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  • Writer's pictureAlex Handsaker

What is Revenue Scenario Planning?

Revenue Scenario Planning

Scenario planning - Not just a Revops or Finance buzzword, it's a critical, strategic process that can help you to navigate through the volatility of future (and current) market situations and external forces, and when it comes to doing it to your Revenue Plans, it's now pretty mission critical.


Whilst in most businesses the approach to monitor pipeline & revenue have evolved significantly, scenario planning for many is still operated out of a mass of spreadsheets, if even run at all.


It's a process that involves everyone from sales, RevOps, finance and leadership, and should run from a solid bottom up model, which itself can be the start of the problems. Whether you're using planning software already or not, strategic scenario planning allows you to model different revenue scenarios, helping to understand risks and navigate through uncertainties effectively.


Here at Clevenue we believe that everyone should have access to the answers to important questions, and are on a mission to help make planning and scenario testing more accessible to everyone.


This guide should show you how to get started, as well as give you a few resources and ideas for what you should be looking out for.


For those that want to dive straight in, we've built some help for templates to get your started, covering scenario planning and capacity planning, or even better, take a look at what is possible with Clevenue's revenue planning software.


What is Revenue Scenario Planning


Being able to scenario plan your revenue is like having a crystal ball. Here's as breakdown of what it is and how it helps:


  • Identifying Key Trends: This includes market trends, tech advancements that might change the way your teams operate (like the introduction of AI tools), regulatory shifts, and consumer behaviour. It's about knowing the game and the players, ensuring you're not caught off guard.

  • Understanding Currently Developing Scenarios: The "what-ifs" built using intuitive, quantitative, and participatory methods, create multiple scenarios that reflect different futures. This isn't about guessing; it's about informed speculation. Dive deep into each scenario, understanding its potential impact on your bottom line.

  • Optimization and Decision-Making: With your scenarios laid out, analyze them to identify the most financially beneficial paths. This step is crucial for optimizing revenue growth and profitability. It's where strategic choices are made, guiding where to channel investments to fuel growth.


Remember, the goal here isn't just to survive potential futures but to thrive in them, and so it can be a complex but pretty essential task.


The Importance of Revenue Scenario Planning


With how fast trends and markets now change, simply creating a plan and setting off to execute it is a recipe for disaster. The only thing you can guarantee with your plan is that most of the assumptions you make at the start will have shifted by the end, and in most cases before you even make it part of the way through.


Scenario testing helps you build out your playbook for navigating through the unpredictable waves of market situations and external forces. Here's why it's a game-changer:


  • Strategic Agility: At its core, scenario planning fosters a forward-thinking mindset, making your organization nimble and adaptable. You're not just reacting to changes; you're two steps ahead, ready to pivot with precision. This agility is crucial in outmaneuvering competitors and seizing opportunities in early stages.

  • Risk Mitigation and Opportunity Identification: By modeling multiple scenarios, you're essentially stress-testing your business against potential futures. This proactive approach helps in identifying threats and opportunities alike, ensuring that your strategy is robust against various outcomes. It's about making informed decisions that steer your organization towards sustainable growth and profitability.

  • Continuous Improvement: Scenario planning isn't a one-off exercise - It's a continuous cycle of monitoring, analyzing, and updating based on new data and trends. This iterative process ensures that your strategies remain relevant and effective, and can help point you back on track if performance pulls you off of it.


A genuine 4x success hack


In our State of Revenue Planning report, we found that businesses that were capable of scenario testing their revenue plans were 4x more likely to hit their targets, thanks to being able to better understand the impact of their planning decisions, and flex them quickly to keep on track.


By building revenue plans in a way that can be inherently scenario tested, it puts you in a position where you are more capable of understanding rapid change, and answering the difficult questions quickly.


Businesses that scenario tested their plans were also more likely to utilise planning software vs. spreadsheets, plan & review their revenue plans more frequently than the average, and more likely to collaborate across the entire planning cycle.

You can find the full break-down of the planning report here:


Step-By-Step Guide to Revenue Scenario Planning


So you want to get started with scenario testing your revenue plans, how do you get started?


  1. Gather Your Team: Successful scenario planning isn't a solo mission, you need key stakeholders from various departments, bringing different perspectives to the table. This mix ensures that your planning is comprehensive and considers multiple facets of the business. Typically, you're going to want Finance, Revenue as well as executive leadership involved.

  2. Build Your Model: Start with a robust revenue model that mirrors your current business reality, this acts as your baseline.

  • Ensure flexibility in your models - as markets change and new data comes in, your model needs to adapt swiftly.

  • Visual aids like charts and graphs are not just fluff; they're crucial for making the implications of each scenario clear to all stakeholders.

  1. Scenario Building: Utilize data to identify the right variables that significantly impact your revenue - These can be things like average deal sizes, conversion rates or sales cycle lengths, or could be more people related like hiring approaches or promotion cycles.

  • Run through three fundamental scenarios: optimistic or best-case scenario (high), realistic (medium), and pessimistic or worst-case scenario (low). This range prepares you for whatever the market throws your way.

  • Understand what GTM resource is needed across each of these to maintain progress towards targets, with a view of how each affects budget and CAC.


Still don't know where to start? We've built some easy templates to get you started like our scenario planning template and our capacity planning template.


Key Scenario Planning Dynamics & Levers


Scenario planning comes with lots of different dynamics and Levers, all of which will stack into larger scenarios or stories that play out. It's incredibly rare that a single KPI will be affected by a bigger story playing out, and so you need to understand the levers at play to be able to come up with realistic stories and scenarios to test.


Deal Dynamics


  • Deal Sizes: Changes to the average size of your deals, which can fluctuate based on the introduction of new product lines increasing value or new competition which can put pressure on pricing.

  • Deal Cycle Lengths: How deal cycles can fluctuate over time, speeding up revenue cycles or contracting, which can push revenue out later than planned.


Performance Dynamics


  • Conversion Rates: How many people you move through the funnel and can close can shift due to sales effectiveness, competitiveness and many other factors.

  • Lead Volumes: The volume of leads generated by marketing and sales can differ wildly from plan, which can have massive impacts on the ability to reach target.

  • Lead Costs: Increases in cost per lead can reduce how far your budget can take you, which ultimately reduces the volume of leads you can produce.


People Dynamics


  • Hiring Plans: Hiring doesn't always go to plan, and can come with different types of roles. Model out the impact of late hiring, or changes to the types of roles you hire for.

  • Promotion Plans: Promotion might be needed to reduce attrition, but can move people out of productive roles in areas that you really need people, like when promoting SDRs out of lead generating roles.

  • Attrition: Not simply a case of losing a static X% per month, attrition is the effect of losing key cogs in the machine that can have serious knockons.


Creating Macro Scenarios & Stories


When coming up with the scenarios, you want to come up with macro scenarios or stories in which you can build out what areas of your plan are likely to be impacted:


Product Changes


  • New Product Launches: Launching additional products can increase average deal sizes, but what about the effects to deal cycles? What if deal cycles increase with the added complexity but the deal size doesn't increase as planned?

  • Product Sunsetting: It can lead to a reduction in revenue, but can increased velocity be helpful in hitting revenue goals? Could a more focussed team convert at a higher rate than previous, in a shorter period of time?


Team Changes


  • Increased Hiring: Hiring new people can be great for new revenue, but can come with heavy cost. Understanding who to bring on board at what times in line with changes to marketing can avoid building teams that miss target.

  • Team Streamlining / Layoffs: Reducing team sizes can have an impact on the ability to generate pipeline, or cause bottlenecks that aren't seen when looking at a top down view.

  • Territory Expansion: Opening up into new territories can involve hiring, moving staff and making assumptions about performance that might not necessarily ring true.


Market Dynamics


  • Entry of New Competitors: New entrants can disrupt market dynamics, potentially leading to pricing pressure or the need for rapid innovation.

  • Changes in Customer Preferences: Shifts in how businesses prefer to purchase and use solutions could necessitate changes to sales and marketing strategies, affecting conversions and the ability to generate opportunities.

Implementing Scenario Planning


Tackling scenario planning isn't easy, and can expose issues, weaknesses and flaws in plans that can put more pressure on some departments than others, or even directly onto leadership.


  • Identifying Key Drivers: Start with a deep dive into your industry, market trends, and the competitive landscape, and test everything and every combination.

  • Managing Complexity and Creating Stakeholder Buy-in: Keep it simple. Focus on a manageable number of scenarios to avoid analysis paralysis, get everyone on board early. Use workshops & meetings to engage stakeholders, showing them the value and impact of scenario planning.

  • Avoiding Bias and Maintaining Agility: Encourage diverse viewpoints to counter individual biases, that can quickly emerge and end up pitting departments against each other (like marketing vs. sales). Stay agile, using scenario planning software to quickly adjust your strategies as new data comes in.

Remember, it's not about predicting the future perfectly. It's about being prepared for whatever comes your way.


Using Dedicated Scenario Planning Software - Clevenue


By identifying key factors, developing informed scenarios, optimizing decision-making processes, and continuously engaging in this strategic practice, businesses are not only equipped to navigate through volatile futures but are also then in prime position to capitalise on opportunities that can make for sustainable growth.

Scenario testing, deeply rooted in strategic foresight, allows organizations to become more agile, resilient, and proactive in their approach to facing potential market changes and challenges.


Whilst hugely valuable as an exercise, the reality is that to really get the most out of scenario planning, businesses need to look to using technology build out their models.


Whilst not only making things faster, easier and more collaborative, using dedicated software for Revenue Planning can deliver a 2.1x increase in the ability to hit target, which when combined with a 4x from scenario testing can really reduce the chances of failure.


This is where Clevenue comes in - Dedicated Scenario Planning & Testing software designed to sit on top of your sales capacity plans. Built in minutes, plans in Clevenue can be tested in ways not possible in spreadsheets, allowing millions of permutations of the plan combining different hiring and personnel strategies with changes to business and market conditions.


If you're interested in taking their strategic planning to the next level, learn more about how Clevenue can help you scenario plan revenue, providing a structured and comprehensive framework for adapting to and thriving in any market situation.





FAQs


What is the Process of Scenario Planning?

Scenario planning involves a structured approach that can be broken down into several key steps:

  1. Initiating the Process: Begin by brainstorming potential future scenarios within a defined timeframe.

  2. Recognizing Trends and Forces: Identify the trends and driving forces that could impact your scenarios.

  3. Creating a Planning Template: Develop a template for the business to systematically approach scenario planning.

  4. Scenario Development: Use the template to develop detailed scenarios.

  5. Scenario Evaluation: Assess each scenario to understand its implications.

  6. Adjusting Strategies: Based on the evaluation, update your strategies and policies to align with the scenario outcomes.

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