Chapter 3

Set the Goal

I was a chubby kid at 15, which made my teenage years depressing. Because I was chubby, I was picked on in school by all the other kids (and those were my friends). I was always the last kid selected to a team for dodgeball and the first to then get violently nailed by the ball. After living like this for a while, I developed an inner drive for something better. I wanted to be bigger and stronger than the other kids. I wanted to do something great. But to do this, I knew I needed a goal and a plan.

I found my inspiration in muscle magazines. Charles Atlas, a famous bodybuilder in the early 1900s who advertised in these magazines, got to me. Weighing about 150 pounds at the time, I figured if I could bench press twice my body weight, I would feel more comfortable and confident.

Ultimately it took about three years. But over those three years, everything changed. I went from the last kid picked for the team to the first. Focused on my 300-pound bench press goal, I devoted my days to my workout plan, which included a better diet and a strict workout schedule. I started in my garage with a set of concrete-filled plastic weights from Sears. Back then, sporting goods stores didn’t carry weight lifting equipment and there were few gyms outside of the weight rooms at local high schools. I saved lawn mowing money and bought a mail order set of real barbells and a bench that arrived one day in the back of a semi-truck that pulled up in front of the house. Those, and a good spotter who I worked out with, took me to the next level. I eventually moved up to working out at the Philadelphia YMCA when I was in college.

My first 300-pound lift was just a formality at that point. I was in shape, and I wasn’t getting picked on anymore. But I remember it vividly. I had two 45-pound plates and a 25-pound, 10-pound, and 2.5-pound plate on each end of a 45-pound bar. When I lifted the bar from the rack with a spotter standing over me for safety, I could feel the solid steel bar actually bend. As I slowly lowered the bar to my chest, I could feel my joints creaking—not normal for an 18-year-old. I pushed through, completed the lift, and dropped the bar back into the rack.

After completing my journey, I realized two things. First, I would never have bench-pressed 300 pounds if I hadn’t set that as my goal. Second, in the end, it wasn’t just about the goal. It was about the learning, accomplishment, and gratification I experienced along the way. And when working with sales teams, you should not overlook this second realization. The goals your sales organization sets should factor in what the sales team can learn from its interactions with customers to enhance the account planning process and improve goal setting for future account plans.

Whether you’re lifting weights, developing new skills to improve on the job, or looking to help your sales team drive revenue, you need to set goals to guide you on your path to success. Great account plans aren’t that different. For an account plan to work, the sales team has to have a clear long-term goal. It has to be audacious enough to be worth your investment. And you can’t just go through the motions. No pain, no gain.

Allocation of the Business Plan

At the heart of every account plan is a number, a revenue amount upon which the success or failure of the account plan hangs. So where does this number come from?

The answer, hopefully, is several places. First and foremost, it comes from the top. As part of the overall strategy of the business, the C-level, including the chief sales officer, has a revenue goal for the company. That goal is divided into revenue from current customers that the company expects to retain, and revenue from current customers to whom the company would like to sell additional products or services. And then, most likely, the company would also like to see some new customers.

This annual company revenue goal is then passed down to the sales organization, which divides it further by teams, regions, and accounts. The number is now in the form of account goals, or, from another perspective, quotas for sales teams and individual reps. In best practice sales organizations, sales leaders consider the input of sales managers and reps about which accounts (or even markets) have the most potential for new revenue and the accounts (or markets) that might be highly penetrated. There’s always some tension between the C-level, finance, sales leadership, and the sales organization about sales goals and what’s realistic given the actual potential in the market. There’s also a tension between an aggressive account planning process and the goals that the sales organization will have to take on. Sales teams don’t want to have goals they can’t achieve. And if the teams do achieve those audacious goals, they don’t want to be rewarded with an even higher quota the following year. If that happens, they’ll probably purposefully deflate their numbers, and they might not be proponents of an account plan with aggressive growth goals.

Account plans are necessary for visibility between the C-level and the street level, says Camie Shelmire, chief client officer at Aricent. “At the executive level, account plans are needed so that a sales leader, CSO, or president can see where you are with the client business on a quarterly basis. You’re accountable to the business. That’s one layer. At a second layer, it’s important for the account leader to have a clear plan. It’s a good way for the organization to stay disciplined on the road map to achieve their revenue goal.”

Retaining, Upselling or Cross-Selling, and Acquiring Accounts

At the highest level, companies have three sources of growth: retaining revenue from current customers, growing revenue from current customers, and acquiring new revenue from new customers. Each account plan is trying to develop customers to spend more by either purchasing new products or services or introducing new buyers within the same company. Each account—whether retaining, developing, or acquiring new customers—is part of that overall growth plan.

A critical part of an account plan is understanding how this revenue contributes to the company’s overall growth plan. It’s also important to understand the retained, developed, and new acquisition growth rates in the accounts for which you’re planning. Figure 3-1 illustrates how these three sources of growth relate to one another.

For each account determine whether that revenue is:

• Retained revenue. Retention by definition can be at most 100 percent. For each account, determine if it has retained 100 percent of the revenue from year one or less. Anything above 100 percent is growth revenue. Tally all the retained revenue from those accounts, and divide that number by year one revenue. This is your retained rate. It’s rare to retain 100 percent of revenue year over year. Therefore, to grow, you first have to recover revenue that’s been churned, either through new business or by upselling or cross-selling current customers, before you can increase revenue beyond last year’s.

• Upsell and cross-sell revenue. Next, identify your upsell and cross-sell revenue. Calculate the revenue in year two that was above or in addition to the revenue you had in year one. If an account did $100 of business in year one and $110 in year two, you’d have $100 of retention and $10 of upsell and cross-sell revenue. If an account did $100 of business with you in year one and $90 in year two, then you’d have 90 percent retained, 10 percent churned, and 0 percent upsell and cross-sell revenue. Add your upsell and cross-sell amounts and divide by year one total revenue to get your upsell and cross-sell rate.

• New acquisition revenue. Finally, take any accounts at the end of year two that had no revenue with your company in year one. The total revenue for those accounts is your acquisition revenue.

This analysis can help you get a baseline understanding of your retained, upsell and cross-sell, and new growth rates. In general, you have to put more resources per dollar on new account acquisition versus current account retention or upsell and cross-sell because new accounts take more work and more time to close. The odds of winning the business are often lower, and usually the size of the win is smaller. Sometimes, however, you have to accept these small wins—or even provide something for free—just to get in the door.

Most companies, on average, retain about 82 to 84 percent of their revenue year to year. They penetrate another 15 to 20 percent through upselling and cross-selling, and revenue from new customer acquisition makes up eight to 10 percent. The company’s sales strategy will determine the balance between retained, upsell and cross-sell, and new account growth, and account plans should follow suit. If the company is well established in major accounts it will have more of an expectation of growth in retention and upsell and cross-sell than in new account acquisition. In general, most companies use account plans for the development of current accounts, and a pursuit plan for the acquisition of new accounts.

Cillian O’Grady, SMB EMEA sales leader at Citrix GetGo, sorts his accounts according to the type of revenue each will bring. Then, he and his team create account plans for the top existing customer accounts.

“We would look at our current install base and the penetration rates across the account,” he says. “There are some customers who would use one product, and some would use multiple products. So we would identify which parts of the account were strong, and the areas that we didn’t have any relationships in, or didn’t have any business in. And we’d also look at which products, based on the type of customer account, that we could potentially target for upsell or cross-sell, to penetrate that account. We typically have to target different buyer personas in different departments.”

The account plan should culminate in a goal build. Retention rates explain what retained revenue you expect to have in the account. The gap between retained revenue and your goal will then be the developed growth that you’re going to pursue in that account.

Goal Build

I use the term goal build to describe the practice of listing all the possible sales opportunities that can help you achieve your sales goal. Listing the buyer, the offer, and the value of that offer clearly spells out how you might achieve this revenue goal. While most salespeople have this information floating around in their head, committing it to paper in a room with the larger sales team illustrates to everyone how close or far off the team is. More important, it forces the team to brainstorm any sales opportunities beyond the obvious low-hanging fruit. The goal build is not meant to be a precise exercise, guaranteeing closed deals; it’s a discussion-based exchange of ideas, centered on known buyers, offers, and revenue, and new buyers, offers, and revenue.

A note about the difference between the goal and forecast: A forecast is a projection of what is likely to happen each quarter and is often geared toward investors. Forecasts are made as accurately as possible, but some businesses are easier to forecast than others. Those responsible for the forecast look at revenue numbers in the pipeline above a certain level of probability. Finance and sales leaders forecast next quarter’s or next year’s results based on what the sales team has already closed or should close, using known information and deals in the pipeline.

A company’s goal is more aspirational and goes beyond the forecast. The goal is what you would like, based on the account leader’s understanding of the account’s needs and what she thinks she can accomplish within the account, even if it’s not in the forecast.

The revenue goal for the account is the foundation for the account plan. It identifies your starting point and current state from a market perspective, a customer perspective, and your own perspective. You have booked a certain amount of known revenue in backlog, renewals, or retention. On top of the known revenue and backlog, you have new growth you plan to close. While some of it may show up in the forecast, a lot of it will truly be part of your goals and aspirations for the account. In fact, if you do it right, your goal build will be a couple of multiples of your actual goal, and will include some big opportunities that go beyond what you might think is possible (appendix 12).

The C-level sets the overall revenue goal for the company, and then each account is responsible for its own portion. The goal build identifies specific opportunities within your account that will help you reach your revenue goal.

For example, let’s say the revenue goal for your account is $40 million. Adding up the retained revenue and expected renewals gives us a $12 million starting point. So, now you have to sell $28 million in new revenue. If, in your account planning goal build, you identify only $28 million in revenue, you’re probably not going to make it. It’s simply too short-sighted, and there’s no way you can close 100 percent of your expected deals. Because best practice is to have at least 2.5 to three times your goal in the pipeline at any point in the year, push your account plan goal to have 2.5 to three times the revenue you need. If you have a strong multiple like that starting out, you’ll add more as you go during the year and your odds of reaching your goal rise significantly. So, you’ll need to identify at least $70 million in incremental growth opportunities in your goal build.

To hit your revenue goal of $40 million in this account, you have to identify $70 million of opportunity—and that’s on top of the $12 million of retained revenue. Sounds like a lot, and it is—which is why you need to map it out.

First, list the known opportunities: the offer, the buyer, and the value. Then add up the value of these offers. You probably won’t be at $70 million yet. This first step is just flushing the lines to get the obvious ideas on the table. If you did get to $70 million on the first pass, congratulations. You probably need a higher goal.

Next, it’s time to put your thinking cap on. Go through each business unit, division, and department of the account, as well as each potential buyer, and ask, “What do they need?” Refer to your needs map (section 2 of your account plan) and identify what you can do for them to add value. Go around the room with the team and brainstorm. At the end of this round, ask one more question: “What really big opportunities, worth at least $10 million or $15 million each, have we not yet thought of or do we think we’re not ready to put down on paper?” Add those in and you should be at $70 million or more.

This may sound difficult, but we’ve seen it in action, and it’s incredible what opportunities emerge. We did this exact exercise with a technology company last year. The accounts were large, so this particular team was writing an account plan for one account we’ll call ABC. The sales team had done its homework and completed the profile and position section of the account plan before the meeting. The team had learned that ABC’s total budget for this type of service was $2.9 billion—a huge number, indicating a lot of potential.

Their goal for this account was $52 million, including $32 million of expected retained revenue. Our client wanted to increase the account by $20 million. Therefore, the team needed to put 2.5 times that in the pipeline, or $50 million. I remember standing at the front of the conference room in New York, working through this exercise. I stood in front of the flipchart, and announced that we were going to list $50 million worth of new work with this account, excluding the $32 million in retained revenue. Their reactions ranged from puzzled to weary to incredulous. But we persevered, and slowly, the ideas came. We identified five different projects that were worth an estimated $2 million each. At first those $2 million projects felt like drops in a bucket, but finding five of them made the $50 million number suddenly feel more achievable.

We thought some more, ate some pastries, and came up with a $4 million project, two $6 million projects, a $10 million project, and a $14 million project. Within a few hours—before lunch, even—the team members had identified $50 million of potential work with the client that, they admitted, they would not have considered if they had not walked through the goal build exercise. They would have considered opportunities throughout the year, and certainly tried to meet the original $50 million goal. But the account planning session forced them to specify potential buyers and projects. Once the opportunities were identified, they became part of section 4, or the action plan, in which specific actions were listed to make sure each opportunity became a reality.

At LexisNexis, account planning sessions include a similar goal building exercise so the sales teams can determine how to achieve their target numbers for each account.

“A big part of the account plan is the opportunities,” says David Long, vice president of strategic sales. “We ask, ‘What’s in the pipeline? What deals are in motion? What are the deals that have recently closed and the revenue is not yet recognized? What is the current financial state of the account?’ It’s all built into the financial component of the plan. That’s why it’s got to be a living, breathing document, because all of those things that influence the financials are ever changing. They’ve got to continue to be updated and revised.”

1. How has the account grown historically between retention and upselling or cross-selling, and where are the opportunities to improve those growth rates?

2. Have you separated the conversation about setting the growth goal for the account from setting quotas so that the sales team can think aspirationally?

3. Are you setting your expectations for growth of the account high enough?

4. Have you found at least 2.5 times your incremental growth goal in opportunities?

5. Have you identified several big deals as part of your goal build?