Some says that Sales is more art than science, I don’t disagree, but I will argue that sales management is mostly science. In SaaS company revenue projection could be modeled with numbers that will be fine tuned over time. For software sold as a service on a monthly basis, sales goals could be highly predictable and well monitored. With a simple model On Demand software companies can clearly connect Marketing and Sales efforts with respect to lead generation, referrals, conversion, revenue and profit.
Using the Sales Funnel to forecast revenue
- Value of closed sale – closed lead (annually)
- # of leads enter the top of the funnel
- Close rate
- Revenue per sales rep
- You now have a model that can simulate alternative revenue projections based on different close rates, lead values, MSP(Management Service Provider) sizes, and the number of productive sales reps.
- You can make it more complicated by factoring the close rate for each sales rep and the retention rate.
Using the Sales Funnel to plan and monitor the Sales process.
How many leads do we need to generate $X revenue?
Are we on track?
- Revenue forecast
- Sales funnel
- The number of leads that we need to make the revenue target
- This model help to answer if the pipeline will deliver on the revue target
- It goes back to marketing (inbound and outbound) volume of activities for lead generations(webinars, conference sponsorship, SEM) as well as referrals rate
Next: Using the sales funnel to calculate sales quota, compensation and for forecasting profit