How High Tech CF0s Can Grow Company Revenues Through Metrics and Best Practices

How High Tech CF0s Can Grow Company Revenues
Through Metrics and Best Practices
4 Metrics That Need To Be Measured to Drive Scalable Growth

2 © 2013 Value Forward Group, Inc.
www.ValueForward.com
Contents
Executive Summary ........................................2
The Role of The CFO in Driving IT
Business Growth.............................................3
4 Metrics That Need To Be Managed..........4
1. Monthly Sales Forecasting Accuracy
– Should Be 75% or Higher......................4
2. Sales Quotas Should Be
Mathematically Calculated.........................6
3. Net New Sales Growth Ratio
Calculation...................................................8
4. Cash Management Through Sales
Cycle Selling Time Measurement .............9
Conclusion .......................................................9
The competitor to be feared is one
who never bothers about you at all,
but goes on making his own business
better all the time. –Henry Ford
Executive Summary
The distinguishing characteristics between
an entrepreneurially managed business
process and a professionally managed
business process are metrics, planning, and
having all of your departments linked to a
consistent method of revenue capture. This
is not to say that an entrepreneurially
managed business is not professional, but
the process by which decisions are often
made in this environment are more focused
on experience than confirmed best practice
metrics and planning.
To grow a business in today’s economic
environment, CFOs and executive teams
need to have a planned process where each
action step is linked to a sequential response
made in a timely manner. This linked
information needs to help executive
management make timely decisions to
proactively grow business.

© 2013 Value Forward Group, Inc. 3
Growing your firm’s top line revenues is not
a simplistic business model. Focusing on
what the sales team is doing or having a
sales distribution model (direct, reseller,
internet, etc.) that is operationally efficient is
just not enough.
Instead, growing your revenue must be a
coordinated event where specific
departments must work together in concert
as an integrated effort to move the revenue
capture needle.
Revenue capture and management is a
company responsibility.
Focusing on the sales process as the primary
path to business growth is a limited model
that reduces business growth. The sales
team (or process) you use does not operate
individually but in conjunction with a
collective group.
If you are a growth directed firm, you need
to integrate sales, marketing, strategy and
financial management into one outbound
revenue capture method.
Each one of these four perspectives has a
symbiotic relationship with the other. When
managed separately as silos, they cause other
perspectives to fail and the ultimate
objective of revenue growth to be
unsuccessful.
The Role of The CFO in
Driving IT Business Growth
I once had a CFO say “revenue
improvement cures all” and yes having an
increase in sales can make this true, but it is
also true that money hides mistakes. So,
revenue capture must be a coordinated
approach. When attempting to build a
business model that is scalable and
replicable, the executive management team
must concentrate on integrating
departments, collecting metrics, and
implementing best practices and a planned
process.
Revenue growth is also tied to the executive
teams’ business knowledge on why
prospects buy and why they don’t buy.
Once that is understood, it must be
integrated into a broader range of business
drivers that accelerate business growth.

High Tech CFO’s need to become proactive
senior executives who drive other
department heads (operations, sales,
marketing, development) to greater metric-
driven accountability for their department’s
performance and best practice
implementations.
No business department operates in a
vacuum. Having a low price, the best IT
green widget, or having a great sales team
does not mean more prospects will buy—
your strategy could be wrong. Having a
great inbound lead generation program
managed by your marketing department
does not mean that revenues will increase—
your pricing and financial model may force
the targeted buyer to hesitate. Moreover,
having a world-renowned brand does not
automatically generate revenue—brand
recognition does not mean brand
acquisition.
In today’s world economy, being an
innovator means nothing if you can’t market
and sell your offering against the me-too
competitors who will steal your intellectual
property or mass produce your widget in a
third-world country at one-tenth your cost.
The business success secret to obtaining
revenue growth consistently in any
economic environment is using a planned
process that is metric driven where the
whole company works in tandem using a
define methodology to drive revenue as a
company in totality. And who better than
the company CFO or senior financial
executive to be the arbitrator and
implementation manager of these key
performance indicators (K.P.I.).
4 Metrics That Need To Be
Managed
1. Monthly Sales Forecasting
Accuracy Should Be 75% or
Higher
High tech companies function as an
assembly line machine shop—with multiple
moving components working in tandem to
facilitate the production of a product or
service that can be sold. The execution of
installation, training, bench utilization,
software development and marketing are
symbiotic to the accuracy of the sales
forecast. When the sales forecast is not

accurate, the rest of the machine has to
adjust its departmental execution. When
sales forecasts are wrong, companies have
to adjust their cash-flow projections,
investments in marketing, labor allocation
for projects, new hire timelines and
potentially corporate G & A costs.
The perceptions of many sales executives is
that sales forecasts are not viable business
metrics that can be measured on a monthly
basis due to the complexity of technology
sales, but this is incorrect. All technology
sales, regardless of their average sales cycle
timeline (from one month to two years)
have specific sales process indicators that
can be aligned to determine the forecast
accuracy of a given sales purchase. The key
driving mark to build an accurate sales
prediction of when a client will buy is
having a clear line of demarcation between
the definition of what a sales forecast and sales
pipeline are. Sales forecasts should only
include prospect opportunities that will be
received as a signed agreement in the
corporate office within any 90-day period.
All other prospect opportunities should be
defined as a sales pipeline.
Sales forecasts are living, breathing
snapshots of time that are always changing.
Prospects fall in and out of pipeline and
forecast positions depending on the multiple
changing variables that affect a sale (i.e.,
budget, decision maker availability,
competition). Yet often, sales team
members want to include prospect
opportunities that are complex large ticket
deals with multiple decision makers and are
more than 90 days out in their sales
forecasts to validate their work effort
success. However, sales forecasts are not
sales team productivity assessments. Instead,
they are sales team selling success
measurements and companywide
operational tools which is diametrically
different.
When sales leadership submits a monthly
sales forecast, it should reach a minimum of
75% accuracy from projection to close.
Anything less is an inaccurate calculation
based on hope rather than reality.
For CFOs and VPs of Sales to correctly
manage company revenue capture metrics,
sales forecasts need to be accurate.

2. Sales Quotas Should Be
Mathematically Calculated
Calculating accurate sales quotas is an
important business driver for your firm to
succeed. By implementing a sales quota
based on market research, market gap size
and definable business sales metrics, you can
manage your firm profitably, satisfy your
investor and funding sources, fund your
growth, and capture sales at a lower cost.
When incorrectly calculated based on
guesswork or industry estimates, your firm
can fail.
Today, there are ten sales quota calculation
methods currently in use by many high tech
firms. These methods supplied by multiple
executives use various foundations to
determine assigned numbers. They include:
1. Using last year's territory sales numbers
for this year’s calculation model;
2. Cost of the salesperson times a
multiplier (sales costs x 3);
3. Cost of corporate General
Administrative (G and A) plus a gross
margin;
4. Revenue goals committed to Wall Street
or investors;
5. Total of the sales department's goals
divided by the number of salespeople;
6. Salesperson's success the previous year;
7. An imaginary compensation number
that was sold to the salesperson as their
income potential if he/she hit 100%
quota;
8. What the trade press says is the annual
growth rate this year (up 12%, quotas
are up 12%);
9. The VP of Sales' experiences at other
companies; and/or
10. A percentage of what the top
salesperson did in their territory.
The above ten techniques represent the vast
of majority of sales calculation methods
used today…and all of these methods are
wrong.
These impractical and unscientific quota
determination methods are used over and
over in both public and private firms. More
times than not, the sales quota number is
created based on commitments to investors,
bankers or Wall Street, combined with the

perception of accounting regarding what the
cost of sales should be.
The short-term losers are the sales reps as
they struggle to make their monthly
numbers. The long-term losers are the
companies and the operating departments
because business models have been
budgeted on these inaccurate sales quota
calculations.
What do these measurements have to do
with the potential of a particular
salesperson's territory? The fact is none of
these methods are accurate. These quotas
are based on outside influences and
expenses not related to the sales potential of
the salesperson's product or service in an
assigned territory. When these quota
determination models are used, more times
than not, they just frustrate everybody.
The Operations Department is upset
because their bench utilization is low and
management is forced to reduce payroll.
The Accounting Department is upset
because the company's business budgets are
inaccurate causing operating expenses to be
disproportionate to forecasted corporate
revenues.
The Sales Department is frustrated because
they can't hit their targeted numbers and no
one is making their commissions.
Investors and stockholders become
disenchanted, lowering their commitment to
your senior management team.
Sales Quota Mathematical Calculation
Formula
Here is a mathematical Sales Quota
Calculation that CFOs can use with the
sales team:
IT Sales Quota = territory potential (geography
the salesperson sells in)
Divided by your firm’s average sale (or specific
product or service) in dollars
Divided by number of leads needed to generate
one proposal multiplied
Times the average sales team closing ratio
multiplied
Times the average value in dollars of one deal

This mathematical model gives you an
operating foundation to determine a target
number for each sales territory which can be
rolled up into a national number and can be
massaged or adjusted as needed based on
individual sales team member’s
performance, sales team goals and corporate
objectives.
Is this mathematical model a panacea to give
each salesperson the most accurate sales
quota that will measure their skill efficiency
and forecast revenue capabilities exactly?
No, but it does give a starting point for the
finance department that is metric driven.
3. Net New Sales Growth Ratio
Calculation
Often high tech revenue improvement hides
business model weaknesses. Rising revenues
can often be segmented into categories of
revenue increases, so gross revenue
improvement does not always truly reflect
overall business success. IT firms’ top line
revenue numbers can automatically improve
year over year by having signed, annual
recurring software maintenance or SaaS
agreements in place that have built-in cost
of living clauses (COLAs) that rise each
year. Alternatively, IT revenues can increase
when one large existing client’s ability to buy
improves. To accurately assess a high tech
firm’s growth success potential, one metric
the CFOs needs to measure is the net new
sales growth ratio calculation.
The net new sales growth ratio is calculated
by counting in units the number of existing
customers you have at the beginning of your
fiscal year, adding any new customers in
units you have sold by the end of that fiscal
period, and subtracting in units, lost
customers during the same timeline (i.e.,
existing customers, plus new customers,
minus lost customers).
This metric gives you a definitive
measurement of your firm’s ability to
organically capture new business from new
prospects and your company’s current
capacity to maintain existing customer
satisfaction at high levels. If you are losing
in units (customers) more than you are
selling in units, it identifies business areas
that need correction.

4. Cash Management Through Sales
Cycle Selling Time Measurement
For growth directed IT firms, cash
management and revenue recognition are
financial operating models that must be
managed tightly to help facilitate
appropriate governance and operational
funding. One subliminal cash management
driver that can be improved and monitored
is the sales team’s sales cycle selling time.
Calculating and managing sales team average
prospect selling time helps forecast accurate
cash flow projections, improves revenue
recognition dates and helps accelerate top
line revenue growth. Selling software and
professional services is a time management
business model.
High tech companies need to treat
technology and professional service sales as
an inventory turn business, much like a
retail store. The more inventory (software
unit sales) and staff placement (bench
utilization) you can sell (turn inventory)
within a fiscal year, the higher your revenue
capture. Selling 100 units in twelve months
is not the same as selling 100 units in thirty-
six months. One operational action step that
finance executives can implement is helping
the sales team understand selling timelines
from the prospect first contact to contract
signing date. Once average timelines are
identified, it should become a company-
wide, collaborative effort to shorten
prospect buying cycles by 25%, through
adjustments of your sales, marketing and
strategy techniques to potentially increase
annual revenue correspondingly.
When used tactically, sales cycle selling time
measurement can dramatically increase cash
flow and business growth, and help build a
replicable and scalable revenue capture
process.
CFOs and senior financial executives of
high tech firms need to take control of
organizational operations company-wide
and implement metric models to establish
coherent success programs that drive
performance.
Conclusion
In IT, revenue capture is a company
responsibility. To turn strategy into action,
financial executives need to be the senior

leader to institutionalize metrics, to provide
a success process that is self-perpetuated
and ultimately self-governed. By deploying
metric models, and understanding the
business processes in your firm that
produces results, high tech revenue growth
can become premeditated.
About The Author
Paul DiModica is the founder and CEO of
Value Forward Group, a high tech revenue
capture specialist advisment and management
consulting firm. Paul is also editor of the
world’s largest IT sales, strategy and marketing
strategy newsletter called HighTechSuccess
(www.hightechsuccess.com) read by high tech
executives in over 110 countries.
Additainlly, he is the author of the books
High Tech CEO Business Success
Strategies, How to Sell Technology® and
his new book being published this year called
the Revenue Capture Scorecard®.
Prior to launching the Value Forward Group
in 2001, Paul spent over 20 years in high tech
businesses as a Senior Vice President of Sales
and Marketing, Vice President of Strategy
Worldwide (Renaissance Worldwide Inc.),
Vice President of Operations, Chief
Operating Officer and company Founder in
private, family-run and public IT companies
with annual revenues up to $900 million.
Paul has been featured or interviewed in
hundreds of media outlets including the New
York Times, Investors Daily, Fox News, Selling
Power Magazine, Sales and Marketing Magazine,
CIO Magazine, CFO Magazine, Entrepreneur
Magazine, Training Magazine, Marketing
Magazine, Computer World Magazine, Entrepreneur
Radio, Chicago Tribune, Executive Travel Magazine,
Value Added Partners and many others.
About Value Forward
Group
The Value Forward Group is one of the
largest high tech business success
advisement consulting firms in North
America. They focus on helping CEOs,
company founders and senior executive
team members of technology, software and
professional service companies maximize
revenue, increase marketing success, reduce
operating expenses and build a replicable
and scalable revenue capture process that
gives them a competitive edge using a
revenue capture scorecard approach. For

more information about Value Forward
programs and services, please contact:
Paul DiModica
770-632-7647
pdimodica@valueforward.com
www.valueforward.com

High Tech Senior Management
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IT Sales, Marketing and Strategy Best
Practices and Benchmark Seminar
March 20-21, 2013
Hilton Raleigh-Durham Airport at Research Triangle Park
The High Tech Senior Management Revenue Growth
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For more information and to register, visit
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