Step by step guide to annual revenue planning, including keeping account scoring update to date, capacity planning, and designing territories.
Welcome back to The RevOps Rocket! This edition is designed for every sales/revenue leader that’s thinking about next year’s revenue goals and feeling lost in how to get there. Annual planning is a pain, and if you’re a young, scrappy startup without a sales or revenue operations team helping, it’s easy to feel lost and overwhelmed. We’re going to fix that!
Today, we’re diving into the planning process from start to finish. This includes:
Building territories on bad account scoring data is like going on a treasure hunt with a blind guide. You’ve spent money, resources, and time to prepare for this adventure, but now have no idea if 4 days into your hike you’re even traveling in the right direction.
At its core, Account Scoring should be based on a simple philosophy, Propensity to Spend. This by default implies that your account scores will evolve over time as your product, offering, and market does. By prioritizing who your best customer is today, you’re maximizing the sales team’s likelihood to generate revenue.
First, we define those key metrics for scoring. This is usually a combination of:
Next, we weigh each factor based on its impact. If we know that today we’re not a fit for any organization with more than $150M in revenue because we lack SOC II and additional security certifications they require, organizational revenue would be heavily weighted. Our product may also have started as a niche solution for B2B manufacturing orgs, so industry and even sub-industry weight is increased here.
Manually, this process can take weeks or months reviewing spreadsheet data, building models, or cost tens of thousands of dollars to pull in a RevOps consultant (and may still take weeks) to try and score accounts for you. Ideally you have a platform that can automatically review your account data and recommend scoring for you with a few clicks.
Most importantly with scoring, this process should be revisited regularly as your business evolves. Today, account scoring may happen every few years as a set and forget function, with more progressive companies doing it on an annual basis. Your business is growing, changing, improving a lot faster than once per year, and so utilizing technology that can help keep your account scores up to date with your company's speed of change becomes a huge advantage.
It’s critical to be able to go multiple levels deep without adding too much complexity. As you begin this process, it’s important to be aware of the common issues leaders like you run into when scoring, and how you can avoid them.
Capacity Planning helps you as a sales/revenue leader to align your team needs with revenue goals. The exercise gives you an understanding of how much revenue your sales team is expected to bring in and determine the (best) scenario of resources to hit those targets.
The first step here is understanding your revenue goals. If you did $5M in revenue last year and want to grow to $12M the next year, capacity planning backs into that $12M goal by designing the ideal team size. Revenue goals can be simple, e.g. “We want to achieve $12M next year,” or they can get a bit more complexity: “We have an annual goal of $25M, with industry and geography based goals that make that up:
Annual Goal: $25M
Depending on how many sub-goals you have, capacity can require not only building scenarios to optimize for that annual goal, but ensuring your teams are optimized across each region, vertical, org, etc.
From here, we need to understand average rep capacity.
You also need to know, or have estimates for, what the ramping period looks like for new hires. On average, SDRs can ramp in 1-2 months, AE’s can take 3-5, and Enterprise sellers can take up to 6 - 7.
Revenue per Rep = $25,000 x 6 = $150,000 per quarter per rep, or $600,000 annually.
Now that we understand individual capacity, we can begin mapping our headcount goals. Looking back at our $12M annual new business goal for the year, with each rep, on average, achieving $600,000 against quota, we would need 20 sales reps to hit that number.
$12M / $600,000 = 20 Reps
If you know your historical performance, use those averages. If you don't have enough historical performance, factor in an assumed attainment. There are notes at the end explaining assumed attainment and how factor that in to your capacity needs.
Now that we have a capacity requirement, this becomes our baseline, assuming all 20 reps are already fully ramped and productive. Understanding this is a growth goal and will likely require increasing headcount in our sales org, we need to plan for decreased productivity in year 1 for new hires. This is also highly impacted on when these new hires start during the next year.
The example below shows that a new Account Executive is 0% productive (generating revenue) in Month 1. That slowly improves in months 2 and 3, and then we see a dramatic increase to full productivity from month 4 - 7. We have to factor in this ramp time, as well as if this AE is hired in Month 1 of your new fiscal year or Month 7.
You’re seeing how it’s all the small things to think about and plan for that add up. Having a platform that can guide you through all of these steps, and allow you to be confident in your capacity and hiring plans makes a big difference.
Similar to account scoring, below are common issues that leaders run into when building capacity plans.
The combination of accurately and up to date account scoring and a strong capacity plan allows you to build territories for your team’s that are:
There’s hundreds of ways to slice up a territory or account book, and the best method for your organization is unique to you. This may include:
If you’re a small sales or revenue organization, geographic territories are the easiest way to start. As you scale, it becomes important to look at factors, potentially incorporating multiple metrics into how you design and deploy territories to your teams. Figuring this process out on your own can be rough, especially if it’s your first time. How do you design the best territories for your team? What metric(s) should you focus on? How do we make these territories equitable for my team? How do I help them focus on the best accounts first?
One of the most difficult parts of updating and improving territories as you grow becomes how to make these changes without impacting short term revenue. Ensuring you think about things like locking accounts with open opportunities, the existing rep/customer relationship, even a sales rep’s individual skill set becomes important. One thing we’re seeing more and more at Territories.ai is organizations leveraging CRM data to identify rep strengths and weaknesses in specific types of accounts, and leveraging that data to create hyper-personalized territories, e.g:
Sara is a middle of the pack sales rep, consistently hitting goals but never significantly overachieving. As ABC Company is planning their territories for next year their system recognized that Sara has the highest close rate in the company with banks and credit unions, nearly 3X higher than her peers. Her close rate outside of Finserv is slightly below the company average. Even though ABC Company wasn’t ready to formally verticalize their territories, they used their platform to recommend a personalized territory for Sara with an emphasis on Finserv accounts. The following year, Sara was the second highest biller in the company.
It’s key to make sure each rep has enough accounts to work, but not too many. A common mistake is giving reps massive territories with thousands of leads. Prioritize quality over quantity, so they can focus on closing rather than juggling too many contacts. Just because you have 100,000 accounts in your CRM does not mean all of those accounts need to be built into a territory plan. Ideally, you’re only including the required number of accounts to achieve your revenue goal based on your company’s capacity requirements.
Tools have started to pop-up specifically designed to help revenue teams design and build territories. A lot of these tools however are designed for larger, mature sales/revenue operations teams that have spent years manually building territories in Excel. If you’re not a macro-wizard, you’ve historically been stuck making guesses or hiring expensive consultants to try and solve this. AI is helping make this process faster, more intelligent, and reducing the cost of entry as well, so if you’re struggling to do this alone help finally exists.
Building territories and account books is all about maximizing revenue from each sales rep, but there are common mistakes that get made if we’re only thinking about 100% efficiency. These mistakes can be avoided by understanding when they typically happen.
Once your territories are built and your team is selling, don’t stop there. The market changes, salespeople move, and data gives us new insights. Revenue organizations that want to stay on top of the market should be evaluating the performance of each territory every quarter. Are certain territories underperforming? Is there an imbalance in the potential of one region over another? Adjust territories and goals as needed.
Gather input from your sales reps. They’re on the front lines and can tell you if a certain industry is a dead zone or if a particular geographic region is oversaturated. Make data informed decisions, but don’t forget that your sales team is a data point as well.
Don’t be afraid to refine your approach. Maybe you’ll find that industry-based territories perform better than geographic ones—or maybe you need to split territories even further as you grow.
If you made it this far, just remember that Implementing sales territories for the first time might seem daunting, but by following a structured approach—scoring accounts, building a clear capacity plan, and designing balanced territories—you’ll set your team up for success. Remember, it’s not a one-size-fits-all process, so be ready to adapt as you grow!
*Revenue Per Rep Notes
If we used actual averages and included quota attainment, it would tell us we need 29 reps to achieve that same goal we only need 20 reps for. This is why it's critical to understand if your numbers are based on actual or theoretical averages.There's multiple ways to run this analysis, and doing it the wrong way can lead to significantly over or underestimating your capacity. In the scenario above, we're using ACTUAL AVERAGE deal sizes and deals closed per quarter. This means we are already taking into account the concept of quota attainment, and not assuming all reps average 100% of their quota. If we factor in average quota attainment (say 70%) to the above, then it changes our Revenue per Rep to $105,000 quarterly / $420,000 annually. However, because we're basing our model on ACTUAL historical performance, this means we're duplicating our math.
For newer organizations that don't have enough historical data to look back at actual averages, you can use a THEORETICAL AVERAGE. For a theoretical average, we're making a broader assumption that our average deal size will be $25,000 and reps should be able to close 6 deals per quarter. This is where we need to add in the probability that not all reps will achieve 100% of quota attainment.
Revenue per Rep = ($25,000 x 6) x 70% = $105,000 per quarter per rep, or $420,000 annually.
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