Tag Archives: Realistic

How Do You Establish Accountability for Results? Four Ideas

Situation: A CEO has difficulty gaining realistic projections from sales – projections for which they will be accountable. For example, the VP of Sales promises X but delivers Y – a result substantially below X. What methods have you have used to get realistic assessments and commitments from sales executives? How do you establish accountability for results?

Advice from the CEOs:

  • Shift the issue from their accountability to your own accountability to the company.
    • In order to ship to the projected sales targets, we will need to scale up production to X level, hire Y personnel, and invest in Z inventory. If we miss the target by 20% here’s the impact on our financial performance for the next period. Are we comfortable, as a company, with this exposure, or should we adjust our plan to reduce the exposure.
    • This makes it easier for the sales executive, for the good of the company, to reduce the projection if they are not confident that they will make it.
  • Do you need to examine your commission structure as well as bonuses for sales executives? Consider scaling commissions to make sure that the sales team hits their targets. Make them hungry by offering lower commissions for lower targets, but increasing total commissions for meeting and exceeding targets.
    • Have the sales team project their sales. If the projected level meets company objectives and they meet them they make X%. However, if they fall short they make successively smaller fractions of X% depending upon how much they fall short.
  • Currently, the ratio between new and repeat sales is 20% / 80%.
    • To focus the sales team on new sales, reduce commissions on repeat sales, and increase commissions on new or increased sales and/or accounts.
  • Good sales people are competitive and often respond to pride. Give them in incentive – hit the sales target and get trip to Las Vegas with your spouse or guest.

How Do You Forecast Revenue for a New Technology? Three Ideas

Situation: The Board of a company has asked the CEO to generate to forecast of revenue for this year. Their primary technology is new and the company has just started receiving orders. An achievable revenue forecast my not please the Board. However, the company may lack manufacturing capacity to meet a higher level of demand. How do you forecast revenue for a new technology?

  • Be realistic in your forecast. While the Board may not like your number, the impact of setting the goal too far out of reach is potentially significant, including discouraging the team, and impairing credibility with the Board. However, if you aim realistically and significantly exceed the target you will be heroes.
  • How is it best to approach this in discussions with the leadership team?
    • Create a set of objectives and revenue targets and put probabilities around each. Also look at the obstacles to hitting the higher numbers, including manufacturing capacity and the cost of increasing capacity.
    • For examples if your most likely forecast is $X, then put probabilities around achievement of multiples of this number:
      • $X – 95%
      • .75X – 99%
      • 1.5X – 75%
      • 2X – 60%
    • Once your determine the objective, think through everything that must be covered to meet that goal, from sales to production, and start developing plans and contingencies to address these.
  • Share your probabilities with the board, as well as your plans and contingencies that may increase likelihood of reaching the higher targets. Ask for their input and assistance hitting the higher targets.