How to Hit Growth Targets with More Accurate Sales Forecasts

FP&A, SaaS

Predicting revenue, especially in software-as-a-service businesses, can be tricky. Sales reps play a critical role in closing deals and so are considered a key driver of bookings. Therefore, sales staffing, productivity, and turnover matter—a lot.

Despite this rather obvious reality, many companies forecast in some parallel universe where staffing is 100 percent and every salesperson is a veteran who’s killing it. I would like to live in that world, but I don’t. And I’m fairly certain they don’t, either.

That’s why it’s so important that companies employ a little real-world practicality when preparing their revenue forecasts. If you just count warm bodies instead of adjusting your productivity assumptions based on how long a sales rep has been with the company, your forecast is doomed from the start. When selling a complex product, it can easily be six, 10, or 12 months before a rep is fully ramped. Don’t believe me? Ask your sales manager.

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To nail your forecast, your system needs to include each employee’s start date. That’s critical, because it drives the level of productivity assumed. Then you can work backward from high-level sales targets to ensure that you have sufficient sales capacity—,namely that you’ve hired people early enough so they’re fully mature by the time you need them to start hitting their numbers.

Including these sales ramp considerations in your forecast becomes painless when you use an agile, cloud-based reporting system. These systems can be synced with your company’s HR system or payroll vendor to display a complete personnel sheet.

Then, your vice president of sales can come in and add a row for a new hire, and behind the scenes, the system is calculating the implied ramp schedule as well as aggregating salaries and allocating them where they need to be on an expense sheet or income statement.

The nice thing about these systems is that much like Excel, you can drive the logic any way you like. You can start with a high-level bookings target—often based on an assumed growth rate—and a set of what sales management deems to be reasonable hiring targets and attrition rates, and see what that implies in terms of productivity per rep. Or you can take the productivity per rep as a fixed input and play with your headcount plans until you arrive at the bookings targets you’re aiming for.

Whichever way you end up wiring the logic in your model, having an easy way for your sales management to model ramped rep count is incredibly important to feeling confident in your forecasting.

And that’s where our Adaptive Suite comes in. We’ve been able to help the sales team look beyond just butts in seats and stay on top of ramped rep count goals, so they’re in a much better position to hit their growth targets.

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