BigShrimpin

Account executive

Valued Contributor

Curious about outside management perspective on sales targets

Seems like mainly in the startup world (but could be because I dont have much experience outside that) target setting is very backwards.

For example last year we didn't hit our company number (which was 3x the year before) but I don't understand how the target gets there in the first place. Assuming we come across a windfall deal or two i refuse to believe management doesn't understand this is more of a nice surprise than a repeatable product but it just gets baked into next years forecast as though you can pull more out of your ass at will.

Despite missing our number our target has only come down maybe 10%? We're still leading against our competitors but we'd be absolutely destroying them if we hit these projections and our market just isn't reflecting these numbers. Curious from those who've been in sales leadership or know those who work alongside them to create these projections what is the point of setting an unreachable target?

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Pachacuti

Politicker

7

They call me Daddy, Sales Daddy

IME, Goals or targets are generally set based on a few criteria:

1- profitability

2- VC desires (gotta 10x that investment!)

3- "I think I can, I think I can..." mentality.

4- Arbitrary number.

The first couple make sense, the 3rd not so much. They may know that the previous years' results were due to some luck but they explain it away with a cliche or something else. Then of course, Sales is blamed when the numbers aren't hit.

The 4th is what it is and IME is a mix of 1,2,&3. "We need to make $1M this year and that equates to each of our 4 sales guy selling $250k."

BigShrimpin

Catalyst

2

Account executive

I think youre probably on the money here but we're in startup growth mode so profit is a secondary concern given we have a metric ton of runway. Just seems stupid to set a target backwards from the number vs actual metrics but i understand some level of creativity is required when setting these for valuation purposes.

oldcloser

Arsonist

1

💀

Yep, @Pachacuti has nailed it. You'll notice that none of it has anything to do with the realities of the one closing the deals.

DionysusClytemNe

Valued Contributor

3

Account Executive

Targets (for AEs) are generally set to mean they’re profitable if they hit 60-80% attainment, depending on company. Hence why you’ll often only get PiPped for big misses.

As for company goals, they’re based on many, many more factors — including funding/investors, signed companies last years, competitors’ revenue etc

Phillip_J_Fry

Opinionated

2

Director of Revenue

I saw this once before and leadership didn't have any logic for the 400% quota increase besides 'we believe in you'.

It wasn't until 75% of the team quit, including people with 10+ years at the company before they realized they made a mistake and dialed it back to around a 200% increase (how generous of them lol).

My theory is that they were trying to lower labor costs and paying a fraction of commission and dropping a few employees is easier than dealing with the PR of layoffs.

Justatitle

Big Shot

2

Account Executive

your targets as an IC are set so that if you do 50-60% the company still does solid.

BigShrimpin

Catalyst

1

Account executive

I do pretty well against my target ive had continuous rev growth year over year but nowhere approaching the crazy targets they set just seems weird not to measure the expectations as much as they obviously should with a missed year

Justatitle

Big Shot

0

Account Executive

Yup, ain’t it a bitch

0

Founding BDR

Haven’t seen this too many times to have a well put together answer but always wondered where these targets are calculated from. Sometimes it feels like they blindfold the CEO and make him rip a dart against a wall of numbers

DataCorrupter

Politicker

0

Account Executive

Start ups tend to be messy and this is one of the hallmarks, weird/unrealistic revenue growth. This happens for two reasons: 1. VCs love to see exponential growth (more on this later) 2. Depending on the tech, there might not be an obvious/accessible growth plan in front of them, it might not be obvious how much they can sell initially in year one, two or three until they start doing it.

On exponential growth, just look at Wiz. They went from $1 million in ARR to $100 million in just over 18 months. That's exponential growth, and that's what everyone is hoping for, VCs, CEOs, co-founders, etc. Crudely said, it's the big dick that everyone else is measuring against. Everyone WANTS your company to look like Wiz, so they'll throw out revenue numbers that look similar until they realize they can't hit that.

Depending on the tech, there may not be an obvious plan laid out for them. Let's say your company sells databases. There are many companies that have done it and so they can look at Oracle, MongoDB, Redis, etc. The problem lies in that your tech may be slightly different, have a slightly different audience, and is selling at a different time (see the economy). They'll say let's do it like MongoDB and set out revenue goals that look like what Mongo did. But for a number of reasons, things turn out differently. That's an example of a known tech that has many players who have done it before, the problems multiply when you get new tech that doesn't look like anything else. So anything outside those lanes and you've got to do some educated guessing.

So that's a few reasons why revenue numbers get really weird.

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