Here we are only a few weeks out from the end of another year and how is your business tracking?
Have you already hit the targets and budgets you set at the start of the year … and you’re feeling pretty content, satisfied and comfortable with your results right now?
Are you running so far behind budget that you’ve already written off this year and you’re starting to think about where your business will go next year?
Maybe you’re one of those too few business owners who set yourself targets that you knew were achievable, but knew would stretch and challenge you right up until the last weeks of the year.
If you’re in that latter group, you have probably monitored your results all year and know exactly where you are tracking and right now you are fired up, excited and chasing those last few sales to nail your December sales budget and hit your full year targets … and isn’t that a great feeling.
Having run my own business that grew from zero to $15M in just 3 years, I know that so much of where any business sits with its results right now is due to the time spent on, and accuracy of, the sales and profit forecasting it did at the start of the year.
And that’s where Goldilocks and the Three Bears come in.
Because business forecasting tends to be a bit like the Three Bears beds … too soft, too hard or just right.
A too soft or easy to achieve forecast will usually see a business achieve its forecast results before the end of the year without really challenging or stretching the business to achieve its full potential.
I worked for a major business once, in which the sales targets were too soft, so most of the sales team would hit their monthly targets around the third week of each month. They would then hold new orders back until the start of the next month to get a nice easy start while they finished off the month on the golf course, out shopping or surfing.
In the meantime the business owners wondered why the business was always coming in right on budget when they felt it had so much more potential. Funny about that!
Conversely, a too hard or unrealistic forecast will often result in the projected results rarely being achieved … impacting profit, cash flow, morale, inventory and other sales reliant areas of the business. And that’s not a good thing!
On the other hand a just right or realistic but challenging forecast is a great motivator and guiding light to constant growth and profitability in any business.
A just right forecast is one of the best management tools any business owner could wish for.
Every part of the business, from sales revenue to bottom line profit results, sales and marketing plans, team engagement and performance … becomes so much easier to manage with a just right forecast.
Here’s how a just right budget has helped Alvia Turney manage her Separation Consulting business Act4Tomorrow so much more effectively.
Like so many small business owners at about the 3 year mark, Alvia had built a successful business but it was not hitting the potential she believed it had or generating the profit she wanted. While she had budgets in place she did not have a tool to forecast what the business could realistically achieve. So we looked at her actual sales from the previous year and stretched them a bit as the starting point for a forecast to grow the business.
Not too soft because Alvia was adamant there was more potential in the business.
Not too hard or unachievable because that would put too much stress on her and her team.
But just right would see her business operating at its optimum with consistent, manageable growth and a motivated and engaged team to support her.
Then, using a simple forecasting template in which she could quickly and easily project everything from her sales revenue down to her bottom line profit, she took over and started playing with some “what ifs”.
“What if” she ran a promotion on a particular service at a particular time and used her team more productively to put in a focused sales effort leading up to it.
“What if” she increased the price of some services that were not generating as much profit as others.
“What ifs” around a whole lot of other possibilities that were in fact “possible”… to increase her sales and profitability.
In less than a couple of weeks of playing around, Alvia created a challenging, but realistic forecast that she felt was “just right”.
Eighteen months on and Alvia is right on track for two consecutive years of sales and profit growth … and loving every minute of managing her business.
If you want to enjoy that type of success here are 3 tips for a “just right” forecast for your business:
- Start with the number of sales (units) of products or services that you are selling.
- Be honest with yourself and set realistic numbers … then stretch them a little at a time until you get that “tight undie” feeling. That is a great place to stretch a bit more or back of a tad.
- Get yourself an easy to use forecasting template that will convert your sales numbers into an easily managed monthly report giving you complete control of your business. (I have a couple that I use for product and service based businesses).
If you want to find out how much of a difference a simple forecast can make in your business CLICK HERE to book a call and let me show you.
PS: If you don’t know how you’re business is going on a month to month basis and you’re a little embarrassed by that, it’s OK, you are not alone. CLICK HERE to book a time and let me help you take the stress out of understanding your numbers.