Revenue Forecasting in Project Management

Instead of deciding on a revenue goal and working backwards from there in a spreadsheet to set pipeline and revenue targets, try this instead: 1. Get finance, sales, marketing and customer success in the same room 2. Have each functional leader share their perspective on what a “bottoms up” forecast would look like based on historical performance, reality and specific changes that we can make to improve historical performance 3. Go ahead and model the “top down” scenario on what would be an ideal revenue target and progression towards that goal over the 12 month timeframe 4. Compare the “bottoms up” and “top down” scenario and get clear on the gap 5. Identify what would have to be true to achieve your ideal top down forecast 6. Honestly assess the feasibility of being able to achieve those things based on historical performance and reality  - wanting and hoping for something is not enough to achieve meaningfully different results  7. Take your “bottoms up” model and identify what the GTM teams can do together to make some improvements, place those bets and adjust the forecast accordingly After this exercise, you’ll probably land closer to your “bottoms up” forecast instead of your ideal “top down” model -  but this is likely much closer to what will really happen vs what you want to happen This isn’t about settling for lower goals, it’s about how do we forecast accurately, take reality into account, identify our best bets, place those bets and try to improve results over time in a realistic and sustainable way Bonus - when all GTM teams and finance are all involved in this process together it creates way more alignment, empathy and clarity on what each team is accountable for and how they need to work together to achieve company targets #marketing #b2b #demandgeneration

Most companies are flying blind when it comes to revenue 📊 "Some months we're closing deals left and right, other months it's crickets. I never know what's coming next month." Every month I meet with business owners who tell me exactly this. Revenue unpredictability kills everything. You can't plan hiring, you can't forecast growth, and you definitely can't sleep well at night wondering where next month's revenue is coming from. Well here's the thing...it doesn't have to be this way. ➡️ THE SOLUTION: PIPELINE DRIVEN FORECASTING Stop guessing at your revenue and start building forecasts based on actual pipeline data. Think about that difference. Instead of hoping deals close, you're working with real data from real prospects. STEP 1️⃣ → STRUCTURE YOUR CRM Track each deal by stage, amount, and expected close date in your CRM system. See every deal needs to move through defined stages that actually reflect how your sales process works. You can't just throw deals in there and hope for the best. STEP 2️⃣ → EXPORT PIPELINE DATA Export your CRM data to Excel for revenue forecasting and analysis. You know what's amazing about this? You get complete control over how you manipulate and model your data. Plus Excel gives you that flexibility that most CRM reporting just can't match. STEP 3️⃣ → FORECAST REVENUE Use weighted pipeline data to predict future revenue with confidence. Apply probability percentages to each stage and calculate realistic monthly projections. That's pretty powerful when you think about it. ➡️ RECOMMENDED CRM TOOLS 🔵 Salesforce → Enterprise grade pipeline management for larger companies 🔴 HubSpot → All in one sales & marketing platform ⚫ Pipedrive → Simple, visual pipeline management for smaller teams Now you may be thinking which one should I choose? Well that depends on your company size and complexity, but any of these will work better than spreadsheets alone. ➡️ BEST PRACTICES FOR PIPELINE MANAGEMENT 📅 Keep data updated weekly 📊 Track conversion rates by stage 📋 Define clear stage criteria 📝 Review forecasts monthly ⚙️ Set up CRM automations 🗓️ Set realistic close dates The key is to export pipeline data monthly to maintain accurate revenue forecasts. This monthly ritual will completely change how you plan and operate your business. === I've seen this transform companies from reactive revenue planning to predictable growth patterns. Instead of crossing your fingers each month, you'll know exactly what's coming and can make strategic decisions accordingly. What's your experience been with pipeline management? Are you still flying blind or do you have a system that works?

Want to stress-test your agency? Ask yourself this one question. (85% of agency owners can’t):  “What will our revenue be in 12 months?” If your answer is a wild guess, then that’s a problem. Most agency owners don’t necessarily “like” forecasting because there are too many variables, you can’t predict which clients will renew, new business is unpredictable, (insert another excuse). So instead of trying to predict the future, they just wait to see what happens. Then this happens: → Bad hiring decisions (either scrambling for people or over hiring) → Cash flow problems (because revenue isn’t planned out in advance) → Pricing mistakes (because they don’t have a clear grasp on margins) Instead of that… here’s how to build a simple forecasting system for you agency. 1/ Use Your Sales Pipeline as a Predictor Identify your most reliable sales metric. For most agencies, that’s contracts sent (if a deal has reached this stage, it’s very close to closing). Then track historical close rates. For example, if 80% of contracts sent turn to paying clients, and you send 10 contracts a month, you can reliably expect 8 closed deals in the near future. Then factor in deal size & service type because not all clients are equal. Are your high-ticket deals closing at the same rate as your smaller ones? Are project-based deals converting faster than retainers? 2/ Tie Hiring to Revenue Trends If utilization rate is climbing (above 90%), start hiring BEFORE your team gets overwhelmed. And if utilization rate is dropping (below 70%), pause hiring and rework your sales process to fill the pipeline. ps. If you want more info on utilization rate see my last post. I go IN-DEPTH. 3/ Break It Down by Client Type Forecast new vs. existing client revenue separately. So, if 80% of your revenue comes from retainers, focus on renewal rates first. What % of retainers renew each quarter? Which clients are at risk of churn? If you rely on one-off projects, track pipeline health aggressively. How long it takes to close new deals? How many inbound vs. outbound leads convert? Which project types bring in the highest margins? The takeaway: If you forecast based on real sales & utilization data, your agency runs on strategy, not guesswork. …making it easier to grow and ultimately scale.

When doing revenue forecasting, I like to think in terms of 3 types of revenue: 1. Known revenue 2. Potential revenue 3. New initiatives Known revenue can be contracted or highly likely. Potential revenue is more speculative in nature and are contingent on actions taken, such as selling to a new customer. New initiatives are things that are completely new for the business, such as new line of business, new and aggressive marketing channels, etc. Each of these numbers should be identified for each revenue stream in the business to get a solid forecast. Known provides the baseline, while potential and new initiatives provide your upside scenarios. When you tie expenses to potential and new initiatives, you can exclude those from the budget and only "unlock" that budget if those are achieved. While there is no magic bullet to make revenue forecasting 100% accurate, this helps ensure the scenarios are based in reality.

Why you need a top-down and a bottom-up forecast If you only do one, you are not only losing out on accuracy. You are also robbing yourself of high-value conversations. See, top-down forecasts are typically done by Finance or senior leadership. They start with the result in mind, the performance the company should be able to achieve. Then you reason down from there, forecasting each relevant business driver. That’s pricing, new customers, the impact of advertising, promotion, innovation, and so on. On the other hand, bottom-up forecasts should be prepared by the commercial teams. They are your marketing, sales, growth, or product teams. You start from scratch, evaluating the expected impact of each major project or initiative individually. The advantages of doing both types of forecasts are two-fold: 1) You can de-bias your forecast Most of the time, top-down forecasts lean to the aggressive side. That’s because they are prepared by leaders who are somewhat removed from day-to-day operations on the ground. Additionally, reasoning down from the end result typically means people are more optimistic than they would be otherwise. Bottom-up forecasts tend to have the opposite bias. This is because they are prepared by the people who are responsible for delivering them. Most of the time that means they are conservative to increase the chances of exceeding expectations. Then, by comparing the aggressive top-down with the conservative bottom-up, one can find a happy medium that is often more accurate than each plan individually. 2) You’ll have discussions that drive the business forward If top-down and bottom-up are relatively far apart (as they usually are), the preparers of each one need to sit down together and discuss the differences. That’s a fantastic opportunity to encourage people to think outside the box. By explaining (and justifying) step-by-step how you reached the number you proposed, you have the chance to think deeper than you did before. In my experience, that process alone leads to new ideas and opportunities down the line. To summarize: ➣ Finance or leadership teams create aggressive-leaning top-down forecasts by evaluating internal and external business drivers. ➣ Commercial teams forecast each project individually, which adds up to a conservative-leaning bottom-up plan. ➣ Comparing the two and discussing the differences leads to higher accuracy and new ideas to improve the results. 🛫 If you’d like to learn more about FP&A: Subscribe to my weekly newsletter! Join 20,000+ Finance & Accounting professionals and get: ➢ 3 FP&A ideas from me ➢ 2 insights from others, and ➢ 1 infographic in your inbox ...every Tuesday. 👉 Subscribe at (free): https://lnkd.in/dredP3d5