The ability to continuously create revenue year-on-year is vital to business growth, valuation and future investment.
Here, we’ll explore 3 essential rules for building a formulaic process that accurately predicts how much revenue your business is generating, and could generate in the future.
Does your sales model need to be predictable & repeatable?
You and your sales team need to know what processes drive revenue and productivity, then refine them, measure their success, and use them as a predictive tool.
Build a predictable sales model and you’ll be able to:
Improve productivity throughout the business.
Use real results to inform lead capture, quoting, marketing, and more.
Develop your key performance indicator - year-on-year growth.
Accurately predict short-term and long-term revenue changes and trends.
Assess your strengths as a business, especially profitability, cash flow, and performance.
1. Sales funnel investigation and definition
A successful sales model has clearly defined stages – from lead to customer. Whether your product or service is a quick purchase, or takes weeks of consideration, customers will go through a journey before they commit.
With an accurate sales funnel, you can group prospects together and give them what they need to become a customer. Otherwise, potential customers might scroll through your landing pages, or skim-read a white-paper, and never come back.
Your main task is to understand customer journey and adapt to it. That means empowering people with sales information that answers their questions, and incentivising them to choose you instead of a competitor.
An example customer journey and sales funnel:
2. Know your target deal size
Deal size is essential to setting sales targets and predicting revenue. By analysing the value of each sale, and monitoring the average, you’ll recognise how and when your growth and margins are changing positively, or stagnating.
If you and your team are consistently aiming for deals of a similar value, you’re unlikely to achieve brand new, higher levels of revenue. To raise your average deal size, it’s essential to know the numbers.
How to increase your target deal size over time:
Look for correlation and causation: You can always learn from the circumstances of a sale. Is there a specific associate producing higher than average sales? Which type of customer is spending less, and what are they buying? Answer these questions for valuable insight.
Edit your sales funnel: Higher value sales can often come at the end of a longer buying process. Does your sales funnel put more energy into big spenders or customers on a budget? It could be time to focus on a new strategy, or put more energy into a specific customer stage.
Nurture decision-making and processes: Ensure your salespeople have all the tools, support, and resources they need to attract and convert higher value deals.
3. Measure and refine predictions
Your sales model should adapt as you develop your product or service, and your predictions should change accordingly.
When you collect real data from your customers and website users, you’ll understand which elements of your sales funnel are working and which are slowing you down. Most importantly, you can see how this is likely to affect revenue and growth now, and in the future.
How to test if your sales model is providing accurate predictions:
Dig into the detailed stats. Top-level information, like number of leads and conversions, is useful, but there’s much more insight to be found in your analytics. Measure everything you can and look for meaningful patterns.
Make observations before you make changes. Time will tell how accurate your forecasting has been. Any changes or new additions should be monitored to check they’re doing their job. This will help you prioritise budget too, because you’ll know what to invest in.
Consider all the factors (market changes, hires and fires, product differences etc.) Sales don’t happen in a vacuum. If there have been some changes in the market, an increase in competition, or internal factors have made a difference, take that into consideration.
Building and developing your predictable sales model
A well-developed sales model is full of benefits. Not only does it help you fully understand how well your sales process is working, it helps you develop revenue, predict growth, and create a solid foundation for any future valuations.
These 3 essential sales model rules will help you get it right, make the most of your sales resources, and – most importantly - keep improving revenue.
Take the time to stop and objectively assess where your business stands today and identify the actions to take to grow your business successfully.
WANT TO KNOW MORE?
Selina Bolton is a business strategist and the founder of Seed.Partners, a mergers & acquisitions firm specialising in attracting investment and creating opportunities for small to medium-sized businesses to scale and build value at pace.
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