As a revenue leader, one of the most important things you own is right-sizing the targets and goals you set for your team. While finance often drives top-line budgets, it’s your job as a revenue leader to choose the right upstream metrics that align your team’s focus and position them for success. Ultimately, this is how you engineer attention, motivate, and advocate for the success of your team. Undervalue this exercise at your own peril.
There are of course tried and true methods for calculating these targets, but if you rely on any one of these methods blindly, you’re very likely to over or undershoot the curve, which might have larger compounding effects than you realize. I often refer to this type of work as “metrics and magic” because it’s all about the artful blend of math and social science.
Let’s say you need to set your quarterly bookings, pipeline and opportunity targets for 2025. You likely have one or both of an inverse demand gen funnel or pipeline velocity model spreadsheet somewhere in your drive.
The predictable revenue playbook will tell you to build an “inverse demand gen funnel.” It works backward from bookings targets, calculating required pipeline and lead volumes based on historical close rates, contract values, and other key funnel dynamics. But if you’ve been operating at all in the last 4 years you know that the predictable revenue playbook is out of touch with the macroeconomic environment we’re working in now. Nobody is investing in growth at all costs. In fact, you’re probably restructuring your way toward profitable efficient growth (PEG) targets, slimming down headcount and spending.
Setting goals with a methodology that not only assumes but requires consistent and ever-expanding investment in volume-generating activities while also right-sizing investment is a recipe for burnout and misses.
A PEG playbook on the other hand will tell you to look at pipeline velocity to forecast future targets. Rather than working backward from bookings targets, you aggregate your funnel dynamics by create date to get a sense of how much demand you’re servicing right now, and what that might mean for future performance. This approach emphasizes maximizing the effectiveness of each step in the buying journey, helping you uncover ways to be more efficient with your resources.
Here’s the problem–any velocity based methodology is a directional forecast based on past performance, not a performance metric itself. Funnels and pipelines are useful organizing principles for go-to-market units, but don’t reflect how real-world buying decisions are made. If you’re setting downstream revenue targets based on marginal gains you hope to influence within the buying journey, you’re inferring some big assumptions about causality that might not hold.
There’s a very real chance you can hit or exceed your team targets without measurably improving the growth prospects of the business at all, and that’s not a board meeting you want to be in.
So, there’s inherent risk in any model (I’ve heard this called “shaky math”), what’s the right approach? A blend of both methods—plus some scenario planning. Your job as a leader is to synthesize, strategize, and act accordingly. Effective goal setting is about strategic alignment, not being objectively correct. Leaders must weigh likely outcomes, consider key drivers, and create some structured scenarios to align leadership and teams on the best path forward.
I like to use both models to create upper and lower bounds for growth targets in a thought experiment. On one hand, here’s what next year might look like if we change nothing at all or make marginal improvements. Here’s what it might look like if we had “magic wand” levels of investment. Now take this, along with what you know about your roadmap, market conditions, and upcoming opportunities to outline several realistic scenarios in between these bounds to work through with finance, leadership, and your team.
Somewhere at the end of this exercise is your best guess about what’s going to happen. A believable picture of success that motivates your team and gives your fellow leaders confidence in the growth trajectory of the business. It is at its core, a speculative activity.
You’re engaging in an exercise of informed correlation: if we do these things, we believe these things will happen. Leadership means knowing this, understanding the limitations, and building the plan anyway.
The greatest lie the last 25 years of software development taught us is that growth can be predictable. The best we can ever hope for is to manage the conditions for growth. Just like planting any crop–there’s still quite a bit of good fortune required between laying out the planting map and a bountiful harvest. But this is exactly why you shouldn’t underestimate the importance of good strategic thinking in your planning and goal setting practice. You wouldn’t sow crops without developing good heuristics for understanding where, when, and how to plant, and what to look out for along the way. Why would we assume growing a business is any different?