Top CEOs understand that their role is to provide their company with an executable strategy. Strategy is the allocation of time, money, and people. The best CEOs are masters of where to place bets, invest their time, and divest from areas of poor performance. This plan is manifested in the annual budget. Sadly, when it comes to Sales, many CEOs treat budgeting with the short-term mindset of a bitcoin investor.
At SBI we work with many CEOs. Many have the patience and mindset to make the hard decisions on the sales budget. But some do not.
Top CEOs see sales as the engine that drives revenue. Poor CEOs look at sales as a cost of doing business. Download our CEO Sales Budget Tool to see how top CEOs allocate their sales resources.
Here are the top 3 Investment Blunders CEOs make when allocating sales budget:
One of the key mistakes CEOs make is the “more of the same” fallacy”. It’s not risk, and it has worked in the past. More heads doing the same thing. More of the same software. The “more of the same” fallacy assumes that all processes, channels, and systems are adequate and will scale with additional headcount. The only thing needed is more horsepower. However, there comes a limit to this strategy, and diminishing returns soon emerge. Ask an owner with a 600 HP Mustang, how often he takes it over 200 mph?
Short Term Mindset
Sometimes the ideas with the most opportunities require the biggest investment. Consider an electronics manufacturer that is considering partnering with an Original Equipment Manufacturer. To get included in the design, a rep will need to invest 12-18 months to win a deal. This OEM deal could be worth millions. But it requires a significant investment. Investments in lead generation, strategic accounts, new sales channels, and sales operations also can take months to payoff. Because of this, they are often neglected. Worse, the initiative is added to somebody with another job responsibility. Smart CEOs aren’t afraid of making big bets, and waiting for them to come in.
Bigger Quota, Same Budget
Many times, we’ll engage with sales leaders and ask about their strategy. Are they trying to achieve greater efficiency with their current sales team (profitability) or effectiveness (growth)? Most of the times we get back the blasé answer, “Both”. Sometimes there is fat that can be cut. But companies don’t consistently grow faster than their peers without investment. To achieve sustainable growth, you must continue to add dollars to the sales budget. Asking sales to continually hit a bigger number with the same budget is a recipe for disaster. You can only squeeze so much juice out of the same lemon. Once the quotas become unreasonable, get ready for a “A” Player exodus that can impact your company for years.
Top CEOs see sales as the engine that drives revenue. Poor CEOs look at sales as a cost of doing business. Download our CEO Sales Budget Tool to see how top CEOs and Sales leaders allocate their resources.