Following Independence Day and entering the “summer slowdown” or vacation season, many revenue teams are prepared to see increased cycle times and decreased opportunity conversions. Depending on how long your average sales cycle time is, this could have serious implications for your annual goals— especially if you didn’t factor this into your forecasting at the beginning of the year. Why is forecasting critical to consider seasonality?
Seasonality plays a crucial role in pipeline forecasting due to its impact on sales patterns and customer behavior throughout the year. What areas are key to understand around seasonality?
Sales Funnel
Many industries experience fluctuations in demand and sales volume based on different seasons, holidays, or specific periods of the year. Understanding these patterns allows businesses to anticipate and adjust sales forecasts. These impacts may also cause opportunities to slow-down or speed up during certain seasons, such as the “summer slowdown” where many take vacations in the summer months– causing processes to take longer through the funnel to close.
During forecasting, some companies choose to break-out targets evenly among quarters, but this doesn’t allow for seasonal trends or deal cycle lengths. Keep in mind that seasonality depends on industry. For example, universities tend to make more purchases during the late spring and early summer while SaaS companies typically ramp up in January and February.
Resource Planning
Seasonality affects resource allocation and planning. Specifically, for sales teams or inbound/outbound business development teams that have a ramp period for new hires, it’s a necessity to factor in the ramp period with their seasonality. Not planning for ramp periods and the company's busy season can have fully-ramped revenue-generating employees stretched thin, letting details fall through the cracks. This can also result in new employees ramping up with fewer opportunities to work, if this aligns with a slower season. Accurate pipeline forecasting that considers seasonality helps optimize resource allocation and avoid staff management inefficiencies.
Top-of-Funnel
Seasonality heavily influences marketing strategies and promotional activities. By analyzing historical data, businesses can identify which periods are more conducive to certain marketing campaigns and promotions. For instance, offering discounts during low-demand seasons or launching brand-new products during high-demand periods can maximize revenue potential. Other implications of seasonality include paid media availability. There may be decreased availability during peak seasons, making it more expensive or more difficult to find quality placements.
Quarterly Financials
Understanding seasonal sales patterns aids in effective cash flow management and communicating with investors. As many companies need to report quarterly earnings projections or even LTV/CAC analysis quarterly, it’s key to understand seasonality– as some quarterly will inevitably have less than stellar numbers to report. Businesses can anticipate periods of high revenue and plan for potential dips in cash flow during slower seasons. This enables them to make informed decisions regarding investments, expenses, and financial planning
Seasonality is critical for accurate forecasting and effective resource planning for revenue teams. Seasonality impacts sales patterns, customer behavior, and marketing strategies throughout the year. By analyzing historical data, businesses can anticipate demand fluctuations, adjust sales forecasts, and optimize resource allocation. Moreover, understanding seasonality aids in top-of-funnel marketing strategies, allows for effective cash flow management, and facilitates transparent communication with investors. By incorporating seasonality into pipeline forecasting and strategic decision-making, businesses can navigate revenue cycle variations and ensure long-term success.
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