Significant Challenges in Annual Revenue Planning for a VP of Sales

Indiana takes the shot

It’s that time of year again! Senior marketing and sales operations executives are reeling from the top-down delivery of audacious company goals. If this is you, you’re probably in discussions with finance and senior leadership by now regarding next year’s revenue targets. Unfortunately, you once again find yourself bringing the equivalent of a knife to a gunfight.

How many times have we witnessed a revenue plan driven down to the business teams without any real planning exercise, or validation of plausibility? You find yourself asking how your senior leadership came up with that number, and how can I possibly hit it? Your list of concerns grows, as does your anxiety level. Finally, the process is completed and you’ve “volunteered” for a plan that you may or may not have the resources to meet.

Establishing a reasonable and attainable top line revenue plan can be a tricky business. In some cases, companies will use accepted industry year-over-year growth rates to determine their plan for the upcoming year. That’s all well and good, but chances are your team and company have unique circumstances and revenue histories that do not fall into industry norms or guesstimates. Your goals, to be reasonable and attainable, must align with three specific areas of the business to have any chance to meet them. If you do not align these important facets you reduce your plan to a “hope and a prayer.”

  1. Resource Planning
  2. Accurately estimate client retention and revenue
  3. Determine your net-new client revenue goals

Resource Planning – Once you have identified the revenue target for the next year, you’ll need to then determine the number of sales resources to hire, as well as when to hire them. Seems simple and straightforward, right? Not so much. You must take into account dozens of factors to accurately assess your resource plan. Areas such as new lead arrivals, renewal rate, client retention rate, sales resource retention, recruiting efficiency, new hire ramp, historical revenue recognition of product, sales cycle, etc.

I think you get the picture. This is truly a science. Missing or neglecting any of these considerations increases failure rates and shortens the life expectancy of your finest performing sales leaders.

In order to successfully execute on an effective resource plan, you need the tools to:

  • Align your current and future staffing requirements.
  • Model adequate and obtainable quotas for current and future employees.

Accurately estimate client retention and revenue – Do we really know how much revenue fall-off we will experience next year? Will this swag make or break next year’s revenue? Do we really have a good understanding of renewal rates and price compressions? To provide an accurate prediction we must look to the historical data that lurks in the corners of our CRM and financial systems. It is not an easy analysis to consider the dozens of moving factors across all of our current and past client data. The data is there, but the complexities are well beyond a spreadsheet and a gut feel. You’ll need insight.

Determine your net-new client revenue goals – As part of your net-new client revenue goals you have consider both sales and marketing’s contribution to your sales funnel. How are you leveraging marketing to drive an adequate number of Sales Qualified Leads (SQL)? We know SQL’s fill our opportunity funnel and translate into new revenue and net-new clients. How many SQL’s does marketing have to generate? How much do they cost? What is the expected new revenue from SQL’s and the lifetime value of those new clients? If you know the answer to these questions then you know the cost to acquire clients. You also know the rate of closure and ROI from marketing campaigns and the number of new SQLs they need to generate to meet your plan.

With truncated sales cycles, new online challenges, and more informed clients, the complexities to sales planning continue to increase. Those with the tools to master it can identify, plan, and deliver consistent results in support of the company’s revenue objectives.

Developing a sales revenue plan in today’s business is more about science than art. Leveraging technology that drives predictable outcomes is a tool every sales leader must have to effectively compete and win. Arming yourself with predictive tools in the planning process helps you be more successful all the while beating out your competition. That’s win-win in my book

After 23 years in sales leadership I have finally found my own professional nirvana at ORM Technologies. Not only do I have access to software that delivers on integration of sales and marketing automation to help me effectively plan next year’s revenue plan, but I can also monitor my team’s results and tweak as needed throughout the year. I now lead a sales and marketing strategy that sells this powerful software which every VP of Sales needs. I look forward to sharing with you if interested.

If you have any questions, or would like to know how we can help you with annual revenue planning, please let us know at info@orm-tech.com.