Running a business is complicated. Business forecasting makes it a bit easier.

How do most businesses start? A gifted salesperson or technician or administrator who works for a company and, within months, is excited by the possibility that this marketplace offers and is exasperated by the opportunities the company they are working for either doesn’t spot or make the most of.

But being a great salesperson or a talented technician or an administrator with a finger on the pulse is worlds apart from a businessperson. When they go from being employee to company owner and from company owner to employer, new business owners undergo a “Bell Curve” (in the non-controversial sense) of learning what you need to do and what you need to know to lead from the front.

The most successful businesses we work with (and concomitantly the calmest, most in-control business owners) have five things they do in common – and it’s all to do with business forecasting.

Business forecasting relies on accurate and up to date numbers about your business – not just financial but about the products and services you offer, the cost-effectiveness of each staff member and function carried out in the business and so on. We covered keeping better business records in our last article – please click here to read it.

After reading this, pick up the phone to us and we’ll put together a system of measuring the metrics in your business likely to make life a little easier and work more profitable.

Business forecasting – cash flow

All businesses need access to cash to pay their rent, rates, suppliers, employees, taxes, and more.

Within 6 months of setting up your business, there will be a fairly predictable movement of money in and out of your company. Your bills will almost certainly be paid at regular intervals and the money you’ve got incoming will start to display certain patterns too.

With a decent set of up to date figures, you’re able to tell what you’ll likely have available in cash in one month’s time, six months’ time, and even a year’s time.

This knowledge gives you an important insight. How are you doing for cash retention in the business? If you plot your likely cashflows forwards, you’ll be able to tell if you need to hang onto the money you’re making to pay your bills or whether there’s enough to either invest in your business or pay yourself more.

Business forecasting – customer satisfaction through recommendation

Are you providing your customers with what they want? If you are providing them with what they want, are you doing it quickly enough?

What are your repeat levels of business like? Can this customer be guaranteed (as much as anything in business can be guaranteed) to come back to you in 6 weeks’ or 6 months’ time?

Look at your level of repeat custom. Encourage the customer who you know love you, your products, and your services to recommend a friend for a reward. Keep track on the number of referral voucher redemptions and work out the cost of acquiring your new recommendation customers every month. To do this, add up your ex-VAT turnover from your new customers brought to you by referral and divide it by the number of these customers. Then, look at the lifetime value of your customer – does that cost per customer acquisition make sense to you? If so, push this promotion hard.

Business forecasting – access to finance and credit

At most points, businesses need access to money. That money could take the form of a loan or overdraft from the bank, a commercial mortgage to buy out the premises they are currently renting, or for better credit terms from their suppliers.

If you’re going to ask any company to lend you money, they need to be sure that yours is a good business likely to be able to pay them back and that you are the right man or woman to be running it. Without accurate, regularly-updated financial statistics, you’re not going to be able to provide them with enough visibility or comfort that lending money to your company is a good business bet.

Work with your accountant to provide 2-3 years’ worth of profit & loss and cashflow forecasts based upon solid, historical numbers married to conservative growth projections to give your business the best chance of accessing finance.

Business forecasting – better understanding of profitability

In the way that the restaurants with 100 items on their menu confuses both the staff and the customers and lead to an awful lot of wastage, is your product or service selection hurting your company?

Use the information that business forecasting provides you with to marry up your invoices and payments – how much profit are you really making from each service or product?

If you can, narrow down what’s on offer to the public so they have a better sense of who you are and what you offer. At the same time, you won’t waste time, mental/emotional effort, resources, advertising spend, staff, or anything else on providing niche, barely-profitable services for which there is negligible demand.

Business forecasting – are you headed in the right direction?

A person without a target hits nothing. What do you want from your business professionally? What type of lifestyle do you want it to deliver to you?

Reassess your goals and your frame of mind every three months. The minute you start losing energy, passion, and drive for your business is the minute you should go back in on yourself to find out why you took the road less travelled in the first place.

Business forecasting – work with Burton Beavan

For more information on how to use forecasting to better understand your business, get in touch with the Burton Beavan team today on 01606 333 900 or email hello@burtonbeavan.co.uk.