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Learn to forecast: Mature customer education teams don’t ask for budgets

Written by Bill Cushard

Published on March 4, 2021

We’ve been working furiously on updating our customer education maturity model, based largely on the need to include a few important activities that mature teams perform that new teams do not. One of these activities is forecasting. 
I am sure you can relate to this. Often when a software company starts doing customer education, one person is assigned to help do the training. It’s a side gig. An activity, added on their their normal job. Customer training is not part of the job title or job description. We find someone on the team who knows the product well, is great with customers, and is a go-getter. 
“Would you like to take on training customers?” 
“Sure,” this person responds. 
And customer education is born. 
There is no budget. Just someone’s time spent helping customers. 
As the training gains traction, needs increase and investments need to be made. These investments might be official job titles and headcount. Perhaps tools. And ultimately, learning technologies.
“I need a budget,” you might say.
A budget gets you to spend some money. So you can do more work. 
And that’s the problem. There is usually no outcome or progress attached to a budget request. It is a request to spend money so you can do more work. A budget is a license to spend, says Greg Crabtree.
You might get it approved. You might even get a budget increase every year for a couple of years because what you are doing seems productive and useful. 
Then, as almost always happens, budgets get cut. Do you know who’s budget almost never gets cut? Sales. Do you know why? Because sales VPs don’t ask for budgets. Sales teams create forecasts and plans to achieve those forecasts. 
This is what mature customer education teams do, as well. 
Note: Listen to this short clip from our Connecting the Dots podcast in which I talk about forecasting. 

Forecasting and your company’s IPO journey

Since you work for an early stage, fast-growing SaaS or open source software company, your founder / CEO likely has her sights set on an IPO sometime in the future. Even if your CEO has never mentioned the phrase IPO during all hands meetings, an IPO is one scenario among many under consideration.
If your company has any chance to go public, predictable forecasting is a necessary condition. According to Steve Cakebread, author of The IPO Playbook: An Insider’s Perspective on Taking Your Company Public and How to do it right, and multi-time CFO who has taken several companies public, “Forecasting answers the question: This is what are going to deliver this year.” Cakebread makes a repeated and persuasive case in his book that a company cannot be successful operating in the public markets unless it can create reliable and predictable forecasts and then deliver on those forecasts. 
If we, customer education teams, are going to help our companies progress and grow, we must be able to communicate what we intend to deliver and then deliver. 
That is forecasting.
Forecasting is predicting what results you will deliver to your organization over time. This is vastly different from budgeting in that forecasting begins with results and ends with what resources are required to deliver those results. Budgets begins with  spending on resources so we have what we need to perform work that then might deliver results. 
Big difference. 
Forecasting also assumes that as predicted results are achieved, more resources will be needed to achieve the next level of the forecast. Expense are increased only as, and in promotion to, results are achieved. 
Budgeting assumes one gets an upfront approval to spend a certain amount of money before any results are achieved. What if results are not achieved? Too late. The money is already spent. 
As Greg Crabtree says, you don’t need a budget. You need a forecast and a business model you are willing to act on.
Professional managers forecast.

What do you forecast? 

If you are now convinced that you should learn to forecast, instead of asking for budgets, the next question to answer is, “OK, so what do I forecast?” 
Two things: 
  1. Top line results
  2. Bottom line activities
Top line results include:
  1. Training sales: These are your customer education revenue streams. Sales of live courses. Sales of private training. Sales of training credits. Sales of subscription offerings to content catalogs. 
  2. Enrollments/Completions: If you are building and delivering training, at the very least you should have some idea of how many customers will sign up and complete your training. Whether you sell training or not, some number of your customers should take your training. Otherwise, why bother? In every sales call I have ever had with a prospective customer education team, we discuss how many customers they expect will take their training in the first year. They always have a pretty good understanding for how many. That is the beginnings of a forecast. 
Bottom line activities:
  1. Headcount: How many people will you need (and when) to build and deliver training at the volumes of enrollments and sales you have in your forecast? The “when” part is important. If during the first six months you forecast delivering training to 200 customers, you can probably spread that out and do that with minimal headcount. You might not need another headcount until you get to higher volumes, say 1,000 customers. So you forecast an additional headcount in month nine of your forecast. People who budget ask for approval on that headcount now. Forecasters get it in nine months and only if enrollment volumes increase to plan.
  2. Technology expenses: As you grow, you will need to buy more technology. At the beginning, a Zoom account or video screen recording software and access to the company Wistia account may be all you need. But as volumes increase, learning automation will be necessary. What technology will you need and when will you need it is what goes in your forecast.
This is what we need to forecast. Put another way, if you do a business model design, then you will forecast items in your revenue streams and cost structure boxes. 

Learn to forecast

We ran a webinar describing how you can build your forecasts. It is not a difficult proposition. Simple spreadsheet and a solid understanding of your business model is all you need. Get the webinar recording

New webinar: Customer education maturity model redux

We are recreating the customer education maturity model. We are adding forecasting to it. Learn what else we are adding. This maturity model will help you see more clearly what your future could look like and what you have to build to get there. 
Register for webinar

Originally published Mar 4, 2021 2:47:22 PM, updated Mar 4, 2021