Sales Planning

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Objective

The Sales Planning exercise consists in defining a sales organization capable of delivering the revenue within the cost envelope and other guidelines defined by the company strategy. The final deliverable is a sales territory, a sales quota and a sales compensation plan per sales representative (sales, presales, channel, management, etc.).

Guidelines

In this article, we consider the strategy as an input. The strategy provides guidelines on the sales organization. It is usually updated each fiscal year and covers the following topics (notably but limited to):

Topic	Definition
Expected Revenue	By stream (license, support, SAAS, services, etc.) By product family By quarter and month (seasonality)
Cost Envelope	Employee costs (salary, compensation, bonus, benefits, vacancy, etc.) Travel costs Other costs supported by the sales organization (sales campaigns, etc.) Rules to calculate costs (budget reduction, transfer, etc.)
Account Segmentation	Type of account eligible to a Segment Scope definition per Segment: geography, products, revenue stream, etc. Type and number of resources (account managers, sales specialists, presales, etc.) per Segment
Compensation plans	List of compensation plans available and their specifications Eligibility: which type of reps is eligible to a type of compensation plan Compensation plan structure: metrics, products, stream, slopes, accelerator, etc.
Quota rules	Rules to calculate quota based on gross revenue target including: Uplifts (quota over-deployment) between the different levels of management Attach rates (for example support vs license) Quota ranges per type of reps (min and max)
Product Strategy	Product/solution per product family Product in scope per type of rep
Other Rules	Number of accounts per type of reps (min and max) Span of control: number of individual contributors per manager

Building the sales plan

Defining the layers

The overall approach is a combination of top-down and bottom-up. The top layer is the overall sales revenue the company needs to deliver and the bottom layer is the sale reps. The first step is to clearly identify the “layers” from the top to the bottom.

The plan (and its layers) can be broken down into categories:

• Geography: global, regional, country, etc.
• Revenue stream: license, SAAS, support, services, etc.
• Product family
• Sales motion: direct, indirect
• Client industry
• Other
• A “nice” mix of all of the above

Cascading the plan

At each layer, the sales planning team and the sales management need to validate the feasibility of the goal given by the layer above (i.e. deliver the expected revenue with the cost envelope, the territory and the other constrains), amend it if needed (or possible), cascade it to the layer below.

In the example below, let’s consider we represent the organization B1 in Layer n:

1. We receive guidelines (revenue, cost, other) from A (top-down).
2. We analyze the feasibility and we negotiate with A (bottom-up).
3. We define the guidelines for C1, C2, C3 and C4 (top-down).
4. We negotiate with C1, C2, C3 and C4 ensuring that we consolidation is aligned with the agreement with A (bottom-up).

Note: we may also represent an entire branch. Using the example above, it could be B1 and each node below (C1, C2, C3 and C4). In this case, we follow the same process with the sales managers representing the top node (B1) and each node below (C1, C2, C3 and C4).

Additional considerations

There are different points to consider when we build the plan.

Decision Maker

The sales planning team role is to provide a framework, propose alternatives, enforce the rules, etc. but the key decisions must be taken with the sales management:

• The sales management have field information the sale planning team ignore.
• The sales have to deliver the revenue, so they need to make the sales plan theirs. We do not want a situation where the sales team pretend “they cannot deliver the plan built by sales planning”.

Account Breakage

Account breakage (breaking the sales-client relationship) has a negative impact on the short term revenue because a new rep may need months to establish a good relationship with a client. Some account breakage is inevitable when updating the account segmentation or building sales territories but we need to limit “self-inflicted wounds”.

Revenue Potential of a Territory

Each territory should offer an appropriate revenue potential compared to the associated quota:

• A too high quota will conduct the rep to resign, with has a direct negative impact on the revenue (interruption of the “service” delivered to the client, account breakage, reinforcement of the competitors, hiring costs).
• A too low quota will cost a fortune in sales compensation (accelerators are common above 100% of quota attainment).

Number of Clients per Sales Rep

Each rep should have a reasonable number of clients and resources (specialists, presales, channel reps, etc.).

• If the number of clients per rep is too high, the rep will not have enough time to know the clients well-enough and could become too “transactional” (order taker).
• If it is too low, the rep may be too dependent on a few transactions and my not be able to recover if one of them is cancelled or slipped to another quarter.

Generalist vs Specialist

Sales specialists help focus on a specific (product) scope while generalists help focus on the client relationship. Too many of each category is expensive and unnecessary.

We also need to find the right balance between a specific scope vs a wide scope.

• A too specific scope generates silos and does not promote collaboration.
• A too wide scope is an open door for “free riders” (if everyone is in charge, nobody is in charge).

Quota per Rep

So, we have “additional” quota to deploy, we should deploy it to our best team because they have the best chance to deliver, shouldn’t we?

Well, we need to think about it carefully… If the quota becomes unattractive, reps will leave and this statement is even more valid for the best reps who are in a better position to find another job. We do not want our best reps to leave so we need to ensure their quota stays attractive (which does not mean we cannot increase their quota). For that, we may have to deploy this “additional” quota with a less successful team for which the risk of attrition is less impactful.

The sales management has to “sell” the new quota and territory to their sales reps. Consequently, we need to anticipate the reps will analyze/compare their new quota considering their new territory, their previous quota, how they closed the previous year, how rules are changing, etc.