Sales forecasts are made up, and they sound reasonable. Expansion forecasts are real, and they sound ridiculous.
That isn't a knock on sales forecasts. Somebody picks a target, and everyone works backward from it: how many deals, at what win rate, from how much pipeline, from how many leads. It's funnel math run in reverse, and it's constructed whether anybody says so or not. It also works. Plenty of companies hit it every year.
But look at what that number has to do to survive the planning meeting. It has to be believed. Nobody signs off on a target they think is fantasy, so a made-up number's whole job is to sound reasonable to the people approving it.
The same treatment, on the wrong thing
When expansion finally comes up, it gets the same treatment, because that's the only treatment anybody knows.
"Let's shoot for a 20% uplift on this cohort."
Reasonable. It goes in the plan, people work hard to hit it, and maybe they do.
Now try putting 200% growth in account value in the plan.
You'd get laughed out of the meeting. Probably escorted out by security. There's no funnel math behind a number like that, so it reads exactly like announcing you'll double revenue next quarter because you've got a good feeling. Nobody would believe it, so nobody sets it.
Except 200% might be exactly what's sitting in some of your accounts right now. In one case I've written up, a single customer went from $297 a month to $1,666 across three milestones in 90 days. Try walking that into a planning meeting as a target.
The ceiling
That's the trap. The number you'd accept becomes the ceiling on what you'll ever find.
A constructed target is capped by what sounds believable. So you set 20%, the team hits 20%, and everybody's happy. Nobody goes looking for the rest, because the goal's been met. You hit your number and left most of the money on the table, and nothing in the building will ever tell you.
A measured number doesn't have that cap. It's limited by what's actually there, and nothing else.
Where the real one comes from
An expansion forecast doesn't have to sound reasonable, because it isn't a guess. Everything it's made of is already sitting in your customer base:
- Latent revenue: what your customers are ready to buy and haven't been offered.
- An inventory of what they could buy next, with a price on each.
- The progress milestones that lead to each one, and the readiness gate where it becomes the obvious next step.
- Orchestration, so the customer knows it's coming long before they get there.
Count the customers approaching each gate. Apply the take rate you've already seen. Multiply by the price.
No target worked backward from a board slide. No win rate borrowed from a funnel that's got nothing to do with the customers you already have.
When it sounds ridiculous
Sometimes you'll run that math and the answer will look insane, far past anything anybody would've dared put in a plan.
That's not a reason to throw it out. It's the size of what you've been leaving on the table.
The instinct will be to shave it down to something reasonable before anybody sees it. Don't. The moment you do, you've turned a measurement back into a target, and you're back under the ceiling.
Made-up numbers have to sound reasonable.
Real ones just have to be true.
Lincoln Murphy formally named and popularized Customer Success starting in 2010 and has spent 15 years connecting it to expansion revenue and commercial outcomes. Read The Premise.