Why Predictable Revenue Comes With a Cost
Aaron Ross created an industry when he wrote his book called Predictable Revenue. In it, he advocated the use of specialized prospecting, or Sales Development teams, as a device to provide a predictable growth curve for a company. Most companies nowadays are adopting these teams not as a means to achieve predictable revenue, but as a pre-requisite to achieving any revenue.
Companies with stellar Sales Development teams can still be very unpredictable in meeting quarterly and annual revenue targets. Why? Because achieving predictable revenue comes down to your ability to call a sales number – what deals will close by the end of a given period – not how much pipeline you’re creating at the start. The impact of missing a number is regularly felt in board meetings, VC calls and on the financial markets.
To reach a reasonable level of predictability, companies employ many tactics.
We’ve heard of VPs who spend all day Monday and Tuesday in calls with Sales Managers solely talking about forecasts. EVERY Monday and Tuesday. In other companies, no CEO or board update is complete with a visit to the desk of every sales rep, including multiple visits to the desks of those repeat offenders who sand bag or develop happy ears when talking to prospects.
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This isn’t just a pain for managers. Intimidated by over-zealous sales leadership, many sales people dread their weekly pipeline review meetings. Hired to be tenacious, hard-working, competitive problem solvers, they are grilled for updates as if they were like old-school wheeler dealers. People wonder why it’s so hard to fill sales jobs.
Smarter companies compensate sales reps based on forecast accuracy, so a percentage of what they take home is based on them calling the deals that will close in the quarter.
Of course, depending on your company’s stage, you may just put a cap on the time to be spent forecasting by managers. This definitely limits the cost of predictable revenue, but you need to be sure that it’s worth taking the risk. If you have a board that doesn’t care so much about predictability, that’s fine.
Whatever you do, be aware that while growth costs money, so does predictable revenue. You need to find the most efficient way to deliver an accurate forecast, without sucking all your managers and reps time into a black hole.