This is the season of planning for sales and marketing leaders, especially if your company runs a January-to-December calendar (as most do). If you’re in this category, you should be putting finishing touches to your 2022 sales plans. If you have not started, you are almost late. But the good news is that you might find this piece useful in crafting a robust and practical plan for the next year. If your financial year cycle gives you more time, then you are in luck.
What is planning?
Planning is inevitable for things we are well aware will happen in the future, as encapsulated in this saying, “By failing to plan, you are planning to fail”. This means that failure to plan is also a plan!
Another feature of planning is that it happens before the execution and result, as implied by, “It wasn’t raining when Noah built the ark”
What then is planning? I will describe it as deciding in advance what to do, how to do it, when to do it and who to do it. It involves anticipating the future and consciously choosing a future course of action. According to Haimann, “Planning is the function that determines in advance what should be done”.
While a goal is a desired future state that an organization attempts to realise, planning is the act of determining the organisation’s goals and the means for achieving them. A plan is a blueprint for action that specifies:
What is to be done – in numbers preferably and SMART
resources and resource allocations
actions necessary for attaining goals
Note that planning is:
a continuous process
directed towards efficiency
Benefits of planning
The question is, “why should we plan?” Here is a shortlist of benefits:
Focuses attention on objectives and result
Helps to determine new opportunities
Helps to anticipate and avoid future problems
Helps to develop effective courses of action (strategies and tactics)
Helps to comprehend and provide for the uncertainties and risks with various options.
Helps in setting standards
Challenges of planning
Obstacles on the way of proper planning include:
Lack of accurate information and data. Everyone who has had to plan in Nigeria will easily come against this obstacle. It is even more so in the pharma industry for lack of openness and data gathering cooperation.
It costs time and money to do a plan. Both are usually in short supply for sales managers.
Resistance to change by those who will run and implement it and those who will be affected by it, as it often requires doing things differently.
Lack of ability to plan. Leaders knows that effective planning requires knowledge and skills which are not automatically possessed by those whose responsibility it is to plan.
False sense of security, by figures generated and assumptions that have been made.
Environmental constraints, especially from issues outside the control of the planners (remember COVID-19) and policy somersault by governments!
What to plan
Planning is multi-dimensional, certainly with many of the items interlinked and interconnected. It is even important to point out that sales figures achieved are consequences of a selling process and execution of activities. Sales do not just happen. Such activities must be planned to ensure good result and desired outcomes. Below are my items to plan:
Sales: What products, SKUs, categories? What quantities do you want to sell? When? (specific period performance, say per quarter). Better to focus on volume than value/naira. Volume plans are more useful, realistic, accurate and easy to track.
Number of calls per day (doctors, specialists, pharmacists, nurses, hospitals, institutions, wholesalers, key accounts, wholesalers, distributors, etc.)
Types of calls (Healthcare professionals, specialists/consultants, trade, retail, administrators, primary/secondary/tertiary hospitals, public/private, etc.).
Events and meetings
Coverage. Would you need to cover new territories? If you want quantum growth, you need to plan to significantly increase your geographical, professional coverage, etc. What new market/target indication? What new products are you putting in the market? Would you need to reduce your product list to a manageable proportion?
Headcount: How many more (or less) reps would you need to achieve your plan/objectives? Do they need training? How many managers would you need to effectively supervise them?
Prospecting and lead generations. To grow (which is compulsory) you need to expand your customer base and get new customers. You need to plan how, how many and where these will come from
Other business-development activities and promotions
The chart below is an overview of budget and budgeting.
The first thing you need to be aware of is that sales budget drives many parts of the organisation: production/importation schedule, overheads, cash-flow, expenditures, including cap Ex, profitability, etc. It is a thus a serious business!
Sales budgeting therefore involves estimating future levels of revenue from sales, selling expenses, and profit contributions of the sales function. From the foregoing, there are three dimensions of sales budgeting:
Sales budget – projection of revenue computed from forecast unit sales and average prices.
Selling expense budget – amount that the department may spend to obtain the revenues projected in the sales budget.
Profit budget – merged sales budget and the selling expense budget to determine gross profit. This I have found, from experience, is usually ignored by most sales managers. Yet, how will the company survive and grow if it is ignored by chief revenue officer?
Sales forecasting is estimating a company’s sale for a specified future period. Sales forecasting provides the starting point for assumptions used in various planning activities. It is also used for short-term financial control systems. The financial budget is dependent upon the sales forecast for the projected revenue figures.
There are five levels of concern in sales forecasting: Market potential, sales potential, actual sales forecasts, sales quotas, and sales budgets. Let’s break them further down:
Market potential – This is the highest possible expected industry sales of a good or service in a specified market segment for a given time period. For instance, the market potential for the sales of computer in Lagos state might be two units annually. This is based on buyers’ ability and willingness to buy.
Sales potential – refers to an individual firm’s market share of the market potential, where market share is defined as the percentage of market controlled by a particular company or product. It is the maximum sales a firm can hope to obtain.
Sales forecasts – is the sales estimate the company actually expects to obtain, based on the market conditions, company resources, and the firm’s marketing plan. The sales forecast is less than the sales potential, since it is based on realistic set of circumstances.
Sales quota/target – is a sales goal assigned to a salesperson, region or team. It is usually derived from the sales forecasts. Sales goals and objectives sought by management.
Sales budgets – a management plan for the expenditures to accomplish sales goals. This is derived from sales target, but is like a more realistic target. Most Sales managers are assessed based on budget, while lower-level sales managers are assess based on target. The difference is usually between 10 and 20 per cent.
Sales budgeting process
Below is a summary of the process to develop a useful sales budget:
Situational analysis – sales managers have to look at the magnitude of past differences between budgeted and actual figures and the reasons for these differences.
Identification of problems and opportunities – the actual potential threats and challenges have to be assessed and addressed to determine the probabilities of occurrence and their impact.
Development of sales forecast – A manager is equipped to forecast sales, using one of the various methods. Projections are made about the anticipated levels of sales by territory, product or type of account. It is expressed both in units and dollars.
Formulation of sales objectives – once the forecast has been developed, the sales force has to be told what sales target to strive at and what objectives to pursue.
Determination of sales tasks – the sales manager and the sales force have to carry a broad array of sales activities, ranging from recruitment to evaluation, and from prospecting to after-sales service.
Specification of resource requirement – that is, the resources that will be required to implement the specified activities and achieve the objectives.
Completion of projections – here, all the input and requests from the various units of the sales function are assembled and tied into a comprehensive package.
Presentations and review –present and defend the sales budget proposal before the management.
Modification and revision – sales managers have to engage in a series of compromise sessions. Here, the sales targets and budgets might be adjusted by the higher management, reflecting both the needs of the corporation and the true potential of the marketplace.
Budget approval – final levels are eventually approved and authorised for both the sales and the selling expense budgets. Here, onwards budgets are reviewed periodically looking at the on-going market conditions and other external forces.
Finally, you must know that sales budget and sales target are not exactly the same, though sometimes used interchangeably. Needless to say that there is a very direct relationship between them and that sales target is necessarily higher than sales budget
Tunde Oyeniran, a Sales/Marketing Strategist, Selling/Sales Management Trainer and Personal Sales Coach is the Lead Consultant, Ekini White Tulip Consulting Limited, Lagos. We deliver Training, Recruitment and Field Force Management Solutions .Feedback. Channels 080-2960-6103 (SMS/WhatsApp) /firstname.lastname@example.org or check out https://fb.me/EkiniWhiteTulipConsulting