As the name implies, this technique takes as its starting point where you want to go, and works backwards from it to pinpoint what needs to happen to get there. A client of mine recently paid an external consultancy to work theirs out for them and make a plan.
Without boring you with the full details, for them it runs something like this. They began by understanding the monthly target. For their subscription-based service, this was £12k margin a month coming in from new subs with a minimum 12-month initial commitment.
Next, identify the Average Order Value. Around £400 in this case. By a touch of arithmetic bringing that lot together with calculated meetings figures, you can isolate how many appointments each individual rep must make each month to hit their numbers.
Their results were that 10 such successful meetings a week were required, based on a 38-week selling ‘year’, to bring in the requisite £12k of (recurring) margin a month. So you can see that £12k of margin needs roughly 30 orders a month, and with most deals coming on the first or second call, factoring in this with the three-quarters of a year ethos they had, meant 10 signatures each working week. Their sales support challenge is what can be done to make sure this happens.
This approach is a classic for determining activity levels. Most telesales operations have something of this order. Typically, you’ll know how many dials it takes to get what you’re after, and by simple maths you can work out what each one is worth for you.
The first time I worked this out for a team I ran, their monthly sales target was £30k revenue (as it was in-house made software margin = revenue). We worked out the commission that hitting this would provide, and calculated that each dial made was (rather spookily!) worth £6.66 …. who says we reps do the devil’s work…. 😉
There are really two ways to alter these numbers; either you put more in the top of the funnel, and/or you convert more at the bottom. And that’s often sales management’s biggest task at its most simplest.
(nb: some decent analytical techniques like this one are explained simply by the UK’s JISC)