How Do You Forecast: Deals or Dollars?

How to avoid the strategy gap between finance and sales

There's a strategic gap between finance and sales. And far too often, finance fills that gap. 

Let me explain. 

CFOs work in dollars, euros, yen, pesos - whatever the local currency is. And rightly so. By reducing everything to, let's say, 'dollars,' it makes it easy for them to move value around their spreadsheets, from revenue to salaries to overhead to suppliers, etc.  

However, your sales leader is focussing on deals. They organize their team to engage with clients and close deals. The sales pipeline is deal driven.  

This results in a strategic gap.  

If your company has an objective of achieving $15 million in revenue from a particular marketplace, the sales team has to figure out how to sell $15 million worth of products, and this is where the disconnect happens. You see, it's impossible for a salesperson to sell 15 million dollars. What a salesperson can do is sell 15 deals at $1 million each, or 150 deals at $100,000 each or 1,500 deals at $10,000 each and so on.   

Finance and sales have to agree on a strategy that includes a revenue forecast and a forecast number of deals. And, most importantly, the sales expense budget needs to support the activity level to secure the forecast number of deals. In my experience, the sales expense budget is always underestimated. It’s not unusual for each deal to require engaging 30 different prospects an average of three times each – that’s 90 engagements per deal. And if you need just 15 deals that’s 1350 engagements. 

What to do? 

Always understand your revenue targets as deals. Create a target revenue per deal to drive the calculation (or possibly create a small, medium, large sizing estimate).  All of the communications, branding, and promotional activities, are tailored to the number of deals you need.  

Does your finance team understand what a deal is? Do they understand what your sales pipeline is? If not, it's high time they did. 

After many years working in the sales trenches and many more advising companies on growth, I bring insights on how to establish deal size, how to design a sales funnel along with pragmatic ways to bring home the deals required. 

Call me anytime for advice on how to structure your deal strategy  😊 

See you next time, 

Andrew