I’ve written previously about the 3 Levels of Goal Setting. But if you’re struggling to figure out how to calculate those numbers for yourself, don’t worry! I’m going to help you reverse-engineer your sales goals and create simple activity goals.
Picking a number and saying, “Sure, that feels right,” when you’re trying to set intentional, smart goals can feel disorganized. I find the best way to arrive at the perfect number is to work backward. There’s a simple calculation for it.
When you reverse-engineer your goals, instead of saying, “I’m going to make $100,000 next year,” and then doing whatever it seems like it might take you to get there, you’re saying, “I’m going to set three appointments per week.” This will ultimately lead to your end goal. It’s a more tangible way to approach things because it focuses on easily quantifiable activity rather than cryptic numbers.
Crunch the Numbers Part 1
First off, identify your starting metric. For most people, that’s going to be your total yearly income. For this example, let’s say you want to make $300,000 this year:
Annual Income Goal: $300,000
Next, subtract your annual salary from the total goal to get your base commission goal. Let’s say your salary is $85,000, so:
$300,000 – $85,000 = $215,000
Commission Goal = $215,000
Your new commission goal is $215,000. Next, you have to figure out your average commission from last year. Do this by taking last year’s total commissions number and dividing it by the number of deals you closed. Let’s say you made $150,000 in commissions last year and closed 75 deals. Then:
$150,000 / 75 = $2,000
Average Commission = $2,000
Now we need to divide your new base commissions goal (from Step 2) by your average commission from last year (from Step 3). This will give us the number of deals you’ll need to close if you want to hit that goal. So:
$215,000 / $2,000 = 108
Closed Deal Goal = 108
So at this point, you know that if you want to make $300,000 this year, then you’ll need to close 108 deals.
Crunch the Numbers Part 2
Now that you have those numbers let’s focus on the amount of activity you’ll need to get there. After all, nobody closes 100 percent of their leads. And closing 108 deals in a year does not mean you only need to get 108 leads.
First, let’s find out your lead-to-close ratio. In other words, how many quotes do you need to deliver in order to close one deal? Let’s say you close 7 out of every 10 prospects you quote. When you divide that, you get your ratio:
10 / 7 = 1.4
1.4 quotes needed for every closed deal
From here, we figure out how many leads you need to quote a prospect. Let’s say (on average) you need three leads to generate one proposal or quote. So:
3 / 1 = 3
3 leads to get 1 quote
Now we can calculate the number of leads you need to get to 1 close. To do this, multiply the result of Step A by the result of Step B.
1.4 x 3 = 4.2
4.2 leads per closed transaction
Last step! This is where we calculate the number of annual leads you’ll need to generate to reach your end goal. To do this, multiply Step 4 from Part 1 by the result of Step C from Part 2.
4.2 x 108 = 454
454 annual leads needed
And from here, it’s easy to break down the number of leads you’ll need per month (454 divided by 12), or per week (454 divided by the actual number of weeks that you’ll be selling this year—make sure not to count holiday and vacation weeks, I recommend 46 weeks).
Get to Work
Now, rather than trying to “find a way to make $300,000 next year” as a goal, you have a simple goal for how many leads you need to talk to every week if you want to make $300,000 this year. The best way to ensure that you hit your activity goal is by creating a goal tracking sheet. (I’ve got a blog post coming for you soon on this topic!)
The goal I recommend you break down here is your Stretch goal (assuming you’ve created a “CRUSH it” goal, a Stretch goal, and a Minimum goal). This will force you to push yourself a bit and stretch beyond your comfort level.
You can use the above calculation to reverse-engineer your goals for all three if you like, however. Say your minimum goal is $200,000, your stretch is $300,000, and your “CRUSH it” is $500,000. Doing these calculations will give you an idea of what you really need to do—on a daily, weekly, or monthly basis—to hit those numbers.
If you want to be a top producer, you need to refine your processes and leverage them to achieve maximize output.
Until next time—go sell some stuff!