Sales Commitments vs. Product Commitments

Maybe We're Not So Different After All

A while back, I had an interesting conversation with the head of sales. He mentioned he didn’t think it was fair that they held sales teams to their quarterly revenue goals while the product teams always seemed to have a moving target. Product teams would commit to certain features only to have those features shift around in priority and not get them done by the end of the quarter.

“If we did that, we’d never hear the end of it,” he said, in more colorful language than I’ll put here. “We don’t get to move our goals around. In fact, if it looks like we’re on track too early, we may end up raising our targets!”

Of course, I was taken aback by this initially. And I probably got a little defensive.

“I think the product development process is a little more complex than that,” I said. “We don’t always get to anticipate everything that comes up in a quarter. And even then, we have to have space to adjust to things we learn.”

“Sounds like a load of bullsh*t,” he said. “You just have to deliver.”

He was unconvinced by the nuances of software development.

It began to dawn on me, though, that sales and product development weren’t really that different.

“Let me ask you a question,” I said. “At the beginning of each quarter, do you commit to all the specific sales you are going to make? Each company and the revenue associated with that company?”

“That would be stupid,” he said. “We have goals for our sales numbers, our number of accounts, and some other funnel metrics, but not for individual companies.”

“Yeah,” I replied. “Most product teams beg to have those kinds of goals. But each quarter we get shackled with lists of features. It would be like you having to commit to a list of companies you have to close and then being pressed if you shift to other companies that are more interested or a better fit than the ones you originally thought.”

Quarterly Goals

Each quarter, most companies go through the ritual of creating quarterly goals. This ritual is generally known as “quarterly planning” or something equally original. And it’s always a hellish time.

Sales

For sales teams, quarterly goals will generally consist of the most important thing for any sales team: money. Namely, revenue, or some form of annual recurring revenue (ARR) in the software business.

There may be other goals included as well, such as number of new accounts, accounts in new markets or market segments, specific brand names, etc. But the main goal for a sales team will always be about selling, which means generating revenue.

A traditional sales funnel looks something like this:

Leads come in through a variety of places, such as the company’s website, advertising, social media, email, etc. Marketing will work to qualify those leads based on some form of engagement. Then the sales team can further qualify those leads based on customers who are ready to purchase. Those leads then become opportunities, and eventually are won or lost and potentially become revenue for the company.

The bottom of that funnel is, of course, the most important part. That is where most of the attention is and where most of the goals are for the sales team. And that’s as it should be. Any other metrics or goals can help to drive revenue, but they are only meant to help the bigger goal. No sales team is going to spend the majority of its time worried about qualified leads or specific small deals (unless those deals are very important) at the end of the quarter. It’s going to focus on revenue.

Here is a more simplified view of this same flow:

Appropriately, we focus our goals and energy on the end of the process. This allows for flexibility (as we’ll see) in how we get there, which is important.