Sales POP - Purveyors of Propserity
Account Management, Quotas and Forecasting
Blog / Sales Management / Apr 23, 2021 / Posted by Nikolaus Kimla / 942 

Account Management, Quotas and Forecasting

0 comments

Another important foundational aspect of account management—and sales itself—is the handling of quotas and forecasting.

From my observation, only a few companies manage the problems for quotas and forecasting well. This is because there are two groups with seemingly conflicting interests: the sales team and company and sales management. Salespeople say that quotas are too high and are not achievable, whereas management insists that quotas are not high enough. And it’s fascinating that after so many years, and so many books, seminars, and training on sales, we still have the majority of salespeople underperforming.

The truth is that too much of the time, quotas, forecasts, targets, and goals are often generated out of wishful thinking. Someone will simply say, “We need to grow by 10 percent per year” and this is shoved in as a quota and forecast. This has never worked, as it’s based primarily on guesswork.

To start with, it doesn’t work to push quotas and targets onto salespeople without their agreement. Salespeople, instead of just carrying on and going for the targets, push back against management. Management comes to accept a “status quo” of salespeople never actually achieving their quotas.

These subjects require more rational—and less emotional—thinking. We need a scenario in which everyone can agree, through logic. That doesn’t mean that there will never be tension between sales management and salespeople, even with such a scenario in place. Such tension is actually healthy and is like the two terminals of a power station that, between them, produce power. But there will be trust in place, and both sides will be moving confidently forward.

Let’s take a look at how we can obtain that rational, logical scenario.

The Target

In Pipeliner CRM, we work with 5 different types of targets:

Weighted Target — equal to the sum of the total opportunity values in each sales stage, multiplied by the probability of closure for that sales process stage.

Ranked Target — based on the probability used by the ranking – number of stars up to 5- selected by the sales rep for each opportunity. Each star is worth 20 percent. Ranked Target multiplies the percentage by the value of that opportunity. Probabilities for all opportunities are added together to achieve the overall Ranked Target.

Balanced Target — an average of both the Weighted Target and the Ranked Target.

Unweighted Target — the total value of all open opportunities in the pipeline.

Won Target — the amount that has already been won.

The Won Target is the one we’ve already reached. The win rate is available in the Pipeliner Archive—another significant feature not available in any other CRM—along with the loss rate. These can be compared. The Won Target is very useful because it shows us the amount of Unweighted Target we need to reach the target we have set for the month, quarter, or year.

The Weighted Target indicates the effectiveness of the sales process we have established, as it shows us how much in the process we have to optimize. It takes into account the duration of each opportunity in each step.

The Ranked Target is based on the perception of the salesperson.

The Balanced Target is calculated by combining the Weighted Target and the Ranked Target together and is the most conservative. Utilized with the Power Panel filters, it is the most realistic overview in the Sales War Room.

Utilizing Sales History

In order to accurately understand how much-unweighted value you need to achieve a target, you need to look back at your history. What percentage of your target, overall, have you achieved in the past? This is a typical lagging indicator—meaning an indicator that shows what we have previously achieved. As you improve, you’ll need less unweighted opportunity value to reach your target, because you’ll be incrementally optimizing your conversion rate.

Setting the Quota

The quota and the forecast are two very different things. First, let’s have a look at the quota.

The quota must be set in relation to the achievement rate of the salesperson for whom you’re setting the quota. For example, you wouldn’t set the same quota for a brand new salesperson as you would for one who has been on the job for ten years. The sales manager, or whoever is responsible for setting the quota, must look at the past record of the salesperson. They must consider the sales yield—the time it takes a salesperson to start achieving quotas. If a salesperson is issued too difficult a quota for them to attain, they won’t reach it. The more this occurs, the more negative attitudes are created within that salesperson because they’re failing.

Pipeliner Quota Tool

Within Pipeliner CRM, we’ve created a tool for setting quotas that makes doing so far easier and more accurate.

With this tool, you can set up a quota to be monthly, quarterly, and yearly. You can then add in the various salespeople that will contribute to making this quota, and set and adjust quotas for each person. The overall quota, as well as the individual quotas, can be increased or decreased individually, or by percentage affecting everyone.

With the Performance functionality, you have, for each person, the weighted average of what they have already achieved so it can be compared.

Figuring a quota this way is more realistic than past “guesstimate” methods. Using this tool, it is far easier to get the salespeople in agreement with management as to what the quota should actually be. This agreement means that everyone can simply get on with making the quota instead of arguing about it.

It’s clear that you cannot run a business without a foundation of incorrectly calculated numbers. Pipeliner CRM’s quota tool utilizes the underlying sales figures of what has been won in the past. You then know what can be forecast with some reality. For example, if you know that your closing ratio has been 25 percent in the past, you need 4 times more opportunity value in the system to reach the quota.

If you’re just starting out, you won’t of course have any figures from the past, and each salesperson will be growing by 100 percent. But simply make sure that sales are being made to the company’s actual buyers (not colleagues, friends, and relatives), and the figures will even out and you’ll be able to calculate precise closing ratios. Quotas will probably be too high in the beginning but can be made more accurate over time.

A quota is a commitment and an agreement that should be made between the company and the salesperson. They should sign a document agreeing to it.

Forecasting

When salespeople are issued quotas, they will then come up with their own individual forecasts. With Pipeliner’s different target types, forecasts can be matched immediately against what opportunities are actually in the pipeline. You’ll be able to see who is forecasting accurately, and where you have issues with salespeople overconfident about their opportunities. You’ll have to work with such people to be more realistic in their forecasting. This will also lead to the person being more realistic with the selling activities, as forecasting should always lead to action.

There is equally an issue if a salesperson is constantly under-forecasting and over-achieving. They might be trying to cheat the system a little bit in order to be seen as more of a sales champion, or not to have attention from management.

Let’s say a person has a quota of $300,000 for the month, and their forecast is the same. Over the month, the person ends upbringing in $150,000. That means there’s a short of $150 in wrong forecasting, and the company is utilizing misleading numbers in prediction.

As a manager, you want to make sure you’re working with reliable data. Whenever numbers are updated in the system, it leads to realistic forecasting. The target comes from past experience, along with visualizing the number the company wants to reach. The forecast should be constantly adjusted to the opportunities currently in the pipeline. If you find that you don’t have the opportunities in the pipeline needed to reach a quota, you need to take immediate action. That’s a challenge everyone in a sales scenario faces.

Pipeliner Forecasting Tool

 At the top of Pipeliner’s new forecasting tool is a line graph which, in real-time, reflects the current sales forecasts out through time. We did that so that sales and company management could always view what was expected. The better the daily process, pipeline forecasting, and analytics, and the more these factors work together, the more accurate the forecasts will be.

In public companies, there is almost zero tolerance for inaccurate forecasts, as investors won’t brook an even 5 percent variation from a forecast. Private companies, however, rarely operate with that kind of accuracy. With our forecasting tool, we are aiming to bring this enterprise-level professionalism to small and medium businesses. If smaller companies could operate with such precise forecasts, they wouldn’t encounter so many problems. Well, now they can.

About Author

A 30-year veteran of the computer industry, Nikolaus has founded and run several software companies. He and his company uptime iTechnology are the developers of World-Check, a risk intelligence platform eventually sold to Thomson Reuters for $520 million. He is currently the founder and CEO of Pipelinersales, Inc., developer and publisher of Pipeliner CRM, the first CRM application aimed squarely at actually empowering salespeople. Also a prolific writer, Nikolaus has authored over 100 ebooks, articles, and white papers addressing the subjects of sales management, leadership and sales itself.

Author's Publications on Amazon

This is a practical manual covering the vital subject of Sales Management. I firmly believe that sales are the most important profession for dealing with today’s turbulent world and Econo my, for salespeople create wealth and produce peace. But salespeople need a competent, stable leader—and…
Buy on Amazon
Inside this eBook, you’ll discover a series of chapters dedicated to some of the most important areas facing sales today. From the sales process definition to measurement, lead generation, and proven sales techniques, this comprehensive eBook will provide you with the information you need to…
Buy on Amazon
A common term in sales today is EQ, which stands for “emotional I.Q.” It means the skill a salesperson has in reading emotions and utilizing them in sales. It means empathy and a number of other abilities. The short version is, it’s an I.Q. when…
Buy on Amazon
People are smart to question the future of automation, for it has become part of everything we do. With the quantity of applications and technology around us, we yet still crave more. We become convinced of its power when our package is delivered from Amazon…
Buy on Amazon
Sales management isn’t a simple subject by any means. But at the same time, it does have some basic and somewhat simple fundamentals—and that is what we are bringing to you with this book. First come pain points of sales management, and how to overcome…
Buy on Amazon
Today the Internet has transformed a seller's market into a buyer's market and author Nikolaus Kimla states that the role of sales has never been more crucial. It is now time to give salespeople the role they factually can play: entrepreneurs within the enterprise. They…
Buy on Amazon
This is our public declaration of the intentions behind Pipeliner, and our objectives and motives for the product and for our company. Behind the development of that CRM application and, in fact, behind everything we do, we have a real cause. The story begins with…
Buy on Amazon
For the future, there must be a perfect balance of humans and technology. You have to have the perfect technology, andthen the perfect human being in application, performance and presentation. Today and into the future, it’s a 50-50 balance. In the past it was perhaps…
Buy on Amazon
The salespreneur is based on the concept of the entrepreneur. Before we can explain the salespreneur, you have to have some understanding of the entrepreneur. The entrepreneur plays a crucial role in any economic system. The entrepreneur seeks out information that can be utilized for…
Buy on Amazon
A seasoned captain would never leave port without a competent navigator. In a similar way, a sales manager might be a total ace at "commanding the ship" – at inspiring and coaching sales reps, pointing out and getting agreement on making quotas, and keeping everyone's…
Buy on Amazon
Comments

..
..
..
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. For information on cookies and how you can disable them, visit our privacy and cookie policy.