Avoiding the Year-End Gold Rush: A Guide to Hitting Revenue Goals Without Losing Money in the Long Run

It’s an age-old fact every purchaser knows — to get the biggest discounts from your sales rep, just wait until the end of the fiscal year (or quarter). This is particularly true in high margin industries, such as technology, where sales reps are notorious for extreme discounting at year-end to hit their revenue targets. The closer a business is to hitting its targets, the more aggressive the discounting becomes.

While year-end discounting can dramatically improve top-line results in the short term, it ultimately destroys your pricing power and can kill long-term profitability. To temper this “year-end gold rush” taking hold of so many companies, consider trying these three things to balance to your year-end selling efforts.

#1. Make sure sales incentives are aligned with both revenue and profitability.

Balanced sales rep incentives incorporate both volume and price. This approach — along with the right training and tools on pricing and profitability — is one of the most powerful things you can do to avoid the year-end gold rush.

#2. Uncap incentives at the end of the year for high performing sales reps.

If you are already uncapped, add an extra incentive to maintain price. Capping effectively takes incentives away for high performers, putting the emphasis on lower performers to help you make your target. Rather than trying to squeeze more out of the reps who are already struggling, give the proven winners an incentive to make even greater contributions. Through this strategy, you’re likely to find yourself under less pressure to reduce price in order to hit your numbers.

#3. Conduct post-mortems at the end of each quarter and year to improve your process.

Collect a group of high-performers and codify what worked — what helped you balance profitability while still aggressively pursuing revenue — and what did not. This is an important but not urgent process that many organizations simply don’t do enough. However, whether in the context of the year-end gold rush or other processes, it’s one of the most effective ways to learn what works in your particular culture and environment.

These are just three suggestions. There are a number of other things that may work well for your business, including some combination of sales incentives, training, policies and procedures redesign, or even systems improvements. Avoiding the year-end gold rush is one of the most important things you can do to preserve profitability and promote rational competitive behavior in the marketplace. The key is to create a structured process to instill balance to your sales approach.

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