Sanity Checks For Next Year’s Sales Goal

The annual planning process is arguably the most crucial task a sales leader undertakes. When done well, it sets the stage for a year of success, motivated teams, and a thriving company culture. But get it wrong, and you’re in for a year of firefighting, missed targets, and plummeting morale.

Unfortunately, many CROs approach annual planning with flawed assumptions and “creative” strategies that are doomed to fail from the start. This often leads to a cycle of missed targets, unreasonable pressure, and a demoralized sales team.

While you’re probably well down the path of finalizing your 2025 sales plan, here are a few last minute sanity checks you can do to ensure it’s grounded in reality and sets your team up for success.

Understanding Your Growth Target

Before diving into numbers, it’s essential to understand your company’s growth objectives. While revenue growth is a key metric, it’s crucial to consider factors like customer retention, which significantly impacts the feasibility of your growth targets.

Growing a company from 100M to 120M in ARR isn’t just a matter of selling 20M more in new contracts. Your targeted growth may be easier if your customers are in thriving industries, naturally calling you through the year to add additional users to their contracts.  Conversely, if your clients’ businesses are contracting, or they’re unhappy with your current service, a high customer churn rate may make hitting your growth target harder to achieve.

Use your best guess of install base health to determine how much additional selling will need to be done to hit your annual plan.

Modeling Your Existing Customer Business

While you’re at it, build a month-by-month plan for what you think will happen with your install base business. Identify contracts up for renewal, potential price increases, and customer satisfaction levels. This allows you to:

• Prioritize Renewals: Focus on securing multi-year renewals, especially from satisfied customers.
• Optimize Pricing: Leverage contracted price increases and negotiate strategically with customers to maximize revenue.
• Forecast Churn: Realistically assess potential churn and factor it into your projections.

By carefully evaluating your existing customer base, you can create a reliable foundation for your annual revenue plan.

Use Historical Performance Data to Shape Future Expectations

Past performance is a valuable indicator of future potential. Analyze historical data to establish a baseline for your sales team’s performance:

• Individual Performance: Evaluate average bookings by month, quarter, and year for tenured sales reps.
• Onboarding Ramp-up: Assess the time it takes for new hires to reach full productivity and factor in their projected contributions.

This data-driven approach ensures your expectations are grounded in reality and avoids overly optimistic projections.

Consider Turnover

Employee turnover is inevitable. Factor in anticipated turnover and its impact on your sales capacity:

• Analyze Historical Trends: Review past turnover rates to predict future trends.
• Anticipate Departures: Identify potential departures based on individual circumstances or performance issues.
• Account for Recruiting Lag: Realistically estimate the time it takes to replace departing sales reps.

By proactively considering turnover, you can mitigate its impact on your overall sales targets and avoid potential shortfalls.

Make Strategic Adjustments

Compare your baseline revenue projections with your company’s growth objectives. If there’s a gap, explore strategic adjustments:

• Increase Headcount: Model the impact of adding new sales reps, considering their ramp-up time and potential cannibalization of existing territories.
• Invest in Training and Marketing: Quantify the potential impact of new programs on sales performance and adjust your projections accordingly.
• Launch New Products: Factor in the revenue potential of new products, considering their launch date, sales cycle, and market adoption.

Remember that every strategic adjustment has cost implications. Work closely with your executive team to ensure alignment and a balanced approach to achieving growth and profitability.

Use Quarterly Seasonality to Your Advantage

Most businesses experience some degree of seasonality. Analyze historical trends to identify patterns and adjust your quarterly targets accordingly:

• Capitalize on Peak Seasons: Set ambitious targets for quarters with historically strong performance.
• Strategically Lower Expectations: Consider slightly lowering targets for slower quarters to create a culture of winning and boost morale.

By strategically leveraging seasonality, you can create a more balanced and achievable plan that sets your team up for success throughout the year.

When Plans Meet Reality

No plan is perfect, and unforeseen circumstances will inevitably arise. However, a well-crafted plan based on realistic assumptions and data-driven insights provides a solid foundation for navigating challenges and achieving your goals.

By following these steps, you can create an annual plan that not only drives revenue growth but also fosters a positive and motivated sales team. Remember, a realistic and achievable plan is crucial for your personal well-being, your team’s success, and your company’s overall growth.

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This article summarizes the detailed templates and tactics of annual planning described in the first chapter of The CRO’s Guide to Winning in Private Equity. Publishing on January 14th, the book provides CROs with the strategies and tools they need to thrive.

To help you implement the strategies outlined in this article, we’ve created a free planning template that you can download here.

You can pre-order your copy of the book here.