You don’t have to be a CPA or CFO to develop a useful revenue plan. Sure, it can get complex, depending on the type of business you have, but at the end of the day it’s revenue and profit that drives your business.

Business owners need to forecast sales and revenue as the starting point to any business’s success as specifically as possible. With a solid forecast in place, you can see if you are hitting your basic numbers, but when you add in rolling forecasts, you can tweak to see even more improvement. Here are some steps to getting there:

• Break down your historical sales by customer segment, service, market, and product line.
• Get your sales team involved for their feedback.
• Understand your customer segments and their buying attributes.
• Forecast any new product sales this year.
• Project how many new customers you gain a year, and determine how many customers do you lose each year.
• Find out the average level of sales per customer.
• Record your average invoice value.
• Discover how many units per month are purchased per customer.
• Think through the average selling price per unit by segment.
• Understand the direct costs to forecast gross profit and gross margin (gross profit = sales – cost of sales; gross margin is gross profit / sales)
• Understand sales (and collection) timing – Is there seasonality to your business?
• Communicate the sales plans and results to the team continually.

Using this data, document your sales assumptions, your sales force growth, market growth, new product timing, new customer revenue, and existing customer revenue.  Develop a specific and realistic forecast (one page on Excel) by segment by month.  Measure actual results against it constantly.

The sales forecast needs to be a stretch to cause excitement with your team, but also realistic and reachable to ensure the team is motivated for success.

I’ve made the mistake both ways.  I’ve been much too optimistic with goals that are way too lofty and not perceived as achievable.  Actual results can be quite de-motivating to the entire organization.  On the other hand, I’ve set sandbag goals that are easy to hit.  This fosters complacency and can really slow your business’s growth potential.  The best way to find balanced goals is to work together with the sales team with the intention developing an aggressive forecast to accomplish together as a company.

Revenue models generally don’t change much. Don’t make the mistake of doubting the businesses’ revenue model and over-complicating things with continually changing sales plans.  This inevitably leads to confusion like a squirrel crossing the road.  Understand your customer needs and company’s value exchange then run with it.

Then, make sure to have timely feedback loops and adjust plans based on actual data. “What gets measured, gets managed.”

Don’t stick your head in the sand if you are not hitting your sales numbers plan. Take the necessary action to get back on track.

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Now that you have some early sales results for the year, this is great time to evaluate this year’s sales plan.

How are you doing vs. your expectation so far?  How is the sales team doing?  Are you hitting your new customer goals, measured against the assumptions you made developing your plan?  Make the adjustments now to set yourself up for a successful year.  I currently have a client that was already significantly off on their sales plan.  They were proactive and just completed a full review and now have a much better plan for the rest of the year.  I can help you do the same. Contact me for details.