It's a good time of year to start thinking about next year's revenue picture. That must mean it's time to pull out the Black Magic Book o' Forecasting.
[Sounds of chanting, bone rattling, and drums ensue. Someone brings out the chicken feet.] Forecasting might as well be voodoo for many business owners. How in the world can you see into the future and predict what revenue is going to be next year?
Truth is, you can't.
But...
...you can do something that's even better than forecasting. You can set a Revenue Goal. In truth, that's what forecasting really is:
Defining a revenue target, and identifying the resources needed to reach it. So the word "forecasting" is a misnomer, isn't it?
Still, I suppose we'll use the term since it's wormed its way into our business language.
People sometimes get a little nervous when they start thinking about setting a financial goal for the business. "How the heck should I know what the number should be? I just want to make more than I did last year."
Fact: Ambiguous goals lead nowhere. Bite the bullet, set a goal, and then create programs designed to achieve it.
Don't settle for some off-the-rack business future. Build it yourself and you'll love it.
Here's a simple process that will make your "forecasting" a little easier:
1. Clarify your *personal* financial goals. You're in business to support a certain lifestyle, right? You cannot set your business goals without first knowing what you want.
2. Identify the financial goals of all the other players: Your partner(s), investors, and employees. After all, they have financial goals, too.
3. Now... set a business financial goal. Give it some stretch, too.
A good financial goal will leave you feeling just a little edgy because it challenges your comfort zone.
4. Assess the resources needed to achieve that goal. What will it take? Cash investment? More people? If so, then adjust your financial goal to cover the additional cost of doing business. Or make the decision that the goal is too lofty and adjust it down to make the risk more palatable. Don't back off just because you're feeling anxious, though.
5. Communicate the financial goal to your employees. If for some reason you want to keep the actual dollar figure secret (and I'm not sure that makes a lot of sense), find a way to quantify the goal. Make it concrete. Otherwise, there's no meaning in the business for your employees. Meaning drives performance.
6. Create specific programs and plans that, when faithfully executed, move you toward the goal.
7. Measure frequently, and make midcourse corrections as needed.
While the process itself is simple, there's nothing shallow about it. You'll have to dig deep and ask good questions to put your forecast together. It will take time and some sweat. But a little sweat never hurt anybody.
Hey, at least you won't have to bring out the chicken feet.
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