Purpose and assumptions

Service businesses typically sell subscriptions: quarterly or annual contracts to deliver measured amounts of
service each month. This forces the company to plan along some unique dimensions, including:
--- When does subscription money come (cash basis) and when do we earn it (accrual)? What happens if
customers demand refunds mid-way through their subscriptions? How do we forecast for upgrades?
--- How long will it take for new sales reps to become productive? Generally, you can assume several
months of training, lead development, account plannng, etc. Forecasting the company's cash flow from Sales
may be critical.
--- Is it more important to increase average deal size, or get more deals? Can new reps work smaller deals
and sell upgrades later?
This model uses some simple sales productivity assumptions to map out subscription-style sales and revenue.
Reps are assumed to take 3 months before making their first sales (aggressive!), with other values taken from
the input boxes marked in bold blue. Staffing ramps are also inputs marked in bold blue.
It ignores lots of interesting effects such as changing renewal rates, add-on professional services, alternate
channels, OEMs, geographic territories, etc.
The charts illustrate the lag between hiring and sales productivity, plus the tendency for bookings to run
ahead of recognized revenue.
Rich Mironov, Mironov Consulting
rich@mironov.com
http://www.mironov.com

(c) 2001 by Mironov Consulting
1
Sales Force Productivity
Sales Productivity Model
3
2
$4,000
35%
$2,000
Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02
New reps hired this month 2 2 2 1 1 1 1 1 1 1 1 1
Existing reps (from last month) 4 6 8 10 11 12 13 14 15 16 17 18
Total reps at end of month 6 8 10 11 12 13 14 15 16 17 18 19
Productive reps closing sales 4 4 4 6 8 10 11 12 13 14 15 16
New sales this month 8 8 8 12 16 20 22 24 26 28 30 32
Total sales to date 8 16 24 36 52 72 94 118 144 172 202 234
New upgrades this month 0 0 0 0 0 0 2 2 2 4 5 7
Total upgrades to date 0 0 0 0 0 0 2 4 6 10 15 22
Recognized revenue this month ($k) $32 $64 $96 $144 $208 $288 $380 $480 $588 $708 $838 $980
Recognized revenue to date ($k) $32 $96 $192 $336 $544 $832 $1,212 $1,692 $2,280 $2,988 $3,826 $4,806
New contract backlog ($k) $384 $384 $384 $576 $768 $960 $1,104 $1,200 $1,296 $1,440 $1,560 $1,704
Total contract backlog ($k) $384 $768 $1,152 $1,728 $2,496 $3,456 $4,560 $5,760 $7,056 $8,496 ###### ######
Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02
Total contract backlog 0 1 1 2 2 3 5 6 7 8 10 12
Recognized revenue to date 0 0 0 0 1 1 1 2 2 3 4 5
Question: how fast can I productively ramp up my sales force?
sales per rep per month once productive
per month average initial sale (subscription)
of customers upgrading to larger subscription later
per month average upgrade 7 months after initial sale
months after hire before first sale (training, start-up, customer contact, etc)
Inputs/Assumptions
(c) 2001 Mironov Consulting
2
(c) 2001 by Mironov Consulting 3
0
2
4
6
8
10
12
14
16
18
20
J
a
n
-
0
2
F
e
b
-
0
2
M
a
r
-
0
2
A
p
r
-
0
2
M
a
y
-
0
2
J
u
n
-
0
2
J
u
l
-
0
2
A
u
g
-
0
2
S
e
p
-
0
2
O
c
t
-
0
2
N
o
v
-
0
2
D
e
c
-
0
2
S
a
l
e
s

R
e
p
s

Sales Productivity vs. Hiring
Total reps at end of
month
Productive reps
closing sales
(c) 2001 by Mironov Consulting
4
0
2
4
6
8
10
12
14
J
a
n
-
0
2
F
e
b
-
0
2
M
a
r
-
0
2
A
p
r
-
0
2
M
a
y
-
0
2
J
u
n
-
0
2
J
u
l
-
0
2
A
u
g
-
0
2
S
e
p
-
0
2
O
c
t
-
0
2
N
o
v
-
0
2
D
e
c
-
0
2
$M
Booked vs. Recognized Revenue
Total contract backlog
Recognized revenue to
date
Bookings
always run
ahead of
recognized
revenue when
subscription
sales are