Q4 is upon us, which means it’s almost time to craft next year’s plan. For many companies, that means starting with an annual revenue goal they want to hit by the end of 2026.
But this raises two issues:
First, how do you know what you’re likely to achieve next year from a Sales perspective? And second, how can you craft an accurate sales plan to ensure you hit your goal?
In this issue, Dougie Loan (CRO at SourceWhale) shares his simple, but powerful, formula for crafting an accurate sales plan to help you hit your annual revenue goal.
Or listen to it on Spotify or Apple.
Like many companies, when the SourceWhale team was crafting a sales plan for the coming year, much of it was based on what the business was looking at in terms of annualized growth rate. In other words, their ambitions for annualized growth rate, their current ARR, and what they wanted to achieve by December the following year.
Many of these sales plans were headcount-driven, spelling out how many more Executives, SDRs, and Customer Success Managers they’d need. But Dougie quickly found that this wasn’t an accurate way to plan for growth.
“Don’t believe that headcount equals growth. It’s the biggest mistake that I see all the time, and it’s common. Founders [will] have one or two salespeople that are doing well and then they’ll just say, ‘Well, if we just keep doing that and we have 100 salespeople, then life’s great, right?’”
As they quickly found, simply adding more people to the plan doesn’t necessarily mean that performance goes up and to the right.
Dougie needed a better way to learn the key levers that were critical to helping them achieve their annual goal.
What he found was that he could use 3 simple metrics to craft an accurate sales plan for hitting annual goals:
Qualified Held Meetings: the percentage of opportunities booked in the calendar, which show up and meet their qualification criteria (this metric replaced the more general “Opportunities Booked” which was more vague and less accurate for planning).
Close Rate: the percentage of sales opportunities or leads that are successfully converted into customers.
Average Deal Value: The average amount of revenue generated per closed sale or deal.
Here’s a super-simple example of how they use it:
They see that in a given month, they got:
In the old way, Dougie and the SourceWhale team would set a high-level revenue goal and then work backward to try and get there. Now, they’ll use this sales formula to estimate what they think is possible and set a revenue goal based on that.
For example, coming into 2024 they looked at the results for these metrics (or, “levers” as they see them). They analyzed how many Qualified Held Meetings they were generating every month, broken down by region (European and US) and source (Inbound vs Outbound). Then they looked at the average Close Rate and Average Deal Value.
This allows them to project how much revenue they’re likely to generate each month. For example, those 3 metrics might show them that they’re likely to generate $1m/mo moving forward.
If they want to increase that monthly revenue (to $1.5m/mo or $2m/mo for example), they look to see which of three (if not all) they believe they can impact positively.
“The question then becomes, ‘What lever are we going to focus on within that model? Are we going to spend our budget on increasing Qualified Held Meetings? Are we going to spend our budget on improving the Close Rate that we have? Are we going to spend our budget on improving the Average Deal Value?'”
Dougie was quick to point out, this isn’t necessarily only a sales budget. This is their whole business budget. So when they look to increase something like Average Deal Value, they might consider spending money on R&D to expand functionality or build additional product lines they can sell.
The SourceWhale team will pick the levers (any/all of the 3 metrics in their formula) they believe they can influence, and create a model of what it would look like.
For example, they may feel they’re able to improve Qualified Held Meetings by 20%, and increase their Cose Rate by 2%. So they’ll model out the improvement of those 2 levers to see what the outcome would be.
When they’ve arrived at a model they feel comfortable with, they’ll bake it into their annual plan. And as you might expect, this exercise involves all the company’s VP’s and leaders. However, you might be surprised to learn that they’re also aligning marketing and sales on Qualified Held Meetings by sharing compensation. So if marketing can procure leads at an event, that the SDR team follows up and books, the credit goes to both of them.
Once the plan is finalized, how often do they look at these metrics?
From a budget perspective, quarterly. Here, they’ll check if their assumptions are still true and if they aren’t, adjust accordingly.
From an operational perspective, they look at these numbers on a weekly basis. Individual reps will get a notification about their Close Rates (based on Deals closed in the past 30 days). And the four VPs will review a weekly metrics dashboard every Monday morning which shows 20 key metrics (including these 3), just to make sure things are heading in the right direction.
“Our account executives don’t just receive a revenue leaderboard on a weekly basis, they also receive a close rate leaderboard on a weekly basis as well. So they’re able to see, ‘Hey, this is great that I’m closing this revenue, but in terms of where I am as a baseline as part of the model, I’m above or below that line.’ And we have a large focus on our coaching within the organization is to make sure that the account executives are continuing to improve on a day-to-day and week-to-week basis, because we know that if we’re taking these qualified held meetings (which are extremely valuable) and giving them to reps within the organization that are not closing at the 30% rate, we’re breaking the model, right? We’re not going to get what we need at the end of it, particularly if their average deal value is also lower as well. So what do we do? Well, we can either improve that individual, or we can take those Qualified Held Meetings and give them to the individuals who are closing at the right rate, and who have the right Average Deal Value as part of it.”
“Our account executives don’t just receive a revenue leaderboard on a weekly basis, they also receive a close rate leaderboard on a weekly basis as well. So they’re able to see, ‘Hey, this is great that I’m closing this revenue, but in terms of where I am as a baseline as part of the model, I’m above or below that line.’
And we have a large focus on our coaching within the organization is to make sure that the account executives are continuing to improve on a day-to-day and week-to-week basis, because we know that if we’re taking these qualified held meetings (which are extremely valuable) and giving them to reps within the organization that are not closing at the 30% rate, we’re breaking the model, right?
We’re not going to get what we need at the end of it, particularly if their average deal value is also lower as well. So what do we do? Well, we can either improve that individual, or we can take those Qualified Held Meetings and give them to the individuals who are closing at the right rate, and who have the right Average Deal Value as part of it.”
With Databox, you can build custom metrics like Qualified Held Meetings, Average Deal Volume, and Close Rate to create your sales formula. See how.
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