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Getting gritty with sales plans - a buffalo hunter’s guide to sales planning

30 March 2016

Planning is one of those things that people working in a business talk about lots. Everyone will yawn when that oft quoted phrase is trotted out ‘we need a business plan.’ Plans are great, but there is a big difference between plans that get done and plans that get forgotten. Let’s talk about sales plans, because sales plans, of all plans need to be gritty.

An illustrative example

A tribe of primitive people’s is facing starvation; "we need food."

The chief pulls the hunters together to discuss the situation and they develop a plan. It’s not documented because writing has yet to be invented but the plan is agreed on – it’s articulated. The plan goes like this:

"We will focus on the water buffalo because they are slower, yield more per kill, there are more of them, and we know where to look for them."

Everyone agrees that this is a good assessment of the market place and the decision to hunt buffalo is strategically sound. The next day the hunters arise as usual and assemble for a days hunting. "Today we hunt buffalo" and off they head. At the end of the day they return empty handed. The next day, the same, and the day after.

Strategically the plan was good, but it lacked detail.

It didn’t identify where they were hunting (which water ways they would investigate), who was going where and how many water buffalo they needed to kill. It was a marketing plan but not a sales plan.

The chief puts more detail into the plan.

"There are 48 waterways, here on the map (scratched into the dirt). I will divide you into 4 groups of hunters; each group will travel to 12 waterways in the next week."

"But chief there is a great distance to cover; it is not possible to cover that many waterways in 7 days" (unrealistic number of sales visits).

It is agreed that they need to focus on the waterways (territories) that are most likely to contain the highest number of buffalo (market intelligence identifying the lowest hanging fruit).

And so it goes on, until every hunter knows where he will be going as soon as he leaves camp next morning, the morning after that, and for the foreseeable future. He knows what catch he is expected to achieve in order to make his contribution toward feeding the tribe (sales targets and budgets). A few weeks later the chief and the hunters meet.

"How is the hunt for buffalo going?" "Well Chief, most of the waterways that we chose are achieving their targeted number of buffalo kills" a cheer rises from the assembled hunters. "However, there are a small number that are well below target" a groan. Somebody shouts out "Our plan is a failure!"

After he is solidly beaten with clubs (a sales meeting) the discussion continues.

"No! Our plan is good, but it needs fine tuning", says the Chief (the sales manager). "We need to decide; do we abandon these waterways and divert resources into others that we have chosen to ignore, or do we put more hunters in to these same waterways?" And so the process continues until the tribe has developed a detailed focused realistic plan oriented toward producing results.

Sales plans have to provide gritty detail, otherwise stagnation results.

There has to be a sense of who is doing what, when and where and it must set targets. It has to be believable and achievable.

A plan is not something that is slavishly followed, cast in stone, never to be rescinded. It is our best guess, based on the information we had, the information we could afford to obtain, and our past experience.

It is a bench mark against which we measure progress. And through measuring progress we identify where changes to the plan need to be made. So many plans in business are said to have failed when really they were never followed through (sadly in many cases they were never even started); it is impossible to say it was or wasn’t a good plan; it simply never happened.

Sales management is the process of developing a sales plan, putting it into action and fine tuning it on the fly.

In reality a large number of businesses have no sales plan. As one Chief Executive once said to me ‘The only plan my sales reps have is to decide whether to turn left or right when they drive out the gate in the morning.’

So how do we put together a sales plan?

Sales plans are at the bottom of the planning hierarchy. At the top is the high level decision making, as you descend down the planning hierarchy the planning becomes increasingly more detailed or ‘gritty’ to the point where each sales representatives knows what they will be doing when they get to work next week, and this activity will be 100% aligned with the strategic direction of the organisation.

Definition

A sales plan is an operational plan that identifies how the annual sales revenue budget will be achieved by aggregating sales budgets by customer, territory, and sales representative and listing the week to week activity required to achieve the sales budgets.

The important step is that the list of expected sales is translated into a schedule of planned visits to an identified list of customers or prospects broken down by sales representative and territory. The schedule of calls is so devised to ensure adequate promotion of the company’s products/services and the building of the relationship with those customers in order to achieve the expected sales. Of course it’s important not to neglect existing customers, so calls need to be scheduled to maintain existing clients. Sales plans are generally structured around making a list of revenue sources...

Revenue sources listed in a sales plan

  • Existing customers: The 80/20 rule usually applies, that is 80% of revenue is derived from 20% of customers. Your first step is to list all of your existing customers and put a revenue budget along side each. Each sales representative should be able to make a judgment about the next 12 months – will that customer be buying more, less, or the same?
  • Identified new customers: List the sales targets for next year. You might be able to list 20 companies that, with some aggressive sales targeting 25% could become customers. Estimate sales revenue for each.
  • As yet not identified new customers: Put an allowance in for growth from as yet not identified future customers.
  • Major projects: Depending on your type of business, make an allowance for major project revenue.

The sales plan should be driven by the marketing plan. If the marketing plan states that ‘market intelligence has identified a new market segment that we can target using existing product, and we anticipate that with a coordinated promotional campaign followed by a concerted sales effort we should realise 20 new customers, each buying an average of $250k of product’ then the sales plan needs to reflect both the anticipated revenue and the sales activity required to achieve it.

Key elements of sales planning

  • Sales plan: Allocates the available sales resources toward achieving the sales budget and specifies tactics, tools, and training.
  • Not cast in stone: A plan is not something that is slavishly followed. It is our best guess, based on the information we had, the information we could afford to obtain, and our past experience.
  • Measure progress: A plan is a bench mark against which we measure progress. Through measuring progress we identify where changes to the plan need to be made.
  • Sales management: Sales management is the process of developing a sales plan, putting it in to action and fine tuning it on the fly.
  • Must be gritty: The sales plan has to provide gritty detail. There has to be a sense of who is doing what, when, and where, it must set targets, and it has to be believable and achievable.
  • Customers: The sales plan has a list of mostly identified customers or prospects listing the expected sales from each during the next budget period. It is broken down by sales representative and territory.
  • Call planning: This list of expected sales is translated into a schedule of planned visits to an identified list of customers or prospects broken down by sales representative and territory.

The sales plan as a management tool

The sales plan is used to solve the following basic sales management problems:

  • Forecasting annual sales revenue: To plan resources every company needs to begin the year with a sales revenue budget. Instead of simply saying ‘last year plus a bit’ the sales plan can actually identify by customer, by territory, by product, and by sales representative where these sales will be coming from. In simple terms when asked the question ‘how big a brick wall are we building this year?’ the answer can be found by identifying how many individual bricks we plan to generate.
  • Achieving face-to-face visits:: We know that ‘face-to-face wins the race’. Each sales representative is capable of a finite number of sales visits in a year. The sales plan is a tool to provide direction so that this valuable resource is not squandered on less productive activities.
  • How many reps do we need? This is a big question. The sales plan however, provides an outstanding tool to put forward a solid business case arguing the number of sales reps required. It is also provides a very good answer to the chief executive or distant shareholder who hears from a customer that ‘they haven’t had a visit from our sales rep for years.’ In a well managed sales operation the sales manager should be able to find records that show how many visits to the customer have taken place, the objective of the call and the outcome. If no call has taken place ‘for years’ then the reason may well be that the sales representative’s time had been better directed elsewhere. Or, indeed they had been neglecting that customer.
  • What is the purpose of the sales visit? This is another big question that relates directly to the high cost of sales visits. Getting face-to-face isn’t cheap, consequently you must have a purpose for each visit that goes one better than ‘to keep in touch.’

The critical factor: the cost of getting face-to-face

Let’s look at the cost per call; divide the total employment cost of a sales representative by the total realistically possible number of face-to-face visits that can be achieved in a year. Annual salary, on-costs, vehicle costs, laptop, mobile phone, office space, training etc. this can easily total $120k per representative. Then look at the total number of visits; with 48 working weeks less 10 days public holidays per year. Take training days, 1 day per week on sales meetings and reports etc. many representatives would be lucky if they achieved 200 face-to-face visits a year. That’s $600 per call.

The conclusion is obvious; each sales call is expensive and needs to have a purpose. Calls need to be planned, they need to be prepared for, the outcomes reported, and finally there must be follow-up. But let’s go back to their purpose. Sales calls generally fall into the following categories:

  • To sign-up a new customer
  • To maintain the relationship with an existing customer and/or to identify new opportunities
  • To work toward progressing and closing a sale
  • To solve a problem

There are other purposes:

  • To deliver products/services
  • To pick-up a cheque

I am against using sales representatives for administrative matters or for delivery. Sometimes it provides an excuse to see a customer where otherwise there isn’t an opportunity to do so. However, at $600 per visit it’s cheaper to send a delivery person.

You need an appropriate sales model to suit your business

Understanding the purpose of the sales visit is a function of the sales model. Sales modeling is about working out the processes required to complete each sale. This varies by industry and business. A sales operation that sells large capital equipment (for example crushing machines for processing iron ore) will be different to a company that stocks 10,000 SKU’s of spare parts each having a value of less than $1,000.

Sales modeling is a big topic at JWPM and we work with our clients to analyse and understand their sales model and help them to develop one that works for their business.

Sales plan content

A good basic sales plan would include the following sections:

  • Sales strategy: This is a general statement reflecting the strategic direction of the organisation and the main marketing strategy. For example ‘the main challenge for the sales department in the next 12 months is to maintain current sales levels from existing customers whilst supporting the organisation’s plan to grow revenue through the launch of the Crusader product range which is designed for an entirely new customer type.’
  • Sales model: Sales departments can be structured in many ways. The simplest is the ‘every man for him self’ model. Each sales representative is allocated a territory and he or she acts alone selling in their ‘patch’. More sophisticated models are collaborative with some people allocated to relationship building and finding new accounts whilst being supported by estimators and internal sales coordinators. There are other models. The choice of model and the implications on the sales department should be discussed here.
  • Territory plan: Describe how the sales territory is segmented and the rationale behind who has responsibility for each territory. The key issues are efficiency and effectiveness; allocating re sources across territories in a way that maximises sales outcomes for minimum sales resource input. Remember sales territories can be segmented by geography, industry, customer type, product type, and customer size. The choice can have profound implications on sales outcomes.
  • Significant sales opportunities: In every sales planning year there will be identified large opportunities. These may be large customer accounts rumoured to be looking to appoint a new supplier and/or large project opportunities. These are listed with estimated revenues and a plan for capturing these opportunities.
  • Sales budget: A detailed matrix showing last year’s revenue by customer and product, making note about each customer and setting a sales budget for the next 12 months, and includes sales targets for sources of sales growth.
  • Sales activity plan: A call target plan showing planned activity for each sales representative in pursuit of the above sales targets.
  • Sales tactics: The plan might also describe any new initiatives designed to increase the effectiveness of sales activity. For example ‘we will be introducing the white paper method whereby sales reps focus on selling $5,000 white paper studies first which then identifies the project scope.’
  • Resource plan: The resource plan lists the requirements of the sales department mainly with regard to the number of sales representatives required to meet the activity plan, but also support staff, expense budgets, equipment purchases etc.,The resource plan provides a total month by month sales department expenses budget.
  • Sales incentives: The planned incentive scheme and its cost impact on the department are described.
  • Training plan: Training should be ongoing for any sales department. The training plan would indicate what training activities are planned, who will be participating, the costs of the training, the schedule and its impact on other sales activity. The training might also be in support of a new strategic initiative, eg ‘to support the launch of the Crusader product range we will need 2 weeks of product training...’
  • Operations plan: Every department needs adequate floor space, desks chairs, computers, training rooms and software. Such requirements for the next 12 months should be addressed and discussed in this section of the plan. The operations plan will have expense and possibly capital expenditure implications which are also discussed in the operations plan section.
  • Selling expense summary: The total month-by-month costs for the sales department are listed.

Planning starts with analysis, middles with discussion, and should take several drafts to get right. As with any planning process there will be several iterations. The aim should be to complete the first draft early and submitted to others in the management team for comment.

It's particularly important the company bean-counters (the traditional nemesis of the sales department, second only to marketing) are convinced the plan exudes the unmistakable odour of reality (and the arithmetic is correct). The above process delivers the required rigor.

It is important for people to challenge the plan. This should not be seen as negative; lack of challenge usually indicates they either haven’t read it or don’t see it as being important – neither is a good thing. However, rest assured your sales revenue targets will be scrutinised and discussed in forensic detail!

The sales plan's primary purpose is to avoid "inside cat" syndrome

Measuring the progress of the sales plan starts with measuring call rates. The only thing that really matters in sales is getting face-to-face with customers and potential customers and seeing "the whites of their eyes". Too many sales teams become comfortable working indoors waiting for the phone to ring. I call them "inside cats." A key function of the sales manager is to encourage them to venture outside where they might bump into a customer. Good luck 'getting gritty' with your sales plan.

Summary

  • Plans of any sort are no use unless followed. Too often plans are said to have failed when in fact they were simply not implemented.
  • Sales plans need to be detailed. They must be specific about how sales revenue will be achieved and what sales activity will take place to achieve that revenue.
  • Plans are not followed slavishly. They are a starting point from which deviation may occur if better information becomes available to make better decisions.
  • Sales plans are at the bottom of the corporate/organisational planning hierarchy. However, sales activity right down to the planning of a sales visit must be 100% aligned with the corporate strategy at the top of the planning hierarchy.
  • Sales plan definition: A sales plan is an operational plan that identifies how the annual sales revenue budget will be achieved by aggregating sales budgets by customer, territory, and sales representative and listing the week to week activity required to achieve the sales budgets.
  • Sales plans answer the important questions: what is the annual sales revenue target? How many face-to-face visits will our company make this year? What sales resources will we need to allocate to achieve our budget? What sales model are we deploying? How will we make our sales visits more effective?

A good basic sales plan will include the following topics:

  • Sales strategy
  • Selling model
  • Territory plan
  • Significant sales opportunities
  • Sales budget
  • Activity plan
  • Tactics
  • Resourcing
  • Incentive scheme
  • Training
  • Operations plan
  • Selling expense summary

The most critical sections of the sales plan are:

  • The sales budget
  • The sales activity plan

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