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VOL. 39 | NO. 25 | Friday, June 19, 2015

Using past performance to predict future revenue

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Far too many companies look to past growth as the single-best predictor of future growth in setting annual revenue targets with little analysis of the factors driving that past progress, anticipated market shifts over the coming year and the predictability of the sales and marketing strategies built into their annual plan.

It is a goal-setting process with a high likelihood for failure caused by either unrealistically high goals or those which aren’t nearly aggressive enough.

Assuming you’ve measured prior year marketing efforts and assessed anticipated competitive and market factors, you are ready to develop a sales and marketing strategy – ideally with predictable returns.

While plan predictability might sound like fortune telling, there’s no hocus pocus to it. It’s a science that begins with examination of returns on past sales and marketing efforts, as past measurement is what drives your ability to predict results.

Not every sales and marketing strategy is easily measurable or predictable. The key is to “heavy up” your budget toward strategies that are, ensuring the returns generated by those measurable strategies more than cover your entire plan budget.

Digital strategies, such as search-engine pay-per-click campaigns, are highly measurable. Set up properly, you can easily gauge a consumer’s conversion to a sale after entering your targeted keywords into a search engine and ultimately clicking on your sponsored campaign.

Let’s say last year you had a $50,000 search engine pay-per-click campaign budget. For simplicity sake, let’s assume you invested half in keyword combination A and half in keyword combination B.

Combo A generated a two-to-one return, turning $25,000 into $50,000, while combo B generating a four-to-one return, generating $100,000 from $25,000. All in, you earned $150,000 from a $50,000.

Now this year, you opt to put the full $50,000 into combo B that you predict, assuming all other marketplace factors are even, will generate $200,000 in returns.

Naturally, all marketplace factors are never even, and their anticipated impact on your returns must be accounted for.

Generally speaking, look at your sales and marketing plan investment in two buckets – proven and unproven.

Put about 80 percent of your budget into strategies with a history for proven pay off and 20 percent into testing new, innovative strategies for possible larger-scale deployment in future years or those tactics that you know you must deploy but cannot be easily measured.

With more and more companies feeling pressure to deliver a return on their sales and marketing investment, and increasing technological advancements allowing sales and marketing professionals to do just that, say goodbye to hope-based goals.

Lori Turner-Wilson is an award-winning columnist and managing partner of RedRover Sales & Marketing, www.redrovercompany.com, with offices in Memphis and Nashville. You can follow RedRover on Twitter (@redrovercompany and @loriturner) and Facebook (facebook.com/redrovercompany).

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