Did you ever wish you could guarantee how much revenue was coming in to your business from one month to the other? Well, there are no guarantees in life and business but we can come pretty close.
While it’s true that we can’t control how much business we get from our clients, we can often reasonably predict the amount of business we get and do things to help insure that we get what we need. In order to do this you need to know three things. The amount of business in your Sales Pipeline, The average amount you make on a sale (or project), and what your closing ratio is. All of which you should be able to figure out based on past experience.
1. The Sales Pipeline
Make up a chart with columns representing the next 6 months. In each month’s column, list the names and dollar amounts for projects you know are coming in based on commitments made by customers. Also list out any sales that regularly come in based on past patterns and experience. If you’re not sure about some of them, then make the dollar amount a percentage of how likely you will get the sale (example, if there’s a 50% chance that you will land a $3000 project in June then put down $1500). Do the same for any jobs you are currently pitching. Pretty soon, you will have a good picture of which months will have enough income and which months won’t.
So say you need $10K a month to meet all your expenses, and in July you notice you’re short by $6K, here’s what you can do to help make sure you make that extra six thousand.
2. Your Average Sale Amount
Take all the jobs you’ve done over the last 3-6 months and average them out. And let’s pretend that each project comes out to about $2,000. How many projects will you need to add to June? Three! Now we we’re getting closer to knowing how much selling we’re going to need to do in the month of May. With me so far?
3. Your Closing Ratio
Again go count all the business pitches you did in the past six months and count how many of them were successful, in other words, how many of them resulted in a sale. Now you should have a your closing ratio. Let’s imagine that your closing ratio is 1/3. Now we have all the information you need.
Do The Math
IF you know how much more business you need to raise in June ($6K) and if you know what your average sale is ($2K) then you can figure out how many projects you need to add, right? (3)
And IF you know how many projects you need to add (3) and if you know what your closing ratio is (1/3) then you can figure out how many new business pitches you need to make in May (9). Make sense?
So if you do whatever it takes to make 9 business pitches in May, and indeed you get 3 new projects at an average of $2K each, the you just made your June quota!
You can also make your life easier by either increasing the amount of your average sale by raising fees or adding more services, or you can increase your success rate when doing business pitches by learning to be a better closer, or BOTH!