Accurately forecasting revenue is vitally important to a high growth start-up. Often you will be looking to raise money on revenue being delivered at the time of the fundraise or based on future months. Forecasting is vitally important in securing your desired recurring revenue run rate.
Based on my experiences at HeadBox I am going to share some thoughts on how to go about doing this which I have broken down into four sections:
- Sales Process: Mapping out a robust sales process is key. You (and your team) need to know the number of stages, qualifications criteria for each stage, and the likelihood of a deal closing at each stage.
- Sales Skills: Your sales team’s ability to effectively manage timelines.
- Team Cadence: Sales team weekly and monthly forecast meetings are vital to ensuring all relevant parties are informed.
- Qualifying your Pipeline: How to qualify your team on their pipeline and knowing when and when not to step in to support closing a deal as a Sales Manager.
There are, of course, many other areas and processes to explore, but these 4 areas provide a good base case for accurately predicting the income of your business whether to Senior Management, the Executive Team or to Shareholders.
Mapping your sales process
At HeadBox we have a sales manual for the Demand sales team (selling HeadBox Business to large global brands across a range of industry sectors) and the Supply sales team (selling Host Software to hotels, conference centres and restaurants). This process is mapped by Deal Stage and includes the following detail:
- Percentage likelihood of deal closing
- What the sales person needs to do
- Information required from the customer
- Sales collateral available (media packs, rate cards, videos etc..)
- Action on CRM
- Skills required
This document is complemented by a training manual which includes tutorials and structured sessions for the skills required at each stage.
This level of detail means everyone knows exactly what is expected at each stage of the process. It is also very useful for onboarding new salespeople as it provides a complete blueprint for what they need to do – similar to the schematic floor plans of a venue (available through HeadBox 3D).
Understanding the timeline in which the deal will close is vital to forecasting revenue. In order to do this, you need to have a mutually agreed timeline between the buyer and the seller. Failing to keep a timeline in place throughout the sales process is one of the most common pitfalls. From my experience, the main problem salespeople have is ignoring the key term, “mutually agreed”. Salespeople often try to force buyers into their own (as in the seller’s) timeline. This is an error and will often lead to calls being rescheduled, the deadline being missed and, at worst, falling into the horrible situation of being the salesperson chasing the buyer for an update.
You must agree on the timeline with the buyer based on their needs and in order to do so you need to qualify them thoroughly. Areas that are helpful to understand include:
- who is involved in the decision-making process
- what information they need to make a decision
- when they are likely to be able to have the relevant conversations
- any potential obstacles to the decision being made
You can drill these qualification criteria into your sales process and they will allow you to know when a deal will close. It doesn’t matter if the deal is going to close 6 weeks later than originally anticipated, rather know that than keep forecasting it for the current month a missing your target.
Weekly kick-off monthly close meeting
Conversation about pipeline should be constant. I speak to each member of the sales team about their pipeline every single day, at least once. A salesperson should be able to talk in detail about their pipeline – which deals have closed, which ones they are 100% confident of and which deals are their outliers (and what they’re going to do to close them) – at any time of the day, week or month.
We have built-in weekly kick off sessions in which we gather around a screen showcasing the team’s pipeline. We work through each deal in every stage of the sales pipeline discussing the decision-maker, next steps, information required for close, potential obstacles and close date. We can then report on a weekly basis what is going to close. We catch up again each morning for a 10-minute huddle to see how everyone is tracking against their Monday commitments.
Knowing when to step in
Knowing when and when not to get involved in a deal is important as a sales manager. In order to pick the right time, firstly you need to have all of the above mapped out. A robust and accurate process coupled with mutually agreed timelines and forecasting meetings will leave you in a much more comfortable position as a sales manager in your business to know what is going on. That said, despite the best laid plans, deals don’t always stick within the boundaries of the process.
Sometimes it will require a more senior person to come in to lend weight to a negotiation or to firmly set a timeframe on a deal if your team are speaking with a senior stakeholder on the buyer side. However, I would caution against stepping in all of the time, as it can alienate a salesperson if you step in to do the final (and often most exciting) close. Work collaboratively with your team to understand when and how you are needed. If you have created robust processes and trained your team well then you should be needed less rather than more.
So there you have it, some musings on how to accurately forecast the income of your business. We are always looking at ways to develop and optimise each of the areas I have discussed and I would always recommend doing this. Each deal you close will teach you something new. I’m hopeful that, if you implement each of these steps, you’ll have a good shot of accurately predicting your next month of revenue. Good luck!