Mastering Revenue Projections with the 7 Right Questions
Sales revenue projections are vital for any business. Revenue projections are the thermometer of how you run your company, and the difference between an accurate and inaccurate projection is the difference between your company thriving and going bankrupt. The revenue you anticipate for your business drives your function and growth activities.
You need to know exactly where, and how, you’re going to make it rain.
Where is the rain coming from? Can you help those clouds produce more money rain? How should you spend your money to ensure the rain will continue and even improve?
Accurate sales revenue projections allow you to set revenue expectations and help you achieve and exceed them. Without an accurate projection, it’s difficult to know where resources may be needed in other parts of the organization, such as fulfillment, account management, development et cetera. You need a sales revenue projection, people!
When it comes to calculating these revenue projections, you need to talk to your partners to get the details on the state of their business, and then determine how that affects your own growth. Your partners will be looking to tighten their budgeting belts for 2017, so it’s time to position yourself as a revenue driver rather than a cost center. Present yourself as a money-making opportunity they can’t live without, all while you calculate an accurate (and record-breaking) revenue projection.
If you want to jump straight into the questions without reading the why and how of them, I’ve inserted this nifty Table of Contents here so you can skip on through. If you want a full understanding of the why and how of accurate sales revenue projections, I suggest you keep reading.
Making an Accurate Projection: Finding the Deltas
Are there new opportunities to take advantage of?
Best Questions for the Best Revenue Projections
1. Where did you see growth this year? Do you expect that to continue?
2. Will you keep prices the same, lower them or raise them?
3. Do you plan to enter new markets, target new customers or use new sales strategies?
How much additional revenue do you expect these efforts to bring in?
4. Do you need to enhance your product to keep your current customers?
5. Are you adding any additional staff? Which areas, sales, account management, developers?
6. Are you planning to pursue other special projects or initiatives?
7. How do you currently prospect or get leads?
Still with me? Cool. Let’s get into the details of calculating successful revenue projections.
Accuracy Over Existence
It’s not enough to just have a projection. You need to have an accurate projection. Without an accurate sales revenue projection, how can your organisation know:
- Where other resources are needed within the organisation, such as fulfillment, account management, development, etc?
- How sales can align with corporate goals, which in turn helps sales managers determine what’s needed to hit those goals?
- If you’re winning or losing (from a sales perspective) with an inaccurate model to follow?
- If your sales reps are focusing on what’s important to drive revenue?
For sales organizations, developing specific sales targets that challenge your sales team is key. Achievable, yet challenging, goals will set the sights for your sales reps and managers alike, but challenges based on inaccurate revenue projections may result in the sales team constantly missing budget, and drop morale.
So, as a sales organization, what is your projection based on? Of course, your success is based on your clients. When the new year rolls around and your clients are looking at their books, will you be considered a revenue driver or a cost center?
Client Relationship is Key
In order to make an accurate projection, you need to know what’s going on with your clients’ budget books. Getting the right questions with the right answers will help you project exactly how much your sales revenue will change.
However, before you jump on the phone with your clients, you need one special thing. A relationship. If you don’t have a personal relationship with your clients, you don’t have the trust required for them to open up to you about their specific numbers. Having an open and honest discussion about internal numbers is the most vulnerable an organization can get, and it’s the deepest part of a B2B relationship.
If you have that deep-level of relationship, you get honest and accurate answers to your projection questions, and an accurate revenue projection to follow.
Making an Accurate Projection: Finding the Deltas
Before you know what questions to ask, it’s important to understand why you need to ask them. To make it a little bit easier, I’ve designed some graphs.
Each of your clients sees a certain trend in their growth and revenue that you can track over the course of time. If you decide that your clients will continue on trend for the foreseeable future, the projection graph will be pretty boring.
It will also be inaccurate.
Base forecasting says to go with the trend, but as a sales organization, you have to be acutely aware of the deltas. Each delta represents a small change in your client’s organization that can affect the numbers on your projection graph.
Asking questions is the key to finding those deltas. For example, will your client start offering more basket products? Numbers will go up. Slow market? Numbers will drop.
Ask questions to find the deltas that affect the trend on the graph. This example graph only examines two possibilities, but there are countless to consider when making your sales revenue projection.
The Importance of Questions
Beyond simply calculating accurate revenue projections, asking the right questions (and receiving the right answers) will help you determine three things:
1. What’s working?
Where are partners and clients seeing success, and how can you replicate this success in other customers and clients?
2. Where are the gaps?
What’s not really working, and how can you go about fixing or mitigating risk to resolve these issues?
3. Are there new opportunities to take advantage of?
What partners have new sales opportunities, and how can you help them win that business? What does this kind of success entail, such as hopping on calls, making presentations or perhaps additional product functionality? You need to be intimate with their business processes, how they’re selling, who they’re selling to, what their packages look like, and are they using other providers that you may be able to replicate to reduce vendor clutter?
An honest one-on-one conversation with your partner is necessary for moving your business in the right direction, and developing accurate sales revenue projections. So what kind of questions should you be asking?
Here’s the juicy bit. These are some great questions to ask your clients to help you determine how their numbers will change, and subsequently, what to expect for your sales revenue in the upcoming year.
Best Questions for the Best Revenue Projections
Each question may lead to a variety of sub questions, and the deeper dive you take into your client’s business, the more accurate your sales projections will be. Remember that each question is more nuanced than you may think—and each answer may not come with a clear boost or drop in numbers. This is where you have to do some brain work to figure out how it all fits together into your revenue projections.
Finally, the answers you receive may give you more than just a number projection, but also give you a peek into how you can continue to help your clients succeed and meet their goals.
Without further ado, the questions:
1. Where did you see growth this year? Do you expect that to continue?
This question gets straight to the point—tells you what’s working for your client, and if it will keep working for them so you can anticipate a bump in revenue. Pay close attention to anything that may detract or increase the rate of growth for your client, and calculate that into your revenue projections.
2. Will you keep prices the same, lower them or raise them?
Changes to your client’s pricing structures can affect you in a variety of ways. An increase in their pricing may mean they’re targeting higher value customers, which would in turn decrease the number of new accounts you are bringing in. A reduction in prices would mean they want to keep the same profit margins, which may mean looking for additional discounts from vendors. You can also keep an eye on their pricing page for any changes you may wish to discuss.
3. Do you plan to enter new markets, target new customers or use new sales strategies?
If your client is considering expansion into new markets, it may involve additional training for new sales members, or opportunities in other countries that you should be aware of. Is your client targeting a new vertical? You need to be aware of this so you can inform them of best practices you’ve seen in this vertical, like pricing, functionality or packages.
How much additional revenue do you expect these efforts to bring in?
Obviously, this is critical in calculating your sales revenue projection. Based on these projections, sales needs to be asking themselves “is this enough to hit our sales budget? If not, then where or how can we make up the difference?” The answer may lie in promotions, discounts and other offerings to help obtain new customers rather than focusing solely on growing current ones.
4. Do you need to enhance your product to keep your current customers?
This is a sneaky question that helps you determine if your client is happy or not with your products and services. This also helps you identify what your client’s focus will be in the upcoming year, so you can align your team’s expectations and vision for the new year as well.
Don’t worry! This doesn’t automatically bind you into doing all the work they request, but you can bring it up with the necessary parties to see if the work is feasible. The real benefit here is that it gives you insight into how you could improve your product to make more sales, and keep clients happy. If you listen to their concerns, it will improve the relationship, which is the most important part when working with partners. Develop a relationship that is not just about product (since no product is perfect), but create a mutual understanding that you are working together to try and achieve the same goal.
5. Are you adding any additional staff? Which areas, sales, account management, developers?
If your partners and clients are growing their team, they’ll need more customers to support the additional expenses. This will also include additional training of new people, and making new connections and relationships within the company. The best sales people have multiple relationships inside their partner’s organization, as you never know when a person may leave the company, roles may change, and a connection will be broken or lost. Again, developing relationships is crucial in account management, as it helps you find a champion inside these companies to help promote our agenda and products.
6. Are you planning to pursue other special projects or initiatives?
Knowing your partner’s planned future initiatives will help you identify opportunities and see if there’s any cohesion with your own goals and activities to integrate more of your solutions into your client’s product mix.
The answer to this question can also give you insight into your client’s organization and see what their main competencies are. One question that organizations with internal development teams need to consider is whether to buy or build—and it’s the job of the sales force to convince them that it’s better to buy your products than to spend countless resources on build and upkeep of new products.
7. How do you currently prospect or get leads?
A steady stream of hot leads means a steady stream of sales, and subsequently, revenue growth. Knowing where your partners are obtaining their prospects will reveal how steady you can expect their sales and growth to be, and also provides you with a chance to offer advice on obtaining new prospects and discovering those leads. Are they relying solely on leads generated from conferences and tradeshows, or their search engine marketing efforts? Software like Vendasta's Marketing Automation platform provides a constant stream of leads, and shows you which businesses in the market are “red-hot” based on real-time data on their latest campaign activity.
Bonus Questions:
1) What are your competitive advantages over other companies?
2) How do you scale your current offerings?
3) What are the revenue goals and/or opportunities that you are working on?
Keep in mind that the conversation shouldn’t just be an interview, it should be an open discussion. These questions may lead your partners to open up about concerns they have for the coming year, and will give you an opportunity to offer advice and position your services as a solution rather than a budget problem. Drop the notepad and start having a meaningful conversation.
I’ll sign off while you get dialing, and leave you with a quote from Song Rattanavong, our Director of Sales, to keep in mind.
Sales projections and account management is not something that can be done by just one part of a company. It requires the entire company and teamwork for all facets that include marketing, success teams, development and sales enablement/accounting. Without a good team around you the sales organization cannot be successful.
Keep calm and calculate on!
