Running a small business can often be a chaotic mix of feast and famine; one minute you’re slammed nonstop with work, and the next you’re completely barren with no prospects on the horizon. Fortunately, you can alight that rollercoaster of emotions by implementing a simple sales forecast to help you spot upcoming slowdowns then plan ahead – weeks or even months in advance.
In this article, you’ll find out why a sales forecast is critical and learn how to implement one in your business to gauge revenue and workload over the next few weeks and months.
Sound good? Let’s get cracking!
3 reasons why a sales forecast is essential
Let’s start with a short and sharp justification for the creation of a sales forecast in your business.
The primary objective of a sales forecast is to help you get better at planning ahead, spotting problem areas before they occur.
A secondary benefit that stems from this is that it forces you to create the habit of looking for new work (so slowdowns become nonexistent). You might be slammed with work this week, but one quick glance at your sales forecast, reminding you there’s zero billable work lined up for next month, is the best kick in the pants you’ll need to send out a few cold emails.
Last but not least, you should have a steady stream of incoming work (if everything goes according to plan). When that happens, your sales forecast can help you be better prepared to handle the workload by bringing in help or scaling the way you deliver projects to make better use of your time.
Pretty compelling, no?
Implementing a simple sales forecast
A sales forecast is one of those “Sales 101” fundamentals you need in order to plot out clients, projects and incoming cash flows against the coming weeks and months.At the very least, you can use a simple spreadsheet to set up a sales forecast that will help you get a grasp on the following:
- Projected work over the next few months for each client
- Forecasted revenue
- Work capacity to fulfill each project for each client
Start by plotting your incoming cash for each client and project over next few months:
In the example above, we’re assuming hourly rates in Capacity. However, your own pricing and costs might be different depending on how each unit is sold.
If possible, try to also determine what it will take for you to deliver or fulfill each project, and what will be left over.
Differences aside, you’re still after the same things: How much is being ordered, when, and what it’s going to cost to deliver.
Once you’ve put something basic together, it’s time to start looking for insights.
How to make the most of your sales forecast
A sales forecast can provide visibility into how projects might (or might not) be lining up months into the future, and suggest how you should prepare your business accordingly. The most helpful aspect of a sales forecast is that it helps you predict upcoming work. Once you’ve entered anticipated incoming cash over the next few months, do you see any major drop-offs?
Yikes! March looks rough. That means one of two things:
- January and February have to be so good that you’ll have leftover cash to sustain yourself for March (and take a well deserved siesta).
- You need to take a hard look at your lead generation and sales activities.
If it typically takes you two months to land a client, you need to start prospecting and lead generation activities in January to fill up March. Waiting until a month or two from now doesn’t do you any good, because in theory those new clients might not “arrive” until summer.
Next, clarify capacity requirements. In other words, what is it going to take you to deliver each current project? What are the inputs – whether that’s hours or hard costs – and what’s the leftover capacity for new work over those same few weeks or months?
February looks great from a sales perspective, but from a capacity one, it’s a nightmare:
Billing 35 hours each week in February sounds nice in theory, but it doesn’t take into account all of the other non-billable work like administrative tasks, project management and business development.
The smart move is probably to source independent contractors who can help you on a per-project basis, helping you ‘buy-back’ enough time to deliver everything in February, conduct some new business development activities, and not be left on the hook with a huge payroll come March.
Let’s start lining that person up now, a month in advance, so that everything’s good to go when February heats up.
Not only does a sales forecast provide peace of mind, it also help you run a better, more efficient business that’s able to grow and hire additional staff so one day you’re not working every waking minute.
Implementing a simple sales forecast doesn’t have to be overly complex or sophisticated as long as you’re tracking the important stuff – like upcoming work over the next few weeks and months – which will highlight any drop-offs and alert you to the need to start generating new business weeks in advance.
Have you ever experienced any cash flow problems right after busy periods? How did you learn to adapt or avoid these situations? Let us know in the comments section below!