The driving concept is defensibility. You want to be able to withstand a withering volley of challenges, developed by a fleet of fresh-faced MBAs, posed by a buyer who is attempting to destroy your projections, and your credibility, in an effort to reduce the transaction value. Heres how:
Start with accurate, solid historical data.
Analyze inventory of revenue producing assets.
- Products currently deliverable
- New products that will address new markets, extend others
- Backlog of deliverable products and services
- Maintenance and upgrades
- Sales staff that is larger and more experienced
- Marketing programs that are generating more leads
- Growing brand identity and reputation in market
- Larger user base for future upgrades and services
Compute relevant metrics for each projected year and compare to historical.
- Revenue per employee
- New sales revenue per salesperson
- New sales units per salesperson
- Projected revenues by partner/OEM/Reseller
- Total expenses per employee
- Number of customers per support person
Review the pipeline.
- Track trials, demos, benchmarks, RFPs etc. vs prior years
- Understand and articulate your typical sales cycle
Analyze pricing.
- Track vs. competitors
- Room to raise prices / pressure to reduce?
- Cost / benefit motivating factors save if I buy now?
Analyze the competitive environment.
- Who is selling, and how do you compare
- Why you think you can continue to take market share
- Why do you win in a competitive selling situation why do you lose
Macro factors.
- Growth in overall economy, and your sector
- Political issues and constraints
Finally, build unit forecasts and estimates, with adjustments for most likely, pessimistic, and optimistic. Develop a model for sales staffing levels and budgets to support marketing.
Make sure you understand how the forecasts were constructed.
To me, the most critical aspect is to come at it from two angles - bottom up (how many widgets, when) and top down (percentage of total market).