Is Revenue Forecasting That Difficult?

In this issue ...

  • How To Do A Forecast

  • 539 words, a less than 3 minute read.

Most anyone who has visited a Custom Integration business has seen a whiteboard or equivalent that maps out the active projects for the week/month or even longer. Almost every company has evolved a primitive system for representing its current and, sometimes, future projects.

So why, when you ask a CI company “What does the month’s revenue look like?”, you get a lot of shoulder shrugs, and an unconfident “let's wait and see”?

Let’s pick on my little $2M Revenue company, 10 people of which 6 are installers.

We bill about $50K in labor each month - about 500 hours a month at $100 average rate. My 6 techs get paid around $25,000/month for 1,038 hours worked.

So, in planning my average monthly revenue I need to ship about $100K in Equipment, bill for $17K in misc. parts, logistics, etc. and bill my $50K a month for labor. This assumes no security income, service RMR or service billings on top.

So, how many projects might we be required to get to these numbers? History tells us we do about 40 decent size ($40K avg.) projects in a year, with another 150 service and small jobs projects making up the remaining $400K. So, our job board (one month) looks more like 4 BIGS at any time, with 12 or so SMALL jobs spaced in between. Our 10-week view shows two months-worth. We also know about 20% of this business comes from add-on change orders during the installation process; these hit the board as they are known.

Here’s what we do at the first day of every month:

We look 10 weeks ahead. A simple sheet with the Week, 1 thru 10, and Equipment Delivery, Labor Projected and Parts is reflected on each project line. Our 6 techs are scheduled accordingly; “X” hours a week to each project so in a given week we have assigned all of their available 240 work hours. We know we rarely bill 100% of those hours but knowing where they are committed is key. The project board should also have the entire Equipment, Labors and Parts Estimate for the project on the left hand side. The right side for the project should subtotal what the projected delivered totals for Equipment, Labor & Parts are for the projected 10 weeks.

The week plan is reviewed in each weekly production meeting (this meeting is crucial to executing). Competing projects for resources are discussed and changes to the out weeks are made as things change.

As a week is completed the projects are updated for what really happened and the out weeks forecast is adjusted.

So, what are we doing? We are attempting to show production as it happens while re-estimating the timing for each week going forward. Projects will complete in certain months and new projects can be added.

Click here to download worksheet for forecasting.

Why bother?

Because planning work and reviewing it always results in more efficiency. Keeping the team accountable to what they say they are going to do, always wins over the 'whatever happens' method.

You’ll need practice to make this work for you, of course. But a tight process for projecting resources helps you use current resources better and apply new resources better. If you have a shortage of executable work; this process identifies it early.

Open issues like equipment not here, over-booked labor and site readiness issues all become more transparent.

At the end of the day, it’s just a big project board dynamically working to make everyone better.

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