How to set sales targets for your team

A sales target works when it is built upward from what the team can actually do, not downward from the number the owner needs the business to make. The arithmetic runs in one direction: enquiries available, conversion rate, average order value, capacity per person. Multiply those and you get a number that can be argued about honestly. Start from the revenue you want and divide by headcount and you get a number the team privately writes off in the first week, which is worse than having no target at all.

Build the number from the bottom

Four inputs, all of which you already have if enquiries are being recorded.

Enquiries available per month. What marketing produced last year, adjusted for what will change. Do not assume a jump because a new website is planned.

Conversion rate from enquiry to order. Take the honest number from last year, not the best month.

Average order value. By product line, if they differ substantially, because a mix assumption hides a lot.

Capacity per person. How many live opportunities can one salesperson actually manage, given your sales cycle and the number of visits each deal needs. In Indian B2B with a six to ten week cycle and site visits, that number is usually smaller than managers assume.

Multiply enquiries by conversion rate by order value and you have the revenue the current system produces. Anything above that requires one of the four inputs to change, and the plan must say which one and how.

A worked example, with illustrative figures

Take a commercial air conditioning contractor in Hyderabad with three salespeople. Every number here is illustrative.

Now suppose the owner wants ₹3.6 crore. That is a gap of about 32 per cent, and it has to come from a named input. Raising conversion from 12 to 16 per cent gets most of the way there and is a follow-up and qualification project. Raising enquiries from 45 to 60 is a marketing budget decision. Raising average order value means selling maintenance contracts alongside installations. Adding a fourth salesperson only helps if enquiry volume rises to feed them, which is the mistake most often made.

Write the target with the chosen input stated. "₹3.6 crore, on the assumption that conversion improves to 16 per cent through a fixed follow-up routine" is a plan. "₹3.6 crore" is a hope.

How to split the target across the team

Never by dividing equally. Split on the opportunity in front of each person, and show the working.

Look at each territory or account set and calculate the same four inputs for it. A salesperson covering Bengaluru and one covering the rest of Karnataka do not have the same opportunity, and pretending otherwise pushes your better performer towards the door.

Then adjust for experience. A joiner in month two carries a reduced number with a stated ramp: forty per cent in the first quarter, seventy in the second, full from the third. Write the ramp down when they join, not when they miss.

Leave a buffer at the top. If the business needs ₹3.6 crore, set team targets adding to roughly ₹3.9 crore, because somebody will be on leave, somebody will resign, and one large order will slip a quarter.

Targets the team can manage weekly

A monthly revenue number gives a salesperson nothing to do on a Tuesday. Pair it with two or three leading indicators they control.

• New qualified opportunities added to the pipeline this week.
• Enquiries answered within the agreed response time.
• Quotations sent, and quotations with an agreed next step and date.
• Meetings or site visits completed with a decision maker present.
• Pipeline value at the stage that precedes a decision, compared with what is needed to hit the number.

Three of these is plenty. Six becomes a reporting burden and the reports start being filled in on Friday evening from memory.

What goes wrong, and how it shows

The target was set from the bank's requirement. The number the term loan repayment needs is not a sales forecast. Both can be true at once and the gap has to be closed with a decision, not with pressure.

Nobody checked capacity. Three people carrying eighty live opportunities each will follow up none of them properly, and conversion falls as the target rises.

The incentive fights the target. If the bonus pays on revenue and the business needs margin, the team will discount to hit the number and the year will end with growth and no profit.

There is no monthly review of assumptions. Enquiries dropped in April and nobody adjusted anything until October.

What to do next

Work out the four inputs for last year from your own records and write down the revenue your current system produces. Compare it with the number you have been asking the team to hit. If the gap is large, the conversation to have is about which input you are going to change, and that is a business decision rather than a sales one. If you want that arithmetic checked against your own numbers, tell us what you need.