I’m assuming that every Agency has a forecast. That may be optimistic of me, it’s my nature, but if there are any hold outs around let me quickly run through the many and varied reasons to have a revenue forecast.
– This isn’t your birthday or Christmas. No one likes surprises at work. Generally. And certainly not unpleasant ones.
– How do you plan without one? Investing in big stuff like people or property is scary enough if you have an accurate forecast but even smaller, discretionary, costs like training or awards feel a lot more settled if you know you’ve got the income to cover them.
– Completeness. With the best will in the world it’s always good to have a list. You can check for gaps. You can check you’ve billed everything. It’s not a particularly complicated reason but it is a very valid one.
Hopefully I’ve done enough to convince even the hard core hold outs to see the error of their ways and start a revenue forecast. So, what should a forecast look like? What revenue figures should go in?
In my experience once you have more than one person involved in the forecast there will be in difference in approach. It’s human nature. Some people are optimistic, others fear the worst. Put them together in the same spreadsheet and you’ll get wildly different approaches. So whilst you’ll have a forecast in reality it’s not one that should enable you to sleep soundly.
So in addition to the exciting prospect of being able to check a list I’m going to throw in in some rules to help make the forecast a consistent and reliable companion.
– If you want a consistent forecast figure you need to take human nature out of the equation as much as you can. I would do this by only putting booked revenue into the forecast. Leave the ifs and maybes out of the picture entirely. For the moment anyway; they do have a place but that comes later.
-Have a deadline to update the forecast. This will vary from agency to agency but let everyone know when their forecast needs to be up to date.
– Extend for the whole year if you’d like but bear in mind forecasts deteriorate quickly. Next month should be pretty much spot on: the next 3 months less so. If you only put booked work in it will look pretty depressing in the long term but don’t panic because you’ll also be looking at what could happen.
– You need look at the pipeline as part of the exercise. Ideally in the same spreadsheet but on a different tab keep an up to date record of all of the pitches, upsells, RFIs, RFPs conversations and negotiations that are going on.
– Again you’ll need some rules. A pipeline is a good idea. A weighted one is better. Negotiations about the scope and cost of a project is a better asset than a pitch. A pitch is better than a RFI and so on. I don’t mind what percentage or odds you put on each stage in the process from prospect to client but be consistent.
– Now the overall forecast will give you the guaranteed level of income (or the worst case scenario) as well as a stratified layers of potential business. This will give rise to loads of “what if” scenarios particularly around resource but that in many ways is the crucial Agency challenge. Matching resource to activity. This way though you’re doing it based on facts and not guesswork. Rules and process not emotion.
How do you do your forecasts? I’m always interested in different formats and method. If you need any help with forecast please let me know, always glad to help.