What's More Important The Sales Number Or The Revenue Number?

In enterprise software and services sales management you are likely to see the head of business development banging her head on the wall as she seeks to figure out which master to obey, the sales number or the revenue number. Likely she is being pushed by the CEO and CFO to produce more profitable revenue which is a key indicator of how business is performing. I have years of scars on my back from mixing it up for the same reason, but I have never "gotten" that revenue is king and here's why.

This is a chicken and egg question. At the end of the day, the sales number gives birth to the revenue number. Therefore, if you focus on the sales number by definition, you will drive the revenue number. I worked for an executive who would never give me that argument. He flat out said I was responsible for both.

Really?

Marketing, Sales, Business Development and even Product have little-to-no effect on the revenue number.

Why?

Because none of these functions implement or build anything. The implementation, development and delivery teams are responsible for delivering the partial or finished product. In software technology, it is the delivery date that determines what revenue is recognized in any given year. No amount of pressure on business development can change that, ever.

This is similar to the question of what sales executives should focus on; top of the funnel activity or closing? We all know it is prospecting not closing that wins the day.

Now if you’re selling a product or service that requires no development or work beyond “flipping a switch” to turn it on then that's a different matter. Ironically, I seem to always find myself in situations where there are resource constraints for the development staff. That is a common issue in the small companies where I have worked over the years.

What to do about it.

If you are convinced the delivery team is organized correctly, there are a couple of buttons you can push. Try top grading the team to make sure you have  A-Players in every seat. You can, of course, ensure you are using the most efficient development methodologies, and you can add outsourcing to increase capacity. Consider paying delivery staff bonuses on the quality completion of projects. The faster the project is finished with high quality, the more they get. Like the business development guys with the sales number, they will carry the weight of the revenue number on their backs. And since we have defined that they are most influential on that number, you will have created almost perfect alignment for the output they are expected to deliver.

There is one final step. Increasing your variable costs to pay delivery for producing quality faster will have an impact on your margins. The CFO won't like that, but there is a way around it.

What if the business executives reduced their commissions to pay the delivery staff for higher performance?

That way you preserve your margins and give the team responsible for revenue recognition incentives. The argument flows that the business guys would make more money by increased throughput.

So in this world, the business staff owns the sales number, and delivery owns the revenue number, and each has an upside. Just a thought.

My best, Chris