Johannes Hoech explains what companies can do to be more confident in their ability to hit their numbers.
In a perfect world, your company would hit its revenue projection every time. In a good-enough world, you’d hit it at least most of the time. Unfortunately, the current reality may not reflect either of those scenarios. Small Business Trends reports that in 2018, 46% of sales reps missed their quotas. According to Forbes, the previous year it was even higher, at 57%.
How did we get here? Why have one-year revenue forecasts proved as unreliable as one-week weather forecasts? And what can companies do to be more confident in their ability to hit their numbers?
When a sales team falls short of its quota goal, the common reflex is to assign the blame to the sales reps and their managers. But in our experience, the underlying problem just as often turns out to be overly optimistic, imprecisely formulated revenue growth forecasts.
With this in mind, it’s important for companies experiencing quota shortfalls to consider a fundamental question:
Is your team underperforming, or is someone over-forecasting?
This report will drill down into this question, diagnose some outdated norms that have led to such high rates of quota shortfalls, and show how teams can create a roadmap to consistent alignment between forecasted revenue and actual revenue using a process we call Growth ArchitectingTM. This will empower teams to:
Improve relations among C-Suite leaders, especially sales and marketing
Keep the company in good standing with the board
Validate their growth strategy without spending three or four quarters on trial and error – leading to accelerated time-to-revenue.
Underperforming vs. Over-Forecasting: A Case Study
A good place to start exploring this issue is with a recent case involving an information security software company. When the company’s CEO announced the coming year’s forecast in Q4, the Revenue Operations teams took it at face value. The CRO mapped out a plan, and everyone was off to the races.
The Sales and Marketing teams were able to deliver expected growth numbers quarter after quarter – but they were one quarter delayed compared to the CEOs original Q4 forecast – and by the end of the year, they had fallen short of the CEO’s projection. Instead of rewarding the best quarter-to-quarter revenue growth the company had experienced in its history, despite the one quarter delay, finger-pointing ensued as the board looked for someone upon whom to hang the failure. In this case, that person ended up not the CEO but the Head of Sales.
Key points include:
- Underperforming vs. over-forecasting: a case study
Why forecasts and actuals get disconnected
The fallout from inaccurate revenue projections
Read the full article, Are you missing your number or is someone over-forecasting?, on Premonio.com.