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The Sales & Marketing Leading Indicator to Drive Forecast

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Created by: Jeff Schwartz

Last updated: 6th Sep, 2024

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What you’ll learn

Jeff Schwartz presents leading indicators as a more actionable alternative to capacity-based revenue forecasting. The talk explains a SaaS forecasting formula, how demand inputs reveal risk early, and how teams can course-correct through channels and events.

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Key moments

Find the ideas you need and go straight to the source.

Question capacity-model assumptions

“usually that's the answer is we need more people to do that my clicker doesn't seem to okay there we go so in this example their Finance team came and said we're going to have to hit 13 million to hit that goal to get to that 15 million they wanted to get to 13 million in new business AR and so and you can see that the jump from 2022 to 2023 the sales team said okay so what does that mean for me what do like how many people am I GNA have to bring on on to to be able to do that so they looked at what they call sales capacity and”
Watch at 02:56

Use opportunities, deal size, and win rate

“blue something so obvious and when I'm going to tell you is so obvious and so practical yet no one is really doing it most companies are not doing what I'm about to show you so what is it the SAS 101 formula well new business AR how many opportunities are you going to create what is your average deal size you multiply those two numbers together and then what is your win rates over time key thing here is over time most companies do not look at things over time they look at win rates it's very naive and let me explain why it's naive”
Watch at 06:21

Experiment with demand channels

“more it's actually you can actually go one by one and figure out what things are you going to do to actually drive demand in your product so that's the second piece the third piece is if one of them starts to not work and again this is fluid right things sometimes stop working you can bring in new channels so maybe you were doing LinkedIn ads are working and you're like okay maybe we should try Facebook ads because some of our other channels aren't working you could bring these other things in maybe you want to try a podcast maybe you're you're going to create a news letter to drive inbound you could try different things and experiment and it really”
Watch at 09:40

Use events to correct revenue risk

“ad budget that is an expense place so that is a conversation that had to happen um and then the third thing uh that they did was they actually had each sales rep host a local dinner um in different territories throughout the throughout the country um because they saw events were converting well so they they invested a little more in in person so they were able to course correct uh when they right when they fell behind and the result as I showed at the beginning was you had the blue blue and the green line right in line so they hit exactly what they said they were going to”
Watch at 13:06

Examine sales-capacity forecasting

“How Most Teams Forecast Today for the Year: Sales Capacity Example × × $250k Quota 10 reps 75% Attainment How many ramped sales reps will I have in the quarter? What is the quota per rep in that quarter? What % of quota do I expect the team to achieve?”
Read slide 9

Use the SaaS 101 formula

“How Teams Should Forecast: The SaaS 101 Formula”
Read slide 18

See revenue risk earlier

“Key Benefits ✓ You will know if you’re ahead or behind on your revenue numbers way before they hit the books to give you time to course correct # of Opportunities Average Deal Size Win Rates Over Time × × This number might happen 3-12 months before it impacts revenue”
Read slide 27

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    The Sales & Marketing Leading Indicator to Drive Forecast - Slide Deck

Instructor

Jeff Schwartz Headshot
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Jeff Schwartz

dataroomHQ Logo
Founder and CEO of dataroomHQ

CEO of dataroomHQ, a platform providing secure virtual data rooms for M&A transactions and document sharing.

Revenue: $5M

Fast growing SaaS companies offer this course to their employees

Excel file and training we used to launch our profit sharing plan at our $3m ARR SaaS company.

Fast growing SaaS companies

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Slide text

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45 passages

Leading-indicator forecasting

  1. Slide 1Open deck

    SaaSOpen, September 2024 The Sales & Marketing Leading Indicator Framework to Drive Forecast Jeff Schwartz Founder & CEO, dataroomHQ

  2. Slide 2Open deck

    Over the next 20 minutes I’m going to show you How most companies forecast today and why it doesn’t work The SaaS 101 Formula An example bringing it all together

  3. Slide 3Open deck

    We will apply the SaaS 101 Formula Here based on one of our customers planning going into 2023

  4. Slide 4Open deck

    Why Does Forecasting Revenue Even Matter? ✓ Expense budgets are created to ensure the company doesn’t run out of cash before hitting next milestones. If you miss the revenue, then your cash position and runway will be shorter than anticipated leading to RIFs and Shutdowns. Numbers are set to give you the best chance to hit whatever the strategic objectives of a company are. Miss the goals and it makes those objectives much harder. ✓ Company Survival Best Outcome

  5. Slide 5Open deck

    Finance - Here is our Annual Plan for the year. Sales - We need 25 more sellers then

  6. Slide 6Open deck

    Example: Finance Top-Down Company Goal Actuals Plan Finance - We need to add $13M in New Business this year $13M

  7. Slide 7Open deck

    How Most Teams Forecast Today for the Year: Sales Capacity Example 10 reps How many ramped sales reps will I have in the quarter?

  8. Slide 8Open deck

    How Most Teams Forecast Today for the Year: Sales Capacity Example × $250k Quota 10 reps How many ramped sales reps will I have in the quarter? What is the quota per rep in that quarter?

How teams forecast today

  1. Slide 9Open deck

    How Most Teams Forecast Today for the Year: Sales Capacity Example × × $250k Quota 10 reps 75% Attainment How many ramped sales reps will I have in the quarter? What is the quota per rep in that quarter? What % of quota do I expect the team to achieve?

  2. Slide 10Open deck

    How Most Teams Forecast Today for the Year: Sales Capacity Example × × $250k Quota ＝ $1.875M in New Business ARR 10 reps 75% Attainment How many ramped sales reps will I have in the quarter? What is the quota per rep in that quarter? What % of quota do I expect the team to achieve? $7.5M in New Business ARR for the Year

  3. Slide 11Open deck

    How Most Teams Forecast Today for the Year: Sales Capacity Example $1.875M in New Business ARR $7.5M in New Business ARR for the Year Finance - We need to add $13M in New Business this year Sales

  4. Slide 12Open deck

    How Most Teams Forecast Today for the Year: Sales Capacity Example $1.875M in New Business ARR $7.5M in New Business ARR for the Year Finance - We need to add $13M in New Business this year Sales $5.5M Short Hire now, 6 months ramp $5.5M = Reps x $500k x 75% 15 Additional Reps

  5. Slide 13Open deck

    Sales Capacity Formula × × Quota ＝ New Business ARR Ramped Reps Assumed Attainment

  6. Slide 14Open deck

    Major Flaws × Assumes you can hit any number by hiring more sales reps × × Quota ＝ New Business ARR Ramped Reps Assumed Attainment

  7. Slide 15Open deck

    Major Flaws × Assumes you can hit any number by hiring more sales reps Teams hire aggressively to then not hit a number and have to fire aggressively ×

  8. Slide 16Open deck

    Major Flaws × Assumes you can hit any number by hiring more sales reps Teams hire aggressively to then not hit a number and have to fire aggressively × By the time you know if your ‘attainment’ assumption was correct, it is too late ×

  9. Slide 17Open deck

    Major Flaws × Assumes you can hit any number by hiring more sales reps Teams hire aggressively to then not hit a number and have to fire aggressively This tells you the amount of ‘demand’ you can serve, but it does not tell you the demand × × By the time you know if your ‘attainment’ assumption was correct, it is too late × ✓ If used properly!

The SaaS forecasting formula

  1. Slide 18Open deck

    How Teams Should Forecast: The SaaS 101 Formula

  2. Slide 19Open deck

    How Teams Should Forecast: The SaaS 101 Formula New Business ARR is equal to: # of Opportunities

  3. Slide 20Open deck

    # of Opportunities Average Deal Size × New Business ARR is equal to: How Teams Should Forecast: The SaaS 101 Formula

  4. Slide 21Open deck

    # of Opportunities Average Deal Size Win Rates Over Time × × New Business ARR is equal to: How Teams Should Forecast: The SaaS 101 Formula

  5. Slide 22Open deck

    The Formula in Practice

  6. Slide 23Open deck

    The Formula in Practice (End of ‘22) Number of Opportunities Per Month Goal

  7. Slide 24Open deck

    The Formula in Practice (End of ‘22) Number of Opportunities Per Month Goal $25k Average Deal Size Goal

  8. Slide 25Open deck

    The Formula in Practice (End of ‘22) Number of Opportunities Per Month Goal $25k Average Deal Size Goal Win Rates Over Time Goal

  9. Slide 26Open deck

    The Formula in Practice (End of ‘22) Number of Opportunities Per Month Goal $25k Average Deal Size Goal Win Rates Over Time Goal Existing Pipeline

Benefits of leading indicators

  1. Slide 27Open deck

    Key Benefits ✓ You will know if you’re ahead or behind on your revenue numbers way before they hit the books to give you time to course correct # of Opportunities Average Deal Size Win Rates Over Time × × This number might happen 3-12 months before it impacts revenue

  2. Slide 28Open deck

    Key Benefits ✓ You will know if you’re ahead or behind on your revenue numbers way before they hit the books to give you time to course correct Each source has actions that can be done to drive more opportunity. It might require more spend, but it’s actionable. ✓ Event calendar, sponsor, event playbook Optimize conversion, update copy, budgets, targeting

  3. Slide 29Open deck

    Key Benefits ✓ You will know if you’re ahead or behind on your revenue numbers way before they hit the books to give you time to course correct Each source has actions that can be done to drive more opportunity. It might require more spend, but it’s actionable. It gives you enough time to create new demand channels to leverage if you fall behind ✓ ✓ Let’s try Facebook ads, local field events, podcast, tech partnership

  4. Slide 30Open deck

    Key Benefits ✓ You will know if you’re ahead or behind on your revenue numbers way before they hit the books to give you time to course correct Each source has actions that can be done to drive more opportunity. It might require more spend, but it’s actionable. It gives you enough time to create new demand channels to leverage if you fall behind It is math. To hit your target you will need to either hit the targets set OR if you miss one, make up for it in one of the other levers ✓ ✓ ✓

  5. Slide 31Open deck

    2023 Projections New Business ARR if you hit those 2023 Goals

  6. Slide 32Open deck

    2023 Projections Now Overlay Sales Capacity Need to hire more reps to have enough capacity to cover demand

  7. Slide 33Open deck

    2023 Projections Ensure Demand and Rep Capacity are closely aligned +4 Ramped Reps

  8. Slide 34Open deck

    Ability to Course Correct On track, but in May hit a bump

  9. Slide 35Open deck

    Ability to Course Correct On track, but in May hit a bump Increased resources in the channels that were performing the best: Added 4 additional events to their event calendar Had each sales rep host a local dinner field event Slightly increased the LinkedIn Ad budget

Results

  1. Slide 36Open deck

    The Results

  2. Slide 37Open deck

    Applying This To Your Company List out all the sources used to generate new opportunities with a name assigned to each source.

  3. Slide 38Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Applying This To Your Company

  4. Slide 39Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Determine the average deal size and win rate over time assumption. Applying This To Your Company

  5. Slide 40Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Determine the average deal size and win rate over time assumption. Use the formula to see what it yields for New Business. Applying This To Your Company

  6. Slide 41Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Determine the average deal size and win rate over time assumption. Use the formula to see what it yields for New Business. Overlay sales capacity and ensure they’re aligned. Applying This To Your Company

  7. Slide 42Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Determine the average deal size and win rate over time assumption. Use the formula to see what it yields for New Business. Overlay sales capacity and ensure they’re aligned. Compare this to the Top Down Financial plan. Ensure they are aligned. This is where Sales and Marketing should either explain additional budget needed to hit the goals, or explain why it would not be feasible. Applying This To Your Company

  8. Slide 43Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Determine the average deal size and win rate over time assumption. Use the formula to see what it yields for New Business. Overlay sales capacity and ensure they’re aligned. Compare this to the Top Down Financial plan. Ensure they are aligned. This is where Sales and Marketing should either explain additional budget needed to hit the goals or explain why it would not be feasible. If you fall behind on the Opportunity Created goals, determine how many additional opportunities you would need to create in the next few months to course correct and what channel can create them. Applying This To Your Company

  9. Slide 44Open deck

    List out all the sources used to generate new opportunities with a name assigned to each source. How many opportunities will be created by month per source? The person assigned should be the one developing this. Determine the average deal size and win rate over time assumption. Use the formula to see what it yields for New Business. Overlay sales capacity and ensure they’re aligned. Compare this to the Top Down Financial plan. Ensure they are aligned. This is where Sales and Marketing should either explain additional budget needed to hit the goals or explain why it would not be feasible. If you fall behind on the Opportunity Created goals, determine how many additional opportunities you would need to create in the next few months to course correct and what channel can create them. Hit your leading indicators, and the rest is math. Applying This To Your Company

  10. Slide 45Open deck

    SaaSOpen, September 2024 Thank you! [redacted email] Jeff Schwartz Founder & CEO, dataroomHQ