Forecasting how much your business makes in a month is essential for financial planning. It can also help you make strategic business decisions for the future. Simply put, knowing your monthly recurring revenue is crucial for visualizing a sustainable growth trajectory and eventually following it.
For SaaS businesses that have a subscription-based revenue model, the calculation is straightforward. Just multiply the number of customers you have in each tier with their plan’s price and add it all up.
4 Tips to Build Predictable Revenue
- Talk to your customers.
- Audit your sales pipeline.
- Invest in thought leadership.
- Target bigger clients.
But it’s more than that.
Customers can quickly churn and markets can rapidly evolve. Suddenly, the revenue forecasting formula isn’t that straightforward. Your bottom line may not be as predictable as you thought.
In this article, let’s look at five ways you can work around these variables to predict your business’ revenue more accurately.
1. Talk to Your Customers
Staying in touch with your buyers will tell you whether your offerings are hitting the mark. They will also share their experiences with other tools and services. Most importantly, being in contact with your buyers will help you anticipate their future needs which can guide innovation.
Apart from valuable information about your audience’s needs, regularly communicating with customers makes them feel appreciated. This encourages them to engage with your brand and recommend your products or services to others.
There are various ways you can interact with your customers. Surveys, feedback forms, and one-on-one calls are some of the effective ways you can do so. Tools like Typeform, Survicate and ProProfs can help.
You can ask them about the user experience, learning curve and the value they are getting from your offerings. Many brands also include subjective questions related to the perceived ROI and areas of improvement.
If you have too many users, a simple multiple-choice questionnaire can work as well.
You can gain insights that can help you improve your products and services, pricing plans and even usage policies. The most important of all these benefits is that it helps with innovation. And this innovation goes beyond the core offerings of your brand.
You can, for instance, deliver a better user interface (UI) or additional payment options. Furthermore, this can enhance your internal workflows as well. Let’s consider the same examples: a better UI and new payment options.
This may require you to build product development workflows around your users and a scalable subscription management system. To avoid getting overwhelmed, take baby steps and monitor closely.
It is a good practice to keep these feedback and review requests as short as possible. Your users may not have time to answer all the in-depth questions you might have. At the same time, try your best to get detailed feedback from older customers and larger accounts.
2. Audit Your Sales Pipeline
Auditing your sales pipeline tells you the effectiveness and efficiency of your campaign, workflows, tools, and team. It is crucial to revisit this every few months. This can uncover many simple, yet highly impactful areas of improvement.
There is certain data you need to collect first. Key performance indicators (KPIs) for the sales pipeline efficiency include:
- Lead velocity rate (LVR): The percentage growth in qualified leads month-over-month.
- Conversion rate: The percentage of leads that progress from one stage of the sales pipeline to the next.
- Sales cycle length: The average time it takes for a lead to move through the entire sales pipeline.
- Win rate: The percentage of deals closed out of the total number of opportunities.
- Average deal size: The average revenue generated from a closed deal.
This data will help you calculate the potential revenue. For instance, if you have 100 opportunities, a win rate of 20 percent, and an average deal size of $10,000, the potential revenue is 100 * 0.20 * $10,000 = $200,000.
This is also known as pipeline value.
Knowing how to tangibly estimate the pipeline value will give you complete visibility of how things move in your sales processes. This makes it easy for teams to accurately find and fix roadblocks. Roadblocks could be content that fails to persuade, a complex checkout process or poorly set up analytics.
Be mindful that enhancing your sales pipeline after an audit may require you to adopt new tools, rethink responsibilities within the team, or modify workflows by using a database management platform where you can manage your workflow easily. It is important to be cautious while implementing these changes. Tracking the pipeline value with the help of the above parameters is pivotal in this regard.
3. Invest in Thought Leadership
A little bit of credibility goes a long way. For people to choose you over your competitors, they need to trust you first. Yes, your marketing and sales processes need to be on point. But, nothing matters if they don’t trust you.
This is because people buy from people. Brands that are more favorably looked upon do better in all seasons. You might have seen this or experienced it firsthand.
Rand Fishkin, co-founder of the SEO tool Moz and marketing tool SparkToro, possessed expertise and knowledge in the field of digital marketing making it easier to trust those two platforms. These tools didn’t start out as one of the benchmark solutions in their niche.
It’s the user’s faith in Fishkin’s intellect and character that gives them an edge.
Businesses and enterprises, particularly in the SaaS industry, need to start talking to their buyers. Not as a brand, but as a human.
For instance, Dharmesh Shah, co-founder of HubSpot appears on podcasts and shares his experiences on various platforms. By consistently engaging with his audience, Shah has humanized HubSpot.
Start by creating and sharing insightful content. Write blog posts, whitepapers, and case studies that talk about industry challenges and provide actionable solutions. You can also attend and speak at conferences and webinars to share your expertise and connect with a broader audience.
Other effective methods to improve your reach is by:
- Engaging on social media platforms.
- Hosting webinars.
- Collaborating with industry influencers.
- Participating in forums and communities.
4. Target Bigger Clients
Larger clients typically bring higher contract values, longer-term commitments, and increased stability. Their substantial budgets and strategic partnerships can significantly boost your revenue and enhance business growth.
These are typically the big businesses and enterprises. Having a few of these clients can cover most, if not all, of the overhead costs.
To effectively find and close these deals, employ account-based marketing (ABM) and hyper-personalization strategies.
ABM involves researching your potential leads comprehensively and creating tailored content such as presentation decks, emails, and ebooks. After reaching out and successfully engaging with the prospect, the sales team needs to nurture them until conversion.
This is where hyper-personalization comes in. Truth be told, you can personalize almost everything, from sending them personalized videos to generating custom quotations.
Use CRM and marketing automation tools to gather and analyze data on target accounts. If you have the budget, retarget these leads with programmatic ads.
Internally, it’s recommended to have a dedicated account management team that provides personalized service and support. This will make the handover from sales to the customer success team seamless. As a result, the customer success team can begin their relationship on a positive note which can help with retention.
Getting predictable revenue is essential for financial planning and strategic growth. Businesses need to talk to customers, audit the sales pipeline, become thought leaders and aim for bigger clients to forecast their bottom line accurately.
Keep in mind that building predictable revenue is a continuous process. Closely monitor the pipeline performance and revenue metrics to adapt as needed
