Why Is Forecasting Your Agency’s Future So Important?
There isn’t an agency owner or CEO that wouldn’t like a peek into the future of their business.
Because sure, you can say that you plan a ton, but is that all it takes to make sure that your agency is on its path to success?
Some of the questions you have to ask yourself are:
- Can I forecast activities that will affect my future revenue?
- Can I forecast incoming jobs, project management, and resource availability?
Why Do You Need To Know the Future?
Forecasting helps you plan and prepare better. If your agency is new on the market and you’re just starting out, then qualitative forecasting is what you’ll be doing. This method applies when you don’t have historical data to rely on.
Quantitative forecasting comes in when you’ve been running your agency for some time. You can take a look into your historical data and compare trends. With quantitative forecasting, you can predict what’s in store for your business, find gaps and try to avoid them in the future.
Now we’ll show you how to forecast four key metrics that affect your agency’s future.
Forecasting Four Key Metrics
Having all your past and real-time data in one place will make the process of forecasting much easier. When choosing a tool for your agency business, aim for one that has the project, budget, resource management, and reporting integrated with one.
1. Forecasting Sales Revenue
If you want your agency to be profitable in the long run, it’s best to start from the beginning of your business cycle: your sales pipeline. Having a tool that includes a sales funnel and revenue forecasting capabilities that are tied with resource planning will help.
To ensure you can deliver a potential project on time and see profit from it, normally your business development team will work closely with operations to get a clear picture of incoming work.
Knowing the resources you have available, plus the timeline and budget your potential clients have in mind, you can start forecasting your sales revenue.
2. Forecasting Resource Management
Resource planning helps you allocate and plan resources to deliver different tasks. Like in any agency, effective resource management is challenging due to the complexity of projects, shifting deadlines, and maximizing utilization.
When lacking an agency management tool, you follow gut feelings or past experiences to hire new employees. This is why forecasting team availability is crucial. When forecasting resource management, that includes forecasting time off (vacations, unpaid time off, parental leave, etc.)
It’s convenient to have an end-to-end tool to keep track of all the changes that happen in a project. That way, you’ll understand the current and maximum capacity of your resources.
3. Forecasting Utilization
Tracking time gives your agency accurate profitability data, which leads to better decision making, which will steer your agency’s future.
Forecasted utilization is a key metric you need to follow. Because your work revolves around delivering services to clients, billable utilization is a crucial metric to keep an eye on. Software development agencies, for example, aim to keep their billable utilization rates at around 75-85%.
4. Forecasting Revenue
Once your resource planning is mapped out, you can focus on what every company needs to be able to thrive in the longer term: forecasting agency revenue.
In Productive, you can forecast your revenue in forecasting charts and budget overviews. You can also dig deeper into your data in different reports.
Your project budgets and scheduled resources are the main actors in this play.
Productive can forecast how much budget you’ll use in the future and what your forecasted profit, revenue, and billable time will be.
You’ll notice that if you’re a project manager, forecasting revenue for specific budgets helps you find out what exactly to communicate with your teammates and customers.
Try customizing a financial insight by grouping data by date and project and filtering by revenue. That way, you can forecast exactly how much revenue each project will bring you in each coming month.
Forecasting Revenue With Retainer Agreements
The difference between working with clients on a retainer and working with clients on an hourly rate or lump-sum payment agreement is that part of your services (and resources) are booked each month. In other words, working on a retainer fee allows your agency to forecast a certain amount of revenue each month.
Productive helps you manage retainer agreements through recurring budgets. To create such a budget in Productive, you simply:
- Create a new budget
- Make it a recurring budget
- Choose a recurring interval for the budget, as well as the date of the next occurrence. That’ll be the date when Productive automatically creates a new budget for you.
- Last, add services, time and rates for the recurring budget.
Don’t Get Left Behind
Your desires for a brighter future are one thing. But the reality is that having consolidated and real-time data is the only way to predict what’s in store for your future.
We’ve covered how to forecast four key metrics that influence your agency’s future. Now it’s up to you to focus on your forecasting. Be ahead of the game and predict what your next quarter or year will look like. Dig deep into your sales pipeline, resource allocation, and expense tracking data.
If you’re looking for a tool that could help you with forecasting the future of your business, give Productive a try Also, have a look at our Future of Digital Marketing Agencies article as further reading..