How to develop a revenue plan to ensure profitable growth for your organization.
Many business owners tend to equate growing a business as simply an increase in revenue. The first question they typically ask is “How much do I expect my business to grow next year?” They evaluate several factors including, the maturity of the business, demand for their product and overall economic climate, and the set a goal for how much they want their business to grow. This is typically expressed as a percentage increase in revenue compared to the previous year. Once the goal is set, budgets are developed by each department and the business plan is set for the year.
Then the Sales Leader is given the new revenue goal and he/she breaks that goal down and assigns a portion of that goal to each member of his sales team which becomes their sales quota. Sales Leaders often create “stretch” goals that exceed the budgeted sales goal, recognizing that some of their sales team members will not reach their budgeted sales quota and they are hoping to create a cushion to ensure that they meet the overall growth goal set by the business owner. The Sales Reps are given their new target and another sales year begins. Sound familiar?
This approach to growth is common and may be simple to implement, but it is not a good blueprint for how to grow the company. Assigning a “revenue only” sales goal is not good for the company or for the sales rep because it does not establish priorities or provide clear direction for either party.
More revenue does not necessarily mean more profit!
A growth plan for increasing revenue should address the following issues:
1. What % of your revenue do you expect from your existing customers?
a. What products or solutions can you sell to these customers? (Upsell or Cross-Sell)
2. What % of your revenue do you expect from new customers?
a. How many new customers do you need to reach this goal?
(Revenue /Avg Deal Size = # of new customers required)
3. What is your ideal product or service mix?
a. Which products/services yield the highest margin?
b. Which products/services have the highest demand?
4. Which customer/market segments are best?
a. Which customer segments have a larger Avg Deal Size?
b. Is the market segment large enough to reach your growth goals?
c. How complex is the selling process to this customer segment
Once complete, this information should be downloaded into an individual sales plan for each sales rep with specific goals and action steps aligned to meet your objectives. In this scenario, you may find that you have a sales rep with a strong portfolio of existing accounts and direct them to focus on expanding the revenue opportunities in this portfolio more than focus on prospecting for new customers. Similarly, a new sales rep may be given an aggressive new customer goal with lower revenue expectations, assuming the average deal size is lower for new customers. Each sales rep is given an individual sales plan that represents your expectation for how they will contribute to the company’s growth.
Although this process may require a little more effort, it will reap tremendous benefits. The Business or Sales Leader that engages in this process is providing a detailed roadmap to his sales reps and insuring profitable, long-term growth for the company. The additional benefit is that the exercise typically involves getting information for other leaders such as Accounting, Operations and Marketing creating greater alignment for the attainment of the revenue growth goals within the organization.