As a business owner/leader de-risking your growth revenue forecast is critical/key to sustainable, predictable business outcomes. Your recurring revenues, you probably have a good handle on, it is the new and incremental business that drives your revenue growth.
Why should we focus on De-Risking
If you forecast too high then resource allocation, asset purchase and all kinds of expenses will be put in motion to service the business that does not materialize.
If you forecast too low and you don’t have what you need to deliver on your promises, or you pay extra for overtime and rush orders, killing your margins.
If you never deliver your forecast, your peers and bosses will wonder if you are in control of the business.
So how do you de-risk your revenue forecast?
Here are three major methods:
1. Pipeline Health & Sufficiency
2. Forecast Pressure Testing
3. AI-enabled Forecast Analytics
Pipeline Health & Sufficiency
If your win rate is 50% then you statistically need twice as many qualified deals in your pipeline to hit your target. Setting Pipeline goals using a rolling win rate is simple and effective.
You can set pipeline goals by rep, by product, by market segment, or by account. The principle is the same. Modern CRMs like Salesforce can do this.
Forecast Accuracy & Pressure Testing
How you decide what is included in a forecast is a business choice. If you are selling B2B solutions that are not cookie-cutter then I would leave it to each rep to decide what they are prepared to put their neck on the line for with a simple checkbox. Forecast or not, if you are selling high-volume commodity items then you can reverse out the probabilities by sales stage and apply them.
In the case of B2B solutions sales, pressure testing is the art of asking the 24 hard questions that need to be known to be sure something should actually be forecast.
AI-Enabled Forecast Analytics
With today’s embedded AI CRMs like salesforce with Einstein and Tableau can perform deep analytics across your data and make recommendations and predictions as to which deals will close and why or what specific sales actions you can take to statistically increase the probability of winning that specific deal.
Conclusion.
The idea behind de-risking your revenue forecast is to look at risk variables that would cause the company’s cash flow harm in the future, come up with a risk management strategy, a contingency plan in case of such events. You have to prepare your company to be more dynamic in a long term to changing trends and customer demands. It does not need to be an overly complex plan, but it does require a change in building in a learning loop to improve adaptability.
If you need help with increasing your sales forecast accuracy, book a free session today.
