I meet with a lot—and I mean a lot—of startup founders and early-stage sales leaders who build their sales plans based on what they want to happen, versus the reality of what is happening.
I get it, because I did it myself the first time I needed to build a sales plan. Here’s how the conversation went.
Me to my newly hired sales consultant at our first meeting to build my sales plan: “The reps should be closing 10 deals per month, so let’s start with that.”
Newly hired sales consultant: “Why 10 deals a month, what are you basing that on?”
Me: “Well, we set a goal to get to $X million in ARR this year, so we’ll need 10 deals a month per rep.”
Sales consultant: “OK, but today, they are averaging 3 deals per month today. Let’s build from there.”
Me: “No, that won’t work. Each rep has to deliver 10 deals a month—that’s the only way we get to our ARR target, and I can’t hire a bunch more reps, each only delivering 3 deals a month, that will never fly. I told my partners they would close 10 per month each.”
Sales consultant: “Well, you can’t just wish 10 deals a month per rep to come true, there is no basis by which they can magically go from 3 deals per month to 10.”
Me: “Sure there is, we need them to have better skills so they close more of their deals. That’s why I hired you.” (Glaring defiantly)
Sales consultant: “Ok, that’s not how it works. How do you know they can or should be closing more than 3 deals per month? What are you basing that on?”
Me (meekly): “They just should be.”
I’ll spare you the rest of the blow by blow, but this conversation went around and around in circles until it finally sank in. It’s a hard concept to grasp when you are married to what you think ‘should be’ because that’s what you built your plan on.
This sets a baseline as to how much revenue we can close. Oftentimes, revenue targets are built based on the amount of revenue we think the team can close.”Stage2
A lot of first-time founders run into this—they build a sales plan based on how many deals they think sales reps will close, and then run into incredible frustration, tension, disappointment and frantic business model edits when that’s not how it pans out.
Worse is when there is a capable sales leader trying to ‘hit plan’ when that plan is impossible. They either figure out a way to convince the founders that the plan was wrong, or they keep clawing away, making tiny incremental improvements, feeling like a failure about something that’s out of their control.
If you are pre-market and need to build a sales plan, you can use benchmarks (based on your price point, industry and ideal customer profile) to estimate deals and revenue per rep.
But if you have launched and are at, or near, product-market fit, you have to use your own benchmarks and build your plan based on that. Of course, it can’t just be about how many deals reps are closing, a sales plan has to look at the total ecosystem, of which deals closing is just a piece.
Here’s are a few tips:
For inbound, know the answer to these questions:
- How many MQLs will marketing deliver in a period of time
- How many MQLS turn into SQLs
- How many SQLs turn into opportunities
- What percentage of opportunities do you win, what is the sales cycle, and what’s the average won deal size?
For outbound, know the answer to these questions:
- How many leads are needed to generate X opportunities
- You can also look at how many calls to get a connect, how many connects to get an appointment, how many appointments to get an opportunity.
There are various ways to ask the above questions but they all get to the same root information. Depending on your business, you can also start your questioning further back, looking at things like web traffic to product-qualified leads, for example.
With this information in hand you can build an attainable sales plan, and then fiddle with ways to improve upon it—more leads, more MQLs, more SDRs, better skills, etc. Optimize every facet of the elements that make up the plan. But don’t think you will wave a magic wand to suddenly get your sales reps from closing 3 deals to 10.
A plan is never ‘set it and forget it’. We have to be more agile, and more vigilant than that. Once you create your sales plan, review plan against actual on a regular cadence of daily, weekly and/or monthly (whatever makes sense for your business and your sales cycle).
“Plan against actual” should become a regular readout for your go-to-market organization—from how many leads did we generate, to how many of them became opportunities, to how many of those turned into qualified opps, to how many became customers. There should be a report every day of leading indicators that factor into your sales plan.
If you are exceeding plan then you were either too cautious in your plan or are executing exceptionally well. If you are falling behind plan you were either too aggressive or there is a kink in the funnel that needs to be found, inspected, and fixed. If you built your plan on data (not hope) and you are falling behind, it’s usually a kink. There are many things to inspect from why MQLs are being disqualified to sales skills to your closed lost reasons, and everything in between.
The main thing is don’t make up a sales number and think you can will yourself there.