Jim Logan

The most important revenue number you present in a business plan PDF Print E-mail
User Rating: / 21
PoorBest 
Written by Jim Logan   
Wednesday, 09 April 2008 16:13
Some recent client work reminded me of a series of projects and a period of time when I worked with private investors and business owners on a number of investment and M&A opportunities.  My role was evaluation of revenue plans and associated sales and marketing initiatives, opportunities, and challenges.

In these projects, I met with a number of business leaders, listened to a lot of pitches, and saw far more than one up-and-to-the-right revenue plan.  They all pretty much read the same - exponential growth and resultant compounding value.

What I always jumped to first was the nearest revenue number the company would offer - typically their first year revenue projection.  What I'd do is ask a series of questions about that number, the thought being if you can't answer how you're going to make money in the near term, how can anyone believe you'll make money in the long term.  This was a lesson I learned from work with late-stage venture firms earlier in my career.

Here's the typical range of questions I'd ask:

  • What is your target market?
  • What is the profile of the person you'll primarily be contacting?
  • Who influences the person in their position?
  • What does this person value or fear in their job?
  • What are the steps to your target account's typical purchase cycle?  How do they make decisions?
  • What are your sales steps?
  • What is your anticipated sales cycle?
  • What is the expected time for each of your sales steps?  Did you factor in time for making contact, scheduling, negotiating, etc.?
  • What is the expected value of your average transaction?
  • What is your expected close ratio?
  • What is your expected time to revenue?
  • What is your expected time to cash?
  • How many prospective accounts do you expect to have to engage with each month to meet your revenue forecast?
  • How are you going to find these prospects?
  • How are you going to contact them?  What means?
  • What lead generation activities do you have planned?
  • What sales tools do you have?
  • What sales forecasting and review process do you have in place?
  • How accurate were you past forecasts?  Did they adjust much weekly and monthly? (a really bad sign)
  • What is the skill-set and number of sales people you must have to reach your revenue forecast?
  • How will the first customers weigh on the organization's ability to continue to sell?

The questions often went on.

The point was to be sure the company understood everything it takes to make the first number on their forecast.  The same applies to established companies and sales organizations working on an annual revenue plan - if the sales team can't tell you exactly how they'll make the first quarter's number, their chance of making the annual number is based more on luck than ability to control their business.

An important point to make is the companies who best answered the questions above weren't guaranteed to be successful, but the disproportionate number of companies who could answer the above questions in detail were.

Food for thought.
Trackback(0)
Comments (4)Add Comment
Great post, even better checklist
written by Chris Yeh, April 09, 2008
Jim, you really knocked this one out of the park. I'm emailing to my friends in sales, and saving it for the entrepreneurs that I advise.
report abuse
vote down
vote up
Votes: +2
Thanks!
written by Jim, April 10, 2008
Thanks for the kind words Chris! I appreciate the feedback.

It's a good list and reminder for us all.
report abuse
vote down
vote up
Votes: +0
How much wood can a woodchuck chuck?
written by David Daniels, April 14, 2008
It's refreshing to read the list of questions. When reviewing forecasts the first thing I zero in on is sales process assumptions and capacity. It's easy for organizations to rationalize revenue based on market potential. But it's another thing entirely to understand what it really takes to make a sale and the needed resource load required to realize those sales.

I'd like to contribute the questions:
"What resources are need through the sales cycle to make the sale?"
"How many opportunities can each resource work on at the same time?"

Thanks,
--Dave
report abuse
vote down
vote up
Votes: +6
Excellent Additions!
written by Jim, April 14, 2008
Hi David! Thanks for the additions to the list. I especially like the question regarding how many opportunities a resource can work on in a giventime.

You touched on something key in your comment...revenue planning based on market analysis versus revenue planning based on ability to close sales. The difference is huge!
report abuse
vote down
vote up
Votes: +0

Write comment
quote
bold
italicize
underline
strike
url
image
quote
quote
smaller | bigger

busy
 

Main Menu

News

Subscribe

Click to subscribe via RSS:


Or subscribe via email

Enter your email address:

Site Sponsors

Most Popular Posts

Testimonials

"A tremendous visionary, peerless communicator and gifted salesperson...one of the few "go-to" guys when you need real-world business advice."

M. Homman

"Jim has a unique ability to synthesize complex, technical offerings and articulate a market identity and message that effectively communicates and creates interest in the offering."

R. Hall

"Hiring Jim Logan was the smartest business decision I've made..."

J. Hawkins

Latest Comments

Three interesting th...
I like the discussion here. I'm with Jill Konrath...
Cold calling is a nu...
Nesh: Thanks for the thought...I agree. Rejectio...
Cold calling is a nu...
I absolutely agree with your article Jim. Every ma...
Cold calling is a nu...
I think that you are right about cold calling, lik...
Three interesting th...
Hi Craig! It hits a nerve with most of us...you'r...
Creative Commons License
You are here  : Home Logan's World The most important revenue number you present in a business plan