Do most companies miss their revenue targets by setting them too high?

Dear Aunty B,

We are an eight year old business that is borderline on profitable. But our board is glass half full. Once again I have succumbed to their persistent badgering and set very high revenue targets that I know we won’t be able to reach.

In fact, we have never met our revenue targets in the past three years. But when I suggest to our board that we set more achievable targets they complain that it won’t stretch us enough. The problem we then face is that every year we are behind the eight ball and we have to scramble around and try and cut costs to meet our profit forecast: which we mainly do and which makes them happier about us missing revenue target.

My question Aunty is this: Do most companies miss their revenue targets? Are we going to make less revenue if we set our budgets at an achievable level?

Ron,
Moorabbin

Dear Ron,

What an interesting question. You mean do most companies set up a dart board, close their eyes and throw when it comes to setting targets or is there actually some strategy behind the decision?

Probably half and half. I think if you have a sound strategy and your board still makes you aim for huge amounts of revenue that you know you can’t possibly meet, then you have a problem.

The PriceWaterhouseCoopers Business Barometer has an interesting statistic on this. It says last year that 65% of respondents met or achieved their revenue targets and this was in the middle of an economic downturn.

And they also have a bit of advice. If you met the targets ask yourself: how can we build on the range and quality of our services to meet even higher targets? And for those who didn’t (ie. you) ask why you missed the targets, what corrective action can be taken and how you can set yourself up to meet and exceed the targets in the future.

So Ron, a lot of companies meet their revenue targets and it doesn’t make sense to set unachievable revenue targets as it can demoralise your sales force and they stop trying.

Make sure next year that you tell your board drunk on that half full glass that they need to sober up.

Good luck!
Your Aunty B

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