How To Make Forecasting Revenue A Focus For Your Agency

By September 21st, 2018 No Comments

Most agencies we work with have a CRM system that helps to manage pipeline opportunities.

You can keep track of deals with both new and existing clients, how much they are potentially worth to your agency and store notes on progress in getting the deal signed off.

However, one thing that most CRM systems don’t do is actually forecast when this revenue is actually likely to hit your accounts. This can leave agencies owners frustrated that they are completely in the dark when it comes to their forecasted performance against target, and what needs to be done in terms of new revenue to meet the target.

In reality, very few agencies can forecast beyond the next 3 months given the unpredictable nature of project work.

However, that’s no excuse not to have a rolling 3-month revenue forecast in place.

At MAP we’ve spent the last couple of years developing our Revenue Forecast templates through working with many Digital & Creative agencies and understanding what they need to best predict their performance.

Here’s our guide to structuring a revenue forecast:

Start with your confirmed revenue & direct costs

You can report on month by month, per client or by departments. The first place to start is by listing out the won/banked work i.e. the revenue that you already have confirmed. Document this in accordance with the periods where the work is taking place. You should also detail out any direct costs (e.g. ad spend, confirmed freelancers & print costs) and ensure that these are deducted from Revenue to get your Gross Profit on that job.

Once you have your confirmed revenue outlined month on the month you’ll be able to see how far away you are from hitting your target Revenue & Gross Profit, which is the gap you’ll need to fill with new business.

Keep your pipeline in the same document

Next, you need to list out everything that you have in your sales pipeline in a separate section to confirmed work. This includes potential work with both existing and new clients.

Again, try to list these out in accordance to when you believe (at best guess!) the work will be carried out, and estimate any associated costs as best you can. You can include speculative work/opportunities as well, but make sure you’re realistic about when the work is likely to take place.

Once you have your pipeline detailed out you’ll then have a total month on month pipeline figure, which hopefully when added to your confirmed work gives you a total that’s much higher than your target! For example, let’s say your confirmed Gross Profit (Revenue less Direct Costs) for a quarter was £350k and your target is £450k. This means that you’re £100k short.

If your sales pipeline is showing £200k potential Gross Profit, this means you need to convert AND deliver 50% of your pipeline within the quarter to meet the target.

Now you need to decide if this is achievable and what the next steps are to convert the work in the pipeline.

Match Actual Figures to your Accounting System

At the end of each month ensure that your revenue forecast is matched to your accounting system so that you’re reporting figures that match the work done in the period and not billed. Get your accountant/bookkeeper to ensure that Work In Progress (work done but not yet billed) and Deferred Revenue (work billed but not yet done) are both adjusted for in correspondence to your forecast.

This means that the forecast is completely accurate moving forwards.

Don’t know where to start? We’ve already got templates in place to help you. Give us a call on 0161 711 0810 to arrange a forecasting session where we’ll help build your forecast live with you.

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