Your revenue forecast for 2027 is only as good as the plan to achieve it.
Hopefully, you have done a market assessment to arrive at market-based projections for growth. Quite often I find the yearly revenue forecast is based solely on historical data:
“Well, we grew 5% this year, I think we should be able to do 10% this year.”
Or, “We’re at $75 million now and want to grow to more than $100 million over the next three years,” without a clear plan on how to get there.
“Where is the additional $25 million going to come from?”
Start Your Revenue Forecast with the Account Plan
I also find that sales leaders typically take on the responsibility for allocating the revenue targets to the sales team without their involvement.
The first step in the process is to evaluate the carryover sales and growth potential from your current customer base. Your salespeople and account managers have the client relationships and are talking with them on a regular basis. Have them develop their account plans.
Some customers may have significant room to grow. Others may already be purchasing everything they realistically need from you. Some may be in mature or declining markets and may actually shrink.
And, most likely there are many that shouldn’t be included in the evaluation because of the low potential and instead be grouped together as one data point.
They should have an idea of which clients need to be in the plan the revenue forecast. Help them out if they don’t.
Ask:
- Which customers could potentially double their purchases?
- Which could grow by 20% or 30%?
- Which are likely to remain flat?
- Which are likely to decline?
- What conversations have you had with these customers that support those projections?
- What trends are you seeing in the markets you are targeting supported by these conversations that represent opportunities for us?
- What resources would you need to manage that additional business?
This is important because it will determine the starting point of your revenue forecast and your net new customer requirements.
Without an account plan, you most likely are missing opportunities for the ‘low hanging’ fruit within your existing accounts that represents significant growth particularly if they have not yet fully penetrated those organizations.
On the other hand, an equipment manufacturer may have customers that simply don’t purchase equipment every year. Assuming that this year’s customers will automatically produce the same revenue next year can create an unrealistic revenue forecast.
After each member of their team has developed their account plan you can review it with them and offer suggestions for adjustments on the plan. If their plans aren’t realistic or not thorough enough for a meaningful discussion, have them take another stab at it.
For an accurate revenue forecast, your existing customer base has to be analyzed based on its actual buying potential.
Calculate the Net-New Requirement for Your Revenue Forecast
Let’s say your target for 2027 is to grow by $10 million as part of the $25 million 3-year plan. Your analysis indicates that existing customers can realistically produce another $5 million in 2027.
That means you don’t need $10 million in net-new business.
You need approximately $5 million.
That distinction changes everything.
Now you can begin determining what your marketing and sales organization needs to accomplish to meet the revenue forecast.
What markets offer the best opportunity for growth?
How many new customers do you need to bring in to achieve your goal?
How large are those opportunities likely to be?
How long will they take to close?
And how many opportunities can each salesperson realistically manage?
Not Every Deal Is the Same
One mistake I frequently see is treating every new customer opportunity as though it has the same value.
They don’t.
I like to use a baseball analogy.
You need base hits, doubles and triples.
There will be fewer large opportunities than smaller ones. The large opportunities can make a tremendous difference, but you can’t build an entire growth plan around hitting home runs.
Suppose your target market contains several potential customers that could become very large accounts.
Those might be your “triples.”
You may also have a larger number of prospects on your list that could produce meaningful but smaller revenue.
Those are your “base hits.”
Your sales strategy needs to account for both.
The question becomes:
How many of each type of opportunity do we realistically need?
If the number of smaller opportunities required is so large that your salespeople could never generate and manage them, you’ve identified a problem.
You either need to pursue more substantial opportunities, increase sales capacity, improve sales productivity—or some combination of the three.
Remember to build this into your revenue forecast: you may not realize the full potential with net new customers in the first year and larger deals will take longer to close.
Work Your Revenue Forecast Back Through the Sales Process
Once you know how many deals your revenue forecast requires, you can work backward through your sales process.
Suppose you need to close 20 new customers.
If your average proposal close rate on net new opportunities is 25% (remember your close rate on net new opportunities will be lower than with existing customers), you need approximately 80 proposals.
If 80% of qualified new opportunities result in proposals, you need approximately 100 qualified opportunities.
If 33% of qualified leads turn into those opportunities, you need approximately 300 leads or 25 per month or 6 or 7 per week.
The exact percentages will vary by company, market and salesperson.
That’s precisely the point.
You shouldn’t guess at how many leads you need. You should calculate it from your own sales data.
Your historical conversion rates tell you what your sales organization needs to produce at each stage to deliver the revenue forecast.
And Don’t Assume Every Salesperson Has the Same Capacity
This is another area where CEOs can get into trouble.
You may have ten salespeople, but you don’t necessarily have ten people with the same capacity to generate new business.
One salesperson may have a large base of established customers that requires substantial account-management time.
Another may have a territory full of prospects and relatively few existing customers.
One may have twenty years of relationships in the market.
Another may be relatively new and still building a network.
One may be highly effective at generating opportunities but weaker at closing.
Another may be an excellent closer but spend very little time prospecting.
Treating all ten as identical sales units can produce a very misleading capacity calculation and a revenue forecast you can’t hit.
This Is Where Salespeople Often Get Blamed for an Organizational Problem
Imagine that you determine your team needs to generate 100 qualified opportunities.
Your salespeople aren’t producing them.
The immediate conclusion might be:
“They’re not prospecting enough.”
Maybe.
But before you reach that conclusion, ask:
- Do they have enough time to prospect?
- Are they managing too many existing accounts?
- Are they focused on the right markets?
- Do they know exactly who they should be targeting?
- Do they have accurate prospect information?
- Are marketing and sales generating the right leads?
- Are the conversion rates realistic?
- Are they spending time on opportunities that aren’t really qualified?
- Are they spending too much time on low value clients?
The problem may be individual performance.
But it may also be sales-force design.
Growth Requires Capacity—Not Just Ambition
A CEO can set a $100 million revenue target.
But the sales organization can’t simply be told to “go get it.”
There needs to be a logical connection between:
Market opportunity → customer potential → net-new revenue → deals required → proposals required → opportunities required → leads required → sales capacity.
Once you have that model, you can determine whether your current organization can realistically deliver the revenue forecast.
You may discover that you have enough people.
You may discover that you need more people.
You may discover that you need different roles.
You may need account managers to take some responsibilities away from hunters.
You may need sales development resources.
You may need more experienced closers.
Or you may discover that your biggest problem isn’t the number of people at all.
It may be that they’re spending their time in the wrong places.
The CEO’s question shouldn’t be “Do we have enough salespeople?”
The better question is:
“Do we have enough sales capacity focused on the right opportunities to produce the revenue we need?”
That’s a much more useful question.
Because growing from $75 million to $100 million isn’t simply about adding $25 million in sales.
It’s about understanding where that $25 million can realistically come from—and then designing the sales organization, process and activities necessary to capture it. With the revenue forecast and plan in place, each team member has a clear expectation of what their role is in the overall corporate objectives and what they need to do to complete their part.
When each salesperson is involved in developing the plan, it becomes their plan, not just a revenue target they are given. That’s a revenue forecast everyone on your team can get behind!
