Pre-Budget Planning: Long-Range Revenue Plan
For companies on a calendar fiscal year, late summer is a great time to evaluate and update your long-range (3 to 5 year) revenue plan before the fall planning season officially kicks into high gear.
In the below article, David Conrad, Consultant at Bridgepoint Consulting, offers essential insights and recommendations for updating your long-range plan (LRP) for revenue or sales.
Why is now the time to update your Long-Range Revenue Plan?
The companies that tend to be the most prepared for the fall planning season are those that have refreshed their LRP plans, even if on a high level.
Refreshing the plan ahead of time allows a company to focus less on the “what” (the goals) and more tactically on the “how” (the number of salespeople, required marketing spend and marketing conversion), which makes finishing the budget with quality more achievable.
Moreover, an updated demand plan covering the following 2 to 3 years makes the next annual budget more meaningful as next year’s annual plan becomes a continuous step in the longer-term vision.
What’s included in a Long-Term Revenue Plan:
- Revenue/sales goals by year for the next 3 to 5 years.
- Revenue/sales goals segmented by 2 to 3 key opportunity areas such as vertical, target customer, country, and or by product or service offering.
- Considerations of macroeconomic and industry-specific headwinds or tailwinds or changes in accounting standards.
Top Tips & Recommendations for Updating Your Long-Range Revenue Plan
1. Set up your planning approach
Being organized and purposeful while updating your longer-term demand plan will increase the ROI on this initiative.
- Timeframe. It is recommended to be thoughtful on what timeframe you want to plan over. Typically, 3 to 5 years is common. A minimum of 2 years is recommended, as 2 years helps develop continuity between next year’s annual plan and what that company may be thinking of beyond that.
- Environment. Hosting an off-site meeting to update the plan is encouraged as this can foster creativity and it could serve as an adjunct team building exercise.
- Stakeholders. Key stakeholders from Sales and Marketing are obvious to invite. Leaders from R&D and product development that fuel what is sold and offered should be invited as well.
2. Understand prior revenue performance vs. the plan
Revisiting how the company performed compared to the annual plan for last year, or longer, has several benefits. Igniting key memories and lessons learned that can help the company be aware of its planning strengths, weaknesses, and tendencies.
Helping the company be more aware if it budgets consistently too conservatively or too aggressively in certain areas.
Having a handful of reliable data points related to revenue prepared in advance will increase the ROI on this historical review exercise. A couple are listed below.
- Year-over-year trends for both price and volume. Volume may include number of customers, number of subscriptions, or SKU’s sold. Price may include higher-level ratios such as revenue per customer, revenue per subscription or more traditionally price per SKU.
- Top customers. Having honest conversations about what key customers may be at risk long-term and on the other hand which ones are emerging to offset risk is a healthy exercise
- Geographical Breakout. Visibility into what countries and regions are growing or declining can spur the company to think globally.
3. Use benchmarks
As mentioned in Step 1, key internal stakeholders will attend and provide their input. To complement their perspectives, it is recommended to pursue external benchmarks to help compare the company’s vision against reputable 3rd party research firms. This can aid in preventing groupthink.
External benchmarks can help the company with:
- How the overall industry is expected to grow and in what product/service segments or geographies.
- Understanding if the LRP for revenue is on pace with other companies at similar maturity levels.
Final Thoughts on Pre-Budget Planning
Updating your LRP for revenue is not only considered a best practice but also offers a way to save time — and ultimately, money – during your next fall planning cycle.
If you need help with organizing your planning process now or for the fall, Bridgepoint can help.
Contact us today or explore how we can partner for growth here.
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