3 Planning Initiatives Sales and Finance Should Agree On

Bottom-up, top-down, middle-out – sometimes it seems like there are a dozen different ways to generate a sales capacity and quota attainment model and getting started can be overwhelming. Sales and finance may inherently have different priorities, but in the planning process both teams have the same goal: develop a model that predicts with accuracy the outcome of the month, quarter, or year.

As this process is essentially the foundation of a company’s success, it’s critical that the two teams are aligned on planning and execution. Often, they are seen as adversaries, even though both teams have the same mission and desired outcome – hit the numbers, grow the company. How can finance and sales work together to generate an airtight plan to achieve growth in the coming year? Here are 3 steps to help you get aligned.

Develop the Sales Capacity Model as it Relates to “The Number”

Sales and finance should work together to leverage historical sales productivity figures, seasonality data, ramping schedules, and the budget to build a sales capacity model for the coming year. These inputs provide a realistic look at what the current team is capable of producing and paint a more accurate picture for sales from a forecasting perspective, as well as finance from a business planning perspective.

In a top-down approach, typically the revenue forecast is predetermined, the current team is listed with their quotas, and you fill in the blanks with who needs to be hired to reach the goal. Often this is where sales and finance have to come to an agreement on budget – does the budget support the team required to meet the goal based on their quotas and historical performance?

In a bottom-up approach, the team’s capacity defines what the revenue target for the year is, rather than defining the goal up front and working backward to determine the capacity. This is a more conservative approach because you’re limiting growth to what the capacity of the current team is, but one that many find value in if headcount budget is limited or big growth numbers aren’t a factor.

Ideally, these two approaches should check and balance each other, just as finance and sales operate as such. Playing out the number that the bottom-up model yields helps determine what reasonable growth can be achieved by adding additional manpower in a top-down model.

Create a Quota and Compensation Plan

The work you’ve done during sales capacity planning lends itself to determining the targets that drive quotas and compensation. Sales can start by working with finance to analyze the prior year’s compensation plan, quota attainment, and payout results. Analyzing this data will show what parts of the comp plan worked or didn’t work based on the drivers set at the beginning of the prior year.

Using the numbers derived from the sales capacity model and pairing them with the historical sales productivity and seasonality data finance can provide will help determine what quotas should be for reps in various stages of onboarding during various seasons of the year.

Plan for Sales Headcount

Sales should work with finance to align on the headcount needs for the year based on the capacity of the current team, their quotas, and their historical attainment trends. Finance needs all this information to determine what the budget can and should be to support the headcount needed to attain the goal for the year.

Sometimes headcount planning can be a painful negotiation between sales and finance (not to mention other departments with the same planning project at hand). However, by using these data points as the drivers in a driver-based headcount model, the headcount requirements for the sales team become clear and well-justified, and that makes the conversation between sales and finance easier and less contentious.

Following these steps will serve as a solid start to getting finance and sales aligned. If sales and finance work together in the early stages of planning for a new year, and substantiate their plan using a data-driven model, the result is a plan that both teams agree upon and believe in. When both teams are aligned on the goals and the execution, the rest of the year can be devoted to less debate and more of what sales and finance do best – making money.

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