December 20, 2018
Don't Start Sales Planning with Sales
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Several years ago, I worked in the newspaper industry when Craigslist decimated our classified revenue, traditional advertising was migrating to the web, plus a slowing economy made it a difficult time. The organization heads gathered in Chicago to start our annual planning. The owner of the organization asked Richard, a retired CEO with an impressive track record of sustained growth through both good markets and recessions, to kick off our annual planning. His first statement set the tone. Any business who does the same thing year-over-year without change, improvement or advancement will experience a natural decline of 15%. To flip it, if everything stayed the same year-over-year, you would need to sell 15% more to make last year’s numbers.
He proceeded to lead a discussion on how the different departments inside the organization contribute to the overall health and growth of an organization. His approach changed how I, and most of my colleagues, view planning and sales forecasting.
When annual planning begins, the tendency is to start with the sales team to get a revenue forecast. The sales team goes into a hole and eventually returns with an estimate for the executive team. The executive team will say sales is “sandbagging” the number; thus, let the games begin. The assumption is sales has the keys to drive revenue. However, the sales team is the company’s face and voice to the buyer, but they are not the product. If your product or service has not improved, how do you expect the sales team to produce more revenue?
So when can you start forecasting revenue during annual planning?
Planning needs to begin with the executive team providing direction and vision for the upcoming year. The vision needs to drive the plans and the resource prioritization for the departments.
The next step is for the product, marketing, IT and operations teams to present on product, process and system improvements to grow the organizations in the upcoming year. The department heads need to outline their initiatives, how they are holding people accountable, and the impact it will have on the organization. The efforts do not have to be sales focused, but it must be customer focused. A better product, process, and system drives new customer acquisition, increase retention and improves the top line.
After this information is available, you are ready to forecast. The sales team has visibility into the organization’s future, the team’s deliverables and the priorities for the upcoming year. Taking into consideration the new information provided to your sales team, they need to:
Overall, relying solely on your sales team to increase revenue will only lead to modest gains in the short term. However, if the entire organization is not held to the same level of accountability and commitment to grow the business, these gains are unsustainable. Philip Kotler stated it best: “The sales department is not the entire company, but the entire company should be the sales department.”
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