A new company will necessarily face several tough challenges at the start of its journey. One of them is effective sales planning. In the following article, we'll have a look at some of the most common mistakes in the flow of thoughts of young companies when it comes to planning their sales. And we'll also offer you tips to avoid those mistakes and to make better sales planning, too.
The initial thought is usually magnificent: we would like to hit 1M USD in earnings for sales over the next year.
But the following question often remains unanswered: broken down into months, what do we need to do in order to achieve it? How many meetings? How many closed deals?
A key to building a functioning sales plan is to have realistic expectations and exact numbers. Without those, you're wishing, not planning.
Quite often, companies disregard their capacities and conversion rates and don’t consider their readiness for scaling.
Let's illustrate this for better understanding:
There is only a certain volume of meetings each sales rep can take care of. You must be aware that e. g. 50 meetings will generate you about 15 opportunities, which will then result in 5 deals. The number gets lower every time.
Therefore, you cannot do 20 meetings and expect to close 10 deals straight off. Obviously, it could happen, but it is better not to build your business plan on this.
When should you start hiring? And how many people should you add to your sales team at this point? Again, your flow of thoughts must start from a thorough knowledge of your company's budget.
If you want to hire 10 new sales reps in three months, do you have the necessary resources? We're not talking only about money, but also about time that they'll need to adapt, learn and educate themselves, especially in the first weeks of their new job.
So, what's the answer to all this?
- Plan beforehand
If in January you had low revenue, bad marketing, a single sales guy and no one to do the hiring, then, you might have a hard time reaching that 1M USD ARR by the end of year.
Try to always make long term plans. Make rough plans one year ahead, detailed plans for several months ahead.
- Count with delays
One thing you must never not remember is that all processes in your company take their time and you just cannot cheat by skipping some of the steps. If you are looking for the most secure way to hit your goals, then be realistic and include possible delays into your planning schedule.
For example, the hiring process for one new sales representative will take you about two months. Depending on your location, but especially in Europe, be ready for a notice period.
If you are a new company and don't have much experience with hiring yet, count on this process taking you about one month longer, as you'll possibly come across a few hiccups.
Also, don't expect that every new sales rep you hire will also stay on your team.
Provided they stay, they will need some time to on-board before they start delivering results.
Normally, it takes up to 6 months until a sales rep reaches full performance in their new workplace.
See the table that we've prepared below for a more detailed look at how the performance of your new sales guys will go up.
The entire sales process (from prospect to closed deal) takes time. It's weeks or months at best, but sometimes, it's a year or more. If you only have one sales rep at hand and you're still the main deal closer, having proper revenue from a team of well functioning representatives is definitely many months away.
We wish you the best at pulling the lucky card at least in one of the three above mentioned fields. But in case you don't, your plan should be structured in a way that your company will still handle it.
- Include capacity limits into your plan
First, determine whether your sales are mostly inbound or outbound.
Outbound sales reps mostly seek to find 12-15 SQL/month, while inbound ones should be able to hit up to 100 marketing leads per month.
Next, realize how many full performance sales guys does your team have? And are you currently expanding?
You know that your internal recruiter cannot hire you 10 new sales reps per month on his own. If you hire an external recruiter, he can get you about 2 placements per month. An internal recruiter can get you 5. This might sound off track, but having answers to all this might save you.
- Count your conversions
In the long run, you cannot trick the fundamental stats. For sure, there are cases when you attend 2 meetings and you convert them into 2 deals within a month. But, can you get the same numbers with 100 meetings?
In a well functioning company, the conversions from SQL to opportunities should be 30+%.
Opportunities should yield you 40+% deals and obviously, it depends on whether your leads are in- or outbound.
Now is the right time to do some basic math. Let's assume you have just decided to build a sales team and decided to hire a new Business Department Representative.
Hiring process: 2 months
Notice period: 1 month
Time to full productivity: 3 months
Sales process: 3 months
- SQL > OPP - 30%
- OPP > Deal - 40%
Expected performance: 12 SQLs/month
For the analytic types, here is this whole process shown in a table:
You close your first deal 7 months after your decision to hire a BDR.
Note that it happens only if everything goes right and you know what you are doing. You know how to hire, how to onboard and how to sell your product.
- Expand your team at the right time
If until now it's been the founder of the company who was closing most deals, it would be naive to believe that, in a heartbeat, you'll hire a group of ready made sales reps who will take it over. Do not try to skip any of the necessary steps that need to be taken until you get there. Don't rush it.
Start by hiring and fully onboarding two sales reps and a Head of Sales. Once they become self-sufficient and can hit their goals, once the company no longer needs the founder's expertise in order to prosper. That is the moment when the company is ready to start expanding the team.
Hiring new sales reps means having a well-defined sales process, a reward scheme, access to the right tools and a list of prepared leads that the sales rep will take over and tend to.
- Don't optimize just for short term results
A sales playbook, a dashboard and a polished CRM might sound like some useless paperwork at the point where you have one sales rep that is working with you. But the moment you have two sales reps and no formalized know-how or basic processes taken care of, your company's growth will be significantly slowed down.
Better be prepared early than try to catch up with everything at a point where it would only increase your stress levels.
- Plan over the target
Once you have a defined target, build your organization in a way that it can deliver 30% over this target. Something can (and likely will) go wrong on the way and nothing is worse than to miss your target just by a bit. It might be a good result, but it's not what you wanted.
- Ponder over how to do all of the above 5x faster
We don't mean that you should swipe everything you've come up with until now off the table and start anew. Just start executing the plan you made and constantly search for options to do it more effectively and faster.
In other words, your original plan just became your worst-case scenario. And that's right where you need to start from.
Wrapping it up:
Don't underestimate being realistic when planning your sales structure, especially if you're a new company whose sales still depend mostly on the founder. Don't rush expanding your team of sales guys, as it could backfire on you. Only start expanding after you've planned your goals, determined your current hiring budget and resources. If the company only consists of you - the founder - do not start by hiring more than 2 sales reps at a time and keep in mind that they'll need time to on-board before reaching full performance.
All this might sound scary, but already by having learned it, you moved ahead. Be sure to check out our Sales Academy Online for many more winning sales tips, all tested by us. Good luck!