A revenue plan is a set of revenue targets with an accompanying plan to reach them. High quality data, forecasting techniques, and large Excel spreadsheets are the typical tools marketing leaders use to build a revenue plan. Unfortunately there is a flaw in the typical forecasting process.
The Flaw Of Averages
One of the fundamental elements of a typical revenue plan is the conversion rate used to estimate growth. In order to decide how much to spend and where to spend it, we must rely on a single, average conversion rate for each channel. For example:
Paid search converts from a lead to opportunity at 8% on average.
And leads from organic search convert at 6% on average.
So to create a revenue plan you coordinate revenue targets, say $100,000 in MRR, and the use your conversion rate to understand how much you must invest.
But there's a pitfall in using an average conversion rate for revenue and annual planning.