A better place to start when forecasting for growth

Are you projecting revenue by looking at last year's numbers and then adding X percent? Where does that X percent come from, and how do you know you are choosing the correct number? Relying on history? There's a better place to start when forecasting for the growth in your business.

Why forecast? Accurate projections are critical because you need to make sure you have the infrastructure you need in place at just the right time. Invest too soon and you have excess costs - invest too late and you miss opportunities while playing catch-up.

Cash is the oxygen for your business, so you start by projecting how much cash you want to have in the bank. Gut it out, and do this for every month in the next 12 months. Once you have done that, forecast how much cash you want to have in the bank for the following 12 months, and the next 12 until you have developed a monthly cash forecast for 36 months.

To connect cash to the execution of your plan, think about widgets - the things that flow through your business. How many cars do you forecast that you will sell to produce the level of cash you forecast? How many service customers do you project you will handle each month? Every role in your company has associated widgets - the pieces of productivity that contribute to the generation of cash. This is how every contributor in your business connects to your overall plan.

Now that you have thought about the widgets, what changes in materials, people, equipment, etc. do you need to have in place to meet your forecast for the growing number of them you will produce? Your monthly delineation of the widgets helps you develop execution priorities for the upcoming quarter. The priorities make sure that you have what you need to produce whatever number of widgets you forecast. If you are on a rapid growth trajectory, the number of widgets in months 1-3 will look different - perhaps substantially different - from months 9-12.

If you are not yet forecasting, you're rolling the dice about whether you will achieve your revenue goals. Wouldn't you rather choose to put in place the elements that enable your team to win month over month, and year over year?

ProActive Leadership Group coaches can work with you and your team to develop the cash system - and the other systems that help you exceed your prior performance and reach even aggressive growth goals.