Quota attainment
Most publicly traded enterprise organisations look at goal attainment on a quarterly cadence as this aligns with their reporting obligations. Quarterly reporting needs to announce the revenue earned in that quarter and new business closed, quarterly profitability, forecasts of future revenue, growth and profitability. Let’s look only at the factors over which Sales and Marketing have some control. Things like contracted commitments that customers are no longer able to follow through on, perhaps because they are in financial distress, can certainly impact a quarter’s performance but they are hopefully few and far between. The main factors that Sales and Marketing can influence, and thus are typically targeted against, are those connected to creating pipeline or closing opportunities with customers. At the start of each quarter there will be a pipeline of opportunities that are forecast to close that quarter. Providing it has been built and worked properly, that pipeline should have enough coverage to meet the quarterly revenue target, but there are many more factors than just quarter-start pipeline that can affect whether a quote is closed.
Was there enough open, mature pipeline at the start of the quarter that was ready to be closed?
Were you able to pull forward any open pipeline from future quarters to close early?
Were you able to increase the value of any pipeline before it closed?
Were you able to create and close any new pipeline in-quarter?
Were you able to renew or extend the contracts of any customers coming out of contract in quarter?
Considering customer retention within the same calculation as acquisition and expansion gives a complete perspective on the goals that need to be achieved: if you lose a big customer, you need to close more business to make up for lost revenue. Some organisations expect high attrition and so are constantly on the hunt for new customers to replace those they plan to lose. Solid calculations will ideally be in place to forecast these losses and build them into the growth calculations. Objectives around new customer acquisition versus upsell and cross-sell may also be broken out; likewise products, licenses or services may have individual targets against them. Each organisation will have their own set of revenue drivers.
Of course, if you have factors positively affecting performance, you also have negative factors:
Was there pipeline forecast for the current quarter that you had to push back?
Was there pipeline forecast for the current quarter that decreased in value?
Did you lose any opportunities that you’d forecast?
Did you have customers coming out of contract in quarter that chose not to renew?
While pipeline creation is obviously very important to fuel the opportunity engine, that pipeline can change in many different ways. It can be delay, be pulled forwards, increase or decrease value. Measuring, predicting and optimising pipeline progression is more important than pipeline creation as understanding how your opportunities progress also allows you to understand if the pipeline of opportunities you’re creating is of high quality. Creating more opportunities that go on to decrease in value over time or drop out of the funnel later is of no value – it is in fact harmful as it distracts from where focus should be placed. Understanding what good pipeline looks like means understanding how it should progress, and how much pipeline you need to be creating at the start of the funnel.
Seasonality is also important. A healthy pipeline might look good on the surface, but if it is all due to close in one quarter you may end up with three very quiet quarters, followed by one that is too busy for sales to effectively close everything. A one-quarter spike followed by three flat quarters does not instil confidence in a balanced, mature strategy.
The longer an opportunity has existed for, the more mature it should be. This is because once it has been identified it should be worked. The more mature an opportunity is, the more likely it is to close, thus the more confidence you can have that it will convert to revenue. By extension, the longer an opportunity has existing for without maturing, the more likely it is not to close. Opportunities that do not progress will eventually (ideally sooner rather than later) fall out of pipeline.
This is a very high-level view of some of the dynamics that leadership may look at when analysing performance and setting targets. Sales and Marketing teams need shared frameworks for reviewing and reporting success. If we recognise that Marketing is a Sales efficiency engine this is common sense, but sense has never been a pre-requisite for the way organisations operate.