time-consuming and have no obvious short-term gain could eventually reap huge rewards – things like building an organic online presence or nurturing a business community.
The demand for short-term growth can also lead you to abandon strategies that do work simply because they don’t show immediate success. There’s almost always a lag between implementing a new strategy and seeing an impact on your bottom line – often a little patience is all it takes.
Reason 3: Failing to plan
Having a revenue target is not the same as having a plan. At the end of the day, it’s your staff who will convert the proposed numbers into a reality. Your teams must be given the tools they need to meet your revenue targets.
Have your numbers factored in a new competitor? Then your staff need to know how to market around that new competitor, and your sales teams need to know how to answer the questions they’re going to get about the competitor’s products.
If it’s growth you’re after, will your current team be able to handle the extra hours needed to achieve it? Or do you need to add staff? If you need new staff, have you allocated budget for hiring and training them? And have you considered that they’ll operate at a slower pace in the beginning?
Your accountant (that’s us!) can help you gather the necessary data to turn your sales targets into an actionable, budget-friendly plan that makes them a reality.
Reason 4: Bad sales pipeline
You can only sell to customers who actually need your product. You can kiss your revenue targets goodbye if your sales team isn’t getting enough good leads. Without good leads, salespeople start changing their behaviour, wasting time trying to sell to clients they know won’t bite and/or giving deep discounts just to get a hit.
Poor-quality sales pipelines manifest themselves through deals that either don’t close or that take a long time to close. If this is something you’re seeing regularly, here are three questions to ask yourself:
- Is your marketing targeting the right demographics?
- If you are reaching the right demographics, do you have a large enough budget to reach the number of clients you need?
- Are your leads being assessed for quality, and if so, are the sales reps getting the highest quality leads first?
Remember, revenue targets are most often reached by those companies that have gathered accurate data and planned effectively to reach those goals. Your accountant should be on speed dial when you’re putting together revenue targets (and coming up with plans to make them work).
We’d love to chat about your revenue targets – just give us a ring.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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