Back in August and September, Aspire Cofounder Kevin Kehoe cohosted a forecasting webinar series with Greg Herring, CEO of The Herring Group. Together, they walked through the ins and outs of forecasting--from the data to collect to developing the forecasts—as well as discussing how industry giants utilize financial forecasting.
Forecasting brings tremendous value to your landscaping company. Specifically, forecasting becomes essential during uncertain times by enabling you to plan ahead, for both the short and the long term. Not only does forecasting help identify potential risks in your organization but it also uncovers opportunities you may not have considered.
What do you need to start forecasting? Data.
Landscape companies can produce enormous amounts of data. Some companies track their data on spreadsheets. Others use more advanced technology, such as highly efficient software programs like Aspire. In any case, when data is aggregated into well-designed reports, the numbers will tell a story.
Forecasting takes this data and lays it out to develop short- and long-term trends. The trends predict possible future outcomes for everything from expenses, such as labor, to sales and revenue to help businesses create new budgets and quickly adapt.
Evaluate pipeline and compare to goals
Revenue is important to your business, so you want to keep a running forecast of your current and future sales. This is done by analyzing your sales pipeline and determining if you’re on target to meet your goals. If your goal is to sell $5 million worth of services by the end of the year, forecasting can help you determine if you’re on the right track.
This is where your company’s previous data comes in handy. Looking at your previous data can help you determine factors such as close rate. Not every deal in your sales pipeline is going to close. Taking the total pipeline revenue and multiplying it by your close rate will provide you with a general idea of your potential sales.
For example, if you have a close rate of 50%, you will need to have $10 million worth of services in your pipeline to close $5 million in sales. But throughout the year, these numbers can change. That’s why it’s important to create an end-of-year forecast. Utilizing data from earlier in the year can also help determine if you’re on track to hit your goals.
For instance, if your new forecast shows you’re only going to close $4.5 million in sales instead of your goal of $5 million, you now can evaluate where to focus your efforts for the remainder of the year. Because you’ve determined this shortfall ahead of time, you can assess whether you need to improve your close rate, increase your pipeline, boost upsells, or do something wildly different to finish the year strong.
As Kevin Kehoe summarized during the webinar, “Where can you spend your time over the next few months to maximize your contribution and accountability to your team?”
Identifying potential issues enables you to make quick adjustments to allow plenty of time to meet your goals.
Identify future costs
Forecasting offers more than identifying future sales trends. Forecasting is also important for identifying future costs, such as labor. There’s no question that labor is the highest expense for landscaping companies, but managing that cost can mean the difference between your company making or losing money.
Forecasting helps you identify trends in your labor costs so you can make adjustments year after year. For instance, if you see your labor costs are rising by 6% every year, but you’re only raising your prices 3% every year, you’re going to have issues down the line. Over time, your profit margin will continue to shrink until you identify and resolve the problem.
As Greg Herring stated during the webinar, “Unless you are going to increase efficiency, your profit is going to go down.”
So, why forecasting?
More or less, forecasts are created by taking your company’s history and related details and applying assumptions about its future costs and revenues. Having an integrated software system in place can help you prove the future forecast by enabling you to identify opportunities at the detail level.
During the webinar, Greg Herring mentioned an important detail about big businesses and forecasting. He stated that, for large companies, forecasting is a routine practice. “They need to see what the future looks like, in numbers, so they can make important business decisions.” But he also reiterated that it’s not something that is only meant for big businesses. Rather, landscapers of all sizes should utilize their data for forecasting.
Forecasting helps companies plan and make strategic decisions, providing a clear direction for the organization. A forecast helps you visualize the future so you have time to make decisions to change the outcome if you don’t like what you see.
To view the recorded webinars and learn more about setting up forecasts, click below:
At Aspire, we understand that when you’re running a landscape company, it’s important to have the right tools for the job. That’s why we’ve developed an all-in-one, cloud-based solution with the functionality you need to keep your entire business running smoothly—and profitably. If you’re ready to take your company to the next level, contact us today!
Need help finding the right business management software? Download this helpful buyer’s guide to learn everything you need to know before selecting a solution, from initial research to final decision.
For other tips for achieving consistent and sustainable growth, read our article, "4 Ways Landscape Scheduling Software Helps Manage Labor Costs."
If you enjoyed this blog post, you might also want to read, "8 Ways Business Management Software Can Boost the Profits of Your Landscaping Business."