Happy New Year!
I’ve been “living in 2017” for the past 2 weeks (professionally speaking) and it's great to finally have everyone here! Let me explain…
Our 2017 planning started a long time ago and based on my estimate has taken us 80+ hours to get us to where we are today which includes:
All of these documents we’ll be discussing in our full day offsite with our Leadership Team today.
So as we enter 2017 Brian and I are very excited to get back into execution mode and out of planning mode. The planning is behind us and but here’s how we got to where we are today:
It all started back in August when I shared with Brian our first version of our financial projections for 2017 based on where we were then and what we thought the rest of the year was going to look like. The reason we like to start this early is because putting together financial projections is very time consuming and late summer is our slowest time of the year so we have the time to have this type of conversation. Plus starting that early allows us to really think through what we want to accomplish in the coming year.
We put together 2 versions of our financial projections, (1) huge growth and huge investment year which is our high end projection and (2) conservative growth and minimal investment which is our lower end projection. From these two projections we found ourselves somewhere in the middle on our expected projections. Once we finalize that step, we tabled the conversation until the end of Q4 because it was time to get back to work.
At the end of the year, we fine tune the projections based on how we performed in Q4 and based on our further discussions about what we want the year to look like. We also spend some time discussing “what if things go wrong” so we know what levers we can pull in the event we have a down year and need to course correct. With our financial projections pretty much wrapped up we are just waiting for year end, then it’s time to turn our attention to our expenses.
Although we are a product company, people make up over ⅔ of our expenses in any given year which means that we start our expense review around our resources and specifically what investments we want to make in the new year. After some deep discussions Brian and I agreed that after having such a huge investment year (growing our team by 64%) in resource it was time to slow down and wait to see the full impact of our resources in 2017.
The reality is that adding people to your team is a very expensive process, not only in money of salary and possible recruiting fees but also the time to recruit, interview and then onboard. So with our renewed reduction in resource investments in 2017 that helped another big piece of our projections puzzle. As we headed into the Christmas holiday we had an idea of our revenue projections and our expenses (⅔ of which is resource related).
Once we had our Financial Projections and our Resource Game Plan it was time to start working on our Sales Projections and what it would take to achieve our financial projections. This is a tricky process because of how it will motivate the sales team. If we put the quotas too low it might be too costly if you have accelerators built in. And on the flipside if you put the quotas too high you risk demoralizing the team and them not ever achieving their goals.
We use a “historical plus” approach for our sales quota meaning we look at the historical performance of each sales rep and then make “appropriate adjustments” based on grounded assumptions. For example, our Director of Sales now has more people to manage which means we can’t assume he’ll be as productive as he was last year without neglecting his team. Additionally, last year we had a sales rep that started in March but didn’t really finish his onboarding and start selling until June. So we took his 2016 performance from June to Dec and annualized it, then added 10% because we assume he’ll be more efficient in year two.
Therefore by “appropriate adjustments” we don’t mean just increasing their quota by XX% just because of last year’s performance. We have seen that at other companies and it can be totally demoralizing. We want the sales team hungry to close as many of the RIGHT deals as possible as SOON as possible. And we don’t want them worried about quota or timing of deals.
Now that we had the Sales projections done the next natural question is where are the deals going to come from. We used a historical pattern matching approach for this, meaning we looked at the Deal Sources for the prior year and then updated them for 2017 with some grounded assumptions. For example, our leads from Inbound via our Demo Requests we assumed will have a similar performance in 2017 as there isn’t any material impact to our approach to inbound. There’s no need to increase the expectation if nothing from an investment standpoint has changed.
For the areas we saw gaps and needed to come up with Leads we listed our investments we plan to make in order to meet the demand. For example, we are increasing our investments in conferences this coming year to help drive more leads and deals through the pipeline.
By this point we have a solid financial projection, we know what investments we plan to make to our team, we know what our sales team needs to achieve via quotas and how marketing is going to support them with the right leads. Now it’s time to fill in the last piece of the puzzle which is our Product Plan.
The Product Plan is put together by our Head of Product, Brian, where he assesses all the plans we’ve outlined above and then puts together a high level plan for what the Product Team needs to deliver in order for us to hit our goals. In the “product world” it's very difficult to plan too far in advance and most of the best software companies don’t even attempt to try. However, with the information provided above Brian is able to start formulating themes that his team will want to tackle.
For example, with our reduction in resource investments and wanting to drive more efficiency with our current team, Brian is looking at projects we can do to help streamline our internal operations. We are a product company so the Product Team’s input into this process because we can’t do this without them.
There are a lot of details that go into putting this plan together and it's an iterative process, meaning as one part of the plan changes it might impact other parts. Once Brian and I feel comfortable with the plan we share with our Leadership Team. Then during our offsite we get everyone's input on the plans and make any necessary adjustments. It's important that we sync up with the Leadership Team and get on the same page so when we present to the company the following Monday we have ironed out all the details. This allows us to align our Goals for 2017 with our Leadership Team and then ultimately with our entire company.
Then we get busy executing…
Happy Planning as you kick off the New Year!
Our Leadership team is at our Offsite Meeting today where we are discussing all of these topics. For a copy of the agenda & objectives we will cover please download here: