Set outbound revenue targets from the revenue the business needs, then turn the result into wins and funnel measures. Before choosing an amount, decide whether the target will motivate execution or diagnose the motion. Those jobs call for different target designs.1 A target is ready to use when it states its period, revenue basis, average deal value, required wins, and the assumptions behind those wins.
Decide what the target is for and when it applies
Fix the target's job and calendar window first. An annual commitment, quarterly operating target, and diagnostic number should not be treated as the same thing.
A revenue goal can mean the amount the whole team needs to close in one quarter.2 A sales budget is a formal estimate of expected revenue for a defined period, broken down by product, region, or time period.3 A period based budget organizes revenue by month, quarter, or year and connects directly to cash flow planning and seasonality.4
Choose one revenue basis before choosing the amount. Decide whether the outbound motion gets credit for revenue it sources, influences, or closes, then use that definition in every calculation.
Ask, "How much do you need to close this year?".5 If people give different answers, reconcile the period, revenue basis, and ownership before moving on. Different answers to that question are common.6 Keep the business revenue prediction separate from the sales budget. The sales budget excludes the business entity's revenue prediction.7
Set the amount from the business outcome
Connect the target to the result the business wants and define what outbound should contribute during the chosen period.
For a plan built around more enterprise deals, calculate how much revenue the desired increase in deals represents.8 Treat that figure as the revenue target management commits to pursuing based on strategic growth goals.9
Write the target in one line with its period, revenue basis, and amount. The line should show whether the number is sourced revenue for a year, influenced revenue for a quarter, or closed revenue for a month. Every later calculation should point back to that same number.
State the outcome the target funds, the period it covers, and the revenue event that earns credit. If those details cannot fit beside the amount, the number is still underspecified.
Convert revenue into required wins
A revenue amount becomes usable when you turn it into a count of wins. That count gives you something to inspect when the target feels too high or too low.
Use this formula:
Required wins = new revenue target / average closed-won deal value.10
Use the deal value that matches the motion you are planning. If deal values vary across groups you plan to manage separately, run the calculation for each group so one average does not hide the work required in another.
Check the result against the commercial outcome as well as the arithmetic. A sales organization may accept a smaller deal when it reaches the yearly target and satisfies the customer.11 The target should reward revenue that fits the customer's result. It should not force a deal shape that damages the outcome.
If the required-win count does not fit the way your team sells, review the revenue basis, average deal value, or period before assigning funnel and activity numbers.
Test capacity before setting downstream numbers
A clear target can still fail as an operating plan. Check the room available for deal changes, missed opportunities, and the pace required to produce the wins.
One planning example uses $10 million of street quota against an $8 million number to absorb expected business changes.12 Make that difference an explicit planning assumption. Write down what the extra coverage should absorb and keep the assumption visible during target reviews.
Set the revenue target before mapping pipeline stages so every activity and forecast connects back to a number that matters.13 When calculating pipeline coverage, determine the revenue target for the relevant month, quarter, or year first.14
Continue when you can explain how the required wins fit the available capacity and coverage assumption. If you cannot, changing the activity target will only hide the gap.
Cascade the target into funnel measures
Build the measures people will inspect each week after the revenue amount, period, deal value, and required wins are stable. Keep the same definition from revenue through funnel activity.
Calculate the number of new customers and the funnel targets that support the revenue goal.15 Then map the path with the metrics that enable closed business, whether you review the target monthly, quarterly, or annually.16 Set activity measures after this calculation so they describe the path to revenue.
Use proxy metrics at the end of the chain. They can show whether the motion is producing enough opportunities and progress while the revenue target remains the outcome the plan is built around.17
Use external ratios as a comparison point after completing your own calculation. One compensation guide suggests that outbound SDRs aim for three to five times OTE in revenue.18 Use the ratio to check your assumptions, then return to the deal value, required wins, and capacity behind your number.
What not to do
- The typical approach is to find an industry benchmark, apply it to the team, and call it a goal.19
- Do not assume a benchmark applies across different buyers, products, markets, or growth stages.20
- Give the team the direction and guidance needed to pursue the target. Achieving revenue goals is difficult without them, regardless of seller talent.21
- Judge outbound by its connection to revenue, not activity alone. Remove vanity activity from the target decision.22
At the next planning meeting, have everyone using the number show the same calculation from revenue to wins to funnel measures. If they cannot, keep working on the definition before setting downstream targets.