Guide to revenue reporting and forecasting for IT and Software Houses

Challenges with forecasting for IT and Software Houses 

Service-based companies often lack the stability of fixed monthly subscriptions, dealing instead with project-based revenue. 

Thus, to make your reporting and forecasting accurate, you have to spread revenue across billing months based on ongoing project utilization.

Unfortunately, HubSpot's default forecasting doesn't support this approach and splits deals evenly in a SaaS manner.

(HubSpot default recurring revenue reporting)

As a result, IT and Software Houses using HubSpot often lack real-time data to know how the business is doing at any moment.

Fortunately, it can be fixed.

How to forecast annual revenue for IT and Software Houses

Below you can see the forecasting model adjusted to the service-based businesses:

Using this model, you track four revenue metrics:

1. Invoiced revenue: secured revenue that has been invoiced
2. Contracted revenue: future revenue from won deals still due to be invoiced
3. Weighted revenue: revenue from open deals in the pipeline multiplied by stage probability
4. Gap: missing revenue to hit the annual target

Based on those metrics, you can build custom reports in HubSpot, giving you a helicopter view of your business performance and allowing forecast revenue accurately. 

Later in the article, we'll explain how to do this but first, let's look at how you should structure your reporting to get real-time insights into your business health.

How to structure revenue reporting for IT and Software Houses

There are 4 questions your revenue reporting has to answer:

1. Where are you now?

2. How are you pacing?

3. What's the gap to target?

4. What can cover this gap?

The below reports will help you with that.

*In the below examples actual revenue means invoiced.

1. Where are you now?

First, you want to see how your business is doing today.

With the below report, you can easily see already invoiced (actual) revenue in the current year vs. last year.

The second report shows you monthly target achievement for the already invoiced revenue (actual) vs target vs last year.

2. How are we pacing?

Next, you want to learn where you will finish the year given the actual delivery and contracted revenue.

Again, another two reports come with help.

The first one shows you the monthly cumulative progression for already invoiced  (actual) and contracted revenue vs target in the current year.

This one, in turn, presents monthly target achievement for already invoiced (actual) and contracted revenue vs target in the current year.

As a result, you see if you're on the right path to achieving your revenue targets.

But, there's more... 

3. What's the gap to target?

To have a full overview of your business performance, you need also to know what's the gap to target.

It's the amount of missing revenue that may keep you away from hitting your goals.

You can get those insights from the below report that shows the gap between invoiced (actual) and contracted revenue vs target month by month.

But again... knowing your gap to target is just half of the story. 

4. What may cover the gap?

To ensure you will hit your goals, you have to figure out what may cover the gap to target, right?

That's where forecasted weighted revenue by stage comes with help.

It refers to total revenue coming from open deals in the pipeline multiplied by deal stage probability. 

In HubSpot, you can easily configure deal probabilities in deal settings.

As a result, you can see the expected revenue coming in the next months or compare forecasts between years.

How to build revenue reporting for IT and Software Houses in HubSpot 

Now you probably ask yourself: how can I build similar dashboards in my CRM?

Don't worry, we got you covered.

Below you can see our step-by-step process of creating HubSpot revenue reporting for IT and Software Houses.

Create similar reports in your hub, and you get business performance visibility in minutes.

Can you say how your business is doing at any moment?

Maybe your actual HubSpot setup doesn't allow you for precise forecasting tailored to a service-based model?

We're here to help. 

Schedule a free consultation with our senior RevOps strategist. He will analyze your current situation, and propose solutions to build your reporting.