Predictable Revenue

Predictable Revenue

 

 

You do not impress investors if you close a big deal every once in a while. It is predictability and your ability to create a constantly running growth engine that impresses them. 

Predictable revenue is not the result of simply adding marketing and sales resources. Predictable revenue is the result of a thorough and company-wide prediction process. You analyze with your marketing and sales teams how you can predictably generate an ever-increasing number of high-quality leads that you can predictably convert into paying key target customers. You analyze with your engineering and product teams what this entails in terms of products and product features to be developed. You discuss with your HR department what your plans mean in terms of finding and hiring the employees required to deliver on your growth plan. 

You focus on predicting the revenues stemming from new customers you want to predictably acquire, from the existing customer base that you aspire retaining, and from up- and cross-sells that you want to make to your highly delighted customers.

The prediction process must not stop at revenue, nor at EBITDA level. You must also predict your cash flow. 

There are two approaches to predicting revenue growth that can lead to good outcomes. You can forecast your growth on the basis of your historic performance and status quo. Alternatively, you backcast by setting clear future revenue targets and working backwards. 

Given that uncertainty and incomplete information render impossible making right or wrong decisions, it is paramount you focus on creating and implementing a stellar planning process. The process is more important than the result. If you create and implement a proper process but miss your targets, you cannot blame yourself for having made a mistake. 

A proper process is run objectively, transparently, and encourages dissenting views. It includes key employees from all departments and team members with diverse backgrounds. 

A pre-mortem analysis can be a good final checkpoint and tool that allows you to double-check whether your plan is ambitious and realistic at the same time. Assemble your team and brainstorm why you may fail. The outcome of this process may help you identify blind spots and topics where you might have been overly optimistic.

In my book FastScaling, I dive deep into the topics of forecasting, backcasting and conducting a pre-mortem analysis.

 


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