So, How Solid Are Those Sales Projections?

I have spent a fair bit of time with a passel of early stage companies over the last five years, typically ones selling some form of software, service or technology to a segment of the business community for anywhere from $1,000 – $20,000 in MRR (Monthly Recurring Revenue), or $15,000 – $250,000 in total ticket value, helping them build out their sales plan.  One of the routines we invariably go through is developing a realistic estimate of the company’s sales cycle. Actually, it isn’t a routine, it is a struggle: it takes a lot of hard work to figure this out.


Frequently thefounder/visionary has a very optimistic sense of how quickly his team can turn a sale, based on his passion, and drive and his success landing some beta accounts, and has sold this cycle length to his investors.   Couple this with the facts that in the first few years of life, the product offered, its pricing, the vertical(s) targeted and the team doing the selling will likely shift considerably, and you get an idea for why routine becomes struggle.  Early stage sales are often developed on the fly, the company has to stretch to land the order.

To begin to frame what an early stage sales plan, I like to first look at how long it is likely to take for a salesperson to work their way through a target organization, taking into account the budgeting process and the fact that will almost any software and service, particularly one that is new, the buyer will want to run some sort of trial.  This usually results in a sales cycle that is months, not weeks long.

Simple Model

Then I like to build a simple model of how a salesperson will sell – how long it will take them to ramp up, what range of sizes of deals will they do, what volume of deals they can handle, taking into account the closing and provisioning process.  I then take this model salesperson and use it to build out the team.

Finally, I map this theoretical model to the current pipeline, however developed it is, to understand the gap between “What we’ve got and what we’ve got to get to.”

One of the most difficult things in getting your mind around the early stage sale is the fact that non-transactional sales (the kind I am talking about here), ones that require complex selling, navigating an organization, uncovering needs, are still moved forward through a relationship that your sales person builds with the prospect.  It is very difficult to shrink this: very few of us would make a purchase decision for a product or service with a significant net present value without a fair bit of time-burning evaluation and consultation.


In the end, sales projections will almost always take on a slightly optimistic shine.  And they should – those of us working with early stage companies are believers and work hard to make vision reality.

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