The end of the year is here, so the time for annual planning has begun. Or has it? If you’ve waited this long to plan your year, then your plan is dead on arrival. Annual planning faces key issues throughout the year that make it inflexible to changes that occur during the quarter. This inflexibility makes annual planning a detriment to your company. A plan is the heart of your sales and marketing; it drives every action your teams take throughout the year. If you aren’t looking far enough ahead, you’re already behind. So how do you create a plan that properly allocates a budget to your sales and marketing teams to operate? The answer is simple: Multi-year strategic planning.
The Root of the Problem: Annual Planning
Let’s go back a few steps. Typically, sales and marketing budgets are approved annually and resources are coordinated to meet the annual revenue goal. The result is a cyclical annual process that plans for the immediate future. You set a goal, allocate a budget, staff resources to match it, and cross your fingers. Lather, rinse, repeat.
It all seems pretty methodical; however, those key issues I mentioned earlier hemorrhage your initial annual plan throughout the year. You’re hiring people and allocating resources now based upon your revenue goals for 2018. But, in the process, you lose a valuable trained asset when someone leaves and replace them with a new untrained hire. These new sales hires take time to train, effectively draining revenue from the company in the meantime.
Sales turnover and extended ramp times inflate expenses and cost companies four to five percent in additional expenses annually.
It takes anywhere from 12 to 18 months for a salesperson to reach their prime effectiveness. Until then, without accounting for turnover and ramp time, an annual plan relies on hiring more and more untrained salespersons to meet their revenue quotas. Five people are doing the work originally meant for one. Though it may seem familiar and simple, ultimately, an annual plan sets you upon a downward spiral leading to failure.
The Simple Solution: Sales
The best way to move forward is to look forward. At ORM, we recommend a two-year minimum planning cycle for sales productivity ramps that take six months or longer. Bump it up to three years if your sales ramp is closer to 18 months. Make a plan that invests in the future of your business. Multi-year strategic planning evaluates your current resources and projects optimized sales. This ensures that you have a competent sales team in place to meet your long-term sales goals while rescuing revenue from the unnecessary drain of turnover. Start this year’s plan with sales goals for the next two years and adjust your budget to match. By looking two to three years ahead, you avoid the previously unforeseeable ramp time and are always building a sales team that grows with your company.
The Simple Solution: Marketing
For marketing, the solution remains the same. Multi-year strategic planning allows you to create a budget that accounts for returns in the following years. The results of various marketing campaigns aren’t always seen immediately; when competing with sales for budgets, the ability to prove your incremental returns for the future based on increases in spending throughout the year is invaluable. In other words, money spent this year will not only meet your revenue goal for this year, but it will also impact your revenue next year. Who doesn’t like starting out ahead? Evaluating your past campaigns and looking beyond the annual cycle creates a stronger marketing impact within the company.
Conclusion: Save Yourself and Your Business
Save your heart some stress and look a little further ahead. A multi-year strategic plan sounds tedious, but with the right programs, it becomes a simple way to manage your sales and marketing teams while growing your business efficiently and effectively. Here at ORM Technologies, we provide data-driven solutions to annual planning and optimized sales and marketing management. If you have any questions, or would like to know how we can enhance your sales planning process, please let us know at firstname.lastname@example.org.