By Steve Vincent 
For agencies, understanding what work, revenue and profits are coming in (and arguably more importantly, when) is often a very manual process. Data is generally pulled from different systems or simply downloaded directly from people’s heads! They then conduct weekly or monthly meetings to discuss how likely it’s coming in. It’s time consuming. It’s boring. And it’s often guesswork.
This makes it difficult to get meaningful insights to drive your forecasting.
One of the main challenges we see in agencies is that they’re working with the wrong data in the first place. Account managers have a tendency to be over-optimistic, hearing the positives like ‘we want to go ahead asap’ without delving into the realities of what this actually means.
Examples of this include:
- An agency goes through a big RFP for a £1m+ client pitch, win the pitch and forecast the revenue to start coming in a month later, building from £50k to £90k per month. They recruit new team members to manage the work. Procurement onboarding then takes three months, the first brief comes in two months later… and it’s for a banner ad campaign. Making the forecast of £1m highly unlikely. It’s important to remember that bigger clients typically have a longer sales cycle.
- An agency pitches for a rebrand project, with the new brand due for launch by the end of the financial year. They win the pitch, arrange workshops… and discover the key people they need are on holiday, maternity/paternity leave, dealing with another bit project. It takes six weeks to book the first workshop and another four weeks to get everyone together for the second. So a project that was forecast to start straight away is already three months behind on revenue and capacity forecasting.
How to overcome forecasting challenges
The biggest thing you can do to support your forecasting is to make sure the data you’re collecting is realistic and accurate.
Here are the key things you need to know:
- When the work is going to come in, for sales forecasting.
- What resources you need and when, for capacity forecasting.
- When the revenue will come in, for cashflow forecasting.
- What the costs are and when they are going to be billed, for cost forecasting.
- How much profit you’ll make and when, for profit and loss forecasting.
Here’s how to ask the important questions to make sure all aspects of your forecasting is on track.
- When will the work need to go live? When would you like to start seeing the impact of the work? Why then? What if we can’t meet that deadline? What steps need to happen to get there?
- Will we get a PO, and when can we invoice?
- Is there appetite across the business for this project? Who needs to be involved in the decision? What is the decision-making process? When will the decision be made?
- Who needs to be involved in the project? Are all stakeholders briefed and on board? When will they have availability? Do you know about any holidays or other planned leave?
I’d strongly recommend carrying out internal meetings to check these questions have been asked and answered. This in turn can drive your capacity forecasting, checking that you have the right resources in place to effectively manage the work. Ultimately, forecasting is about having all the right data at your fingertips. You need forethought and foresight, an end-to-end view of each project, so you can plan for capacity, billing and revenue.
