An annual sales target should be high enough to be a challenge but realistic enough to be attainable. Craft your initial sales target with historical information about revenues, transactions and customers. Then, adjust the target based on your individual sales representatives' skills and abilities.
Step 1: Forecast Company-wide Sales
Estimate annual sales based on historical accounting data. Accounting firm Inspire CA recommends that companies setting sale goals forecast revenue using the process goal method. To project sales revenue using this method, multiply your company's average transaction value by the average number of transactions you earn per client by the total number of clients your company has. For example, if the historic average sales transaction is $1,000, each client makes an average of 10 transactions a year and you have 50 clients, projected sales revenue is $500,000.
Step 2: Adjust Target Based on Staff Abilities
Vanessa Merit Nornberg, president of Metal Mafia, explains that when she sets sales targets, she considers the skills and abilities of her current sales staff. Using her method, review last year's sales numbers, broken down by sales representative, and consider how much each salesperson contributed to total sales when you set goals. For example, if your top salesman was responsible for 10 percent of sales revenue last year, it's fair to set his goal at 10 percent of $500,000 -- or $50,000 -- for this year. If you have new staff on board, consider how much other sales representatives earned their first years and set the new staffer's goal accordingly.
Increasing expectations across the board without considering each individual's unique skills and abilities can result in unrealistic goals.
Step 3: Ask Employees What They Think
Nornberg points out that it's important to consult with sales staff about their sales targets. An easy way to find out what sales reps think is to simply ask them what they think their target should be for the year. Nornberg noted her sales staff were more motivated to meet sales goals knowing they had a role in setting them.
Step 4: Revisit on a Regular Basis
A year is a long time. Markets can shift, demand can change and certain products and services can go out of fashion. The QuickBooks Small Business blog suggests that managers revisit annual sales targets regularly. Allow sales staff to provide feedback on goals and market changes so management can adjust expectations accordingly.