What is Sales Planning? The Ultimate Guide
Sales planning may help businesses meet their targeted sales quotas. But more often than not, many sales managers find themselves caught in a reactive cycle that leaves sales and revenue on the table. Want to know how to stop that from happening?
What is Sales Planning?
Sales planning is the process of defining a team's sales goals, including revenue targets and key performance indicators (KPIs), and outlining the actionable steps required to achieve them.
It serves as a foundational roadmap that aligns individual roles with the broader business strategy, enabling teams to allocate resources effectively, anticipate risks, and maintain focus on closing deals.
Importance of Sales Planning
Sales planning is foundational to the success of your sales teams. With a solid sales plan in place, your team understands its goals, including revenue targets and KPIs, and the path needed to reach those goals.
An effective sales plan also helps establish the big picture, which encourages creative thinking. It then breaks down that larger goal into actionable steps and helps the team assess and plan for potential risks and obstacles ahead of time.
Because the team shares the plan collaboratively, team members are better able to coordinate their efforts and communicate effectively with all stakeholders. Each team member knows their role in the overall strategy, so they can focus on making sales and closing deals. Productivity and performance improve because each team member knows their individual goals.
A good sales plan also helps you allocate resources and budget effectively. It facilitates course correction, so you can tweak those allocations midstream as needed, and it helps you manage your inventory levels accurately. Salespeople are better able to devote themselves to excellent customer service because they have the information and resources needed to meet customer needs and retain clients.
When you bring your sales and operations planning processes together, you enable your teams to integrate financial planning, production plans, staffing, scheduling, and vendor management to serve your master business strategy. Bringing your Sales teams into the loop with this high-level planning can help you look to the future while tweaking current projects for maximum efficiency and results.
Elements of Sales Planning
Here are the main key elements of sales planning that all teams should consider:
Sales Capacity
Sales capacity represents the total volume of work, such as the number of opportunities, hours, or revenue, that your sales team can realistically handle given your headcount and resources.
Essentially, it defines the upper ceiling of your team’s potential output, and it helps inform realistic decisions, guide territory planning, and drive sales hiring.
Coverage Modeling
Coverage modeling helps sales teams determine the optimal level of sales resources to effectively reach your target market. By analyzing account segments, buying behaviors, and sales cycle lengths, it ensures the right personnel is allocated to the right opportunities.
As a vital sales planning element, coverage modeling optimizes resource deployment, preventing costly over-coverage or missed revenue from under-coverage. Ultimately, aligning resources with market potential creates a scalable framework that supports broader revenue objectives.
Territory Design
Optimized territory design as a part of sales planning enables companies to ensure they have the right coverage to adequately serve existing and prospective customers and balance workload with rep capacity. According to the Alexander Group, optimizing territory size and deployment can drive up to a 20%revenue lift by:
- Ensuring coverage of high opportunity targets
- Increasing “hunting” vs. “farming” time
- Improving focus on new products
Want to learn more ways you can improve territory design with data? Download our Guide to Fair and Productive Territories.
Quota Planning
Too often, companies simply allocate quotas based on the numbers they want to hit. They rarely take the time or apply the data to determine if those quotas are realistic or not.
To adopt a data-driven approach to sales quota planning, organizations need timely visibility into sales team performance at a granular level. Leaders should have insight into the variability of a sales team’s performance and understand:
- Are there regions where quota attainment lags versus other regions?
- Do certain types of sales reps consistently lag behind others for quota? And by how much?
- Are reps selling particular products more prone to hitting or not hitting quota compared to others?
Having detailed and historical insight into quota attainment patterns is key to establishing reasonable quota allocation.
Sales Forecasting
Forecasting provides the milestones and guidelines needed to build an accurate sales plan. Forecasts establish sales quotas and make better estimates of future sales. But a forecast is only as good as the data used to create it. This means the numbers need to be comprehensive, and most importantly, accurate. Miscalculations in actual performance can lead teams astray and negatively affect future planning.
Common Types of Sales Planning
Sales teams often use different sales planning frameworks that are tailored to their specific business cycles and growth objectives. These include:
Annual Sales Planning
This is the most common approach that sets revenue targets and operational budgets for the upcoming fiscal year. It aligns high-level corporate strategy with team quotas, ensuring clear expectations for the next 12 months.
Territory Sales Planning
Territory sales planning focuses on optimizing the geographic or vertical distribution of customers. By balancing workloads and aligning reps with areas of highest potential, it ensures coverage efficiency and maximizes market penetration.
Note: It’s always worth evaluating your sales territory best practices planning throughout the process.
Account-Based Sales Planning
This strategy targets high-value or specific high-growth accounts. It involves creating customized engagement plans for individual key accounts, ensuring that resources and messaging are perfectly aligned with the unique needs and decision-makers of those clients.
Long-Term Sales Planning
This looks beyond the current fiscal year to anticipate market shifts, hiring needs, and product roadmaps over several years. It provides the strategic foresight required for sustainable growth and scalable operations.
Sales Planning Process Steps
By following structured steps, organizations create a cohesive sales strategy that helps them adapt to market changes and empower sales teams. The sales planning process looks like this:
1. Conduct Market Research
Understand the competitive landscape, customer needs, and emerging trends. Research provides the context necessary to identify growth opportunities, size your addressable market, and calibrate your expectations against realistic industry benchmarks.
2. Determine Baseline Metrics
Establish a clear starting point by analyzing historical performance data. This involves reviewing previous revenue, quota attainment, and conversion rates to determine what has worked, what hasn't, and what realistic output you can expect moving forward.
3. Set Objectives & KPIs
Define the specific sales objectives and the KPIs that track progress. These metrics should be actionable, measurable, and directly tied to your broader business objectives, providing a clear scoreboard for success.
4. Establish Sales Targets
Data-driven insights help accurate sales targets. By leveraging historical performance and real-time metrics, you can establish realistic goals. Using "what-if" scenarios can also help the teams to refine these sales targets when necessary and ensure sales strategies are grounded in data.
5. Create The Sales Plan
The actual sales plan document synthesizes all previous research and objective-setting into a cohesive strategy. It should detail the specific tactics, tools, and resources the team will use to hit their targets. This includes defining territory assignments, setting individual quotas, and establishing the sales compensation structures that will drive the desired behaviors.
6. Review & Evaluate
Sales planning is not a "set it and forget it" activity. Regular reviews are essential to compare actual performance against the established baseline and KPIs. By frequently evaluating these metrics, leadership can identify if the team is on track or if external market factors are necessitating a shift in strategy.
7. Optimize for the Future
The final stage of the process involves using the insights gained during the review phase to refine the plan. Continuous optimization allows the sales organization to stay agile, adjusting capacity, resource allocation, and territory design in near-real-time to maximize efficiency and ensure sustainable long-term growth.
Sales Planning Best Practices + Tips
Wanting to get the best sales planning results possible? Follow these best practices:
Build Agile Territory Plans
Sales territory planning is the backbone of sales planning, which is why poorly divided sales territories can lead to uneven workloads, missed opportunities, and sales rep dissatisfaction. To avoid this, make sure your sales territory plans are:
- Balanced: Providing equal opportunity potential across sales reps.
- Dynamic: Adjusted to market changes, mergers, or expansions.
- Aligned: Set to match territories with product expertise or geographic strengths.
Set Realistic, Motivational Quotas
Unrealistic quotas can demotivate sales reps and hurt morale, while overly conservative quotas leave revenue on the table. Successful quota planning involves:
- Leveraging historical data: Analyzing past performance to set attainable goals.
- Incorporating market trends: Adjusting quotas based on economic conditions or competitor activity.
- Aligning with corporate goals: Ensuring quotas support top-line revenue objectives.
Continuously Monitor Results
The new reality is that you can no longer afford to relegate sales planning to a particular time of year.
Companies need the ability to continuously monitor their assumptions on quota sizing and achievement. You need to see how reps are performing against quota.
If you finish the first two months of Q1, and 90%of your reps are performing 50%below average compared with the previous year’s performance, you need to figure out why. If you made an error with quota allocation, you need to fix it: or you will face a massive exodus of sales talent.
Set Contingency Plans
During the course of any sales year, forecast variations are to be expected. For this reason, it’s a great idea to develop contingency plans to handle unforeseen circumstances throughout the year.
Look to the “what-ifs” in your KPIs to give you a baseline idea of the plan you should roll out if worst comes to worst. It might feel like you’re preparing to fail, but unless you can predict the future, it’s reckless not to prepare for every outcome.
Use Data To Allocate
Poor quota allocation causes more than missed revenue targets. When sales reps perceive quotas as unfair or unachievable, engagement and morale plummet. This leads to increased turnover, which is incredibly expensive: replacing a sales rep costs an average of $115k, excluding lost productivity during onboarding.
To avoid these issues, organizations must use data to ensure quotas are fair and transparent. In 2018, when average quota attainment was 58%, it highlighted widespread allotment failures. By analyzing territory penetration and historical performance, companies can build trust and improve the customer experience with motivated, confident reps.
Align Coverage with Market Potential
Effective coverage planning is an important part of sales planning that ensures you allocate resources to maximize market penetration. This includes determining:
- Which accounts or segments need dedicated attention
- Where to invest in field versus inside sales teams
- How to handle cross-territory opportunities
Use Sales Planning Software
Sales planning tools are immensely valuable to all sales teams. They help your team make accurate predictions about sales, provide real-time insights, facilitate team collaboration, and course-correct, compare sales results, and more!
How Xactly Enhances Your Sales Planning Process
Xactly’s Intelligent Revenue Platform helps align revenue, finance, and sales teams so they can move beyond manual, static planning by using data-driven insights during the entire sales planning lifecycle.
By leveraging the 21+ years of unmatched proprietary pay and performance data, you can use the sales planning software to:
- Accurately model headcount capacity
- Predict future performance
- Design equitable territories
- Consider “what if” scenarios
- Integrate data with CRM systems
- Streamline sales quota assignments
Interested in learning more about how Xactly can help you streamline your sales planning?
