What Is A Revenue Generation Forecast?
As a founder, are you struggling to figure out how you can afford to build the sales and marketing team needed to grow your revenue past what you alone can deliver? Creating a Revenue Generation Forecast is a great way to work through solutions to the challenge of moving from Founder Revenue to Scalable Revenue.
A Revenue Generation Forecast is a detailed roadmap outlining how founders will deliberately invest in sales and marketing activities to drive future revenue growth. At its core is the mindset that founders must systematically set aside cash from today’s revenue to develop a marketing and sales engine to drive their business forward into the future. By setting aside cash designated just for this purpose, founders can start to implement sales and marketing initiatives to help close more deals.
A Revenue Generation Forecast provides a complete picture of the actions the company is taking now and in the future to grow revenue and shows total spending as a percentage of current and projected revenue. This vital modeling and planning tool captures and documents every dollar of sales and marketing cost across the business. By tracking this data and using it to make decisions, founders can build an actionable, integrated plan, tweaking the percentage of revenue allocated to sales and marketing over time as needed to drive revenue growth.
Build A Cash Reserve
One of the biggest challenges for small businesses is managing cash flow. Too often, companies spend all their available cash to fund operations, with nothing specifically allocated to grow future revenue. When evaluating marketing or sales opportunities, founders struggle to justify pulling cash away from operational needs to spend on things that could drive revenue growth. With a Revenue Generation Forecast in place, founders deliberately allocate a specific percentage of revenue each month to invest in sales and marketing initiatives. This creates a reserve of funds already designated to spend on people and programs to drive revenue growth.
Ideally, founders should transfer this cash into a separate bank account used only for sales and marketing spending so these funds are completely separate from operational cash. Using their Revenue Generation Forecast, founders can plan to grow and develop a sales and marketing organization over time using the cash reserve already accumulated and designated for that purpose.
Know Your Numbers
In many cases, founders are surprised to find out how much they are spending on sales and marketing initiatives as a percentage of revenue. Some realize they are spending much more than they thought, while others realize they have been spending too little. A Revenue Generation Forecast can provide an eye-opening view of what your actual spending has been so far, providing valuable insights to draw from when creating a go-forward plan to scale revenue over time.
By gathering all these details into a single document, founders have easy access to the data they need to make informed decisions about where they will spend on sales and marketing initiatives to drive future results. Their Revenue Generation Forecast allows them to track what happened in the past, monitor what is going on now, and build out plans to drive long-term revenue growth.
Start Where You Are
No matter how large or small your business is today, you can still develop a meaningful Revenue Generation Forecast. The most important thing is to start where you are and make a plan. By using a Revenue Generation Forecast, founders can see the impact of increasing the percentage of revenue allocated to drive revenue growth over time, as well as model out plans for future sales and marketing initiatives. The flexibility to develop a plan and choose the timing and spending levels that are right for the business make a Revenue Generation Forecast a valuable tool for growing companies.
Make Better Decisions With A Revenue Generation Forecast
Many founders make opportunistic spending decisions on sales and marketing programs based on gut feel or the need to “do something” to drive revenue. Founders realize they can’t continue to be the only resource to find and close all the deals needed to grow the business, but they don’t have a deliberate plan in place to make this shift.
Creating a Revenue Generation Forecast helps founders develop a funded plan to grow revenue and provides valuable context to evaluate spending opportunities. With a roadmap in place, founders have ongoing visibility and control over their sales and marketing investments as the business grows and changes. Not every spending decision will have the outcome the founder had hoped for. But with a Revenue Generation Forecast in place, founders can easily track and evaluate results and continue to tweak the plan over time based on what they learn.
Establish Metrics To Track Results
A key metric for monitoring the effectiveness of sales and marketing initiatives over time is the Customer Acquisition Cost (CAC). This is calculated as the total cost of sales and marketing spend divided by the number of new customers added. CAC tells you how much you are spending on average to get a new customer, an important indicator of sales and marketing effectiveness. By implementing a Revenue Generation Forecast, founders will track total sales and marketing costs on an ongoing basis. This makes it easy to calculate and monitor CAC over time and understand the financial impact of different initiatives on the cost to grow revenue and add customers.
Drive Sales and Marketing Alignment
Moving from Founder Revenue to Scalable Revenue requires building a tightly integrated sales and marketing team all focused on the same outcome. Too often, companies create silos around sales and marketing teams who compete for resources and don’t have shared accountability for results. A Revenue Generation Forecast helps solve this issue because it provides a high-level view of all monies allocated to grow future revenue, with a focus on how the sales and marketing teams can work together to drive the return on that overall investment. By developing a Revenue Generation Forecast before you build out your sales and marketing engine, you can create an aligned team early on instead of struggling to integrate separate teams in the future.
Another benefit of using a Revenue Generation Forecast is the clarity it provides around goal setting for your team. Based on your Revenue Generation Forecast, the entire sales and marketing team can be aligned on one shared goal: to drive increased revenue growth while decreasing customer acquisition costs over time. By implementing this simple tool, your entire sales and marketing team will understand how their combined results will be tracked and monitored, helping you build a unified team with shared accountability around the same goal.
Need Help Developing A Revenue Generation Forecast?
Many founder-led firms need help and support to develop a realistic path to scale their business. The expert team at FounderScale is uniquely qualified to help founders navigate the journey from Founder Revenue to Scalable Revenue so they don’t have to make that journey alone.
FounderScale’s core focus is helping founders increase their impact in the communities where they live and work by helping them successfully grow their businesses. Let us help you create a plan to move from where you are to where you want to be. Contact us today to learn more about how we can support your growth and success.