Revenue Planning For Your Small Business

Posted by Cash Miller on June 8, 2010 under Accounting, Business Planning, Management | Read the First Comment

Running a small business often involves creating a number of different plans and projections to see where you plan to go and how you’re going to get there. But an often overlooked method of planning is what is sometimes termed as revenue planning. To help explain what I’m talking about I’ll start off by telling you what revenue planning is not. It is not financial forecasting and it is not an estimate of future cash flow. Revenue planning is in a category all by itself.

Now I’ll explain what revenue planning is at least as I see it and to make it easy I’ll provide an example. At one time I ran a manufacturing business that catered to the needs of casino’s and restaurants in Las Vegas, Nevada. We had a large established clientele with a constantly evolving work schedule. At any one time we had dozens of job orders that needed to be fullfilled. Being that I am a very visual person I have always used multiple white boards to help me keep track of things. If it’s in front of my face I’m less likely to forget something. Typically I had 3 or 4 white boards always hanging on the walls of my office and one of them was always dedicated to my monthly revenue.

Every month I had two number I worried about the most. The total value of the work orders we had lined up and the amount we actually were able to bill or clients by the end of the month. The first number told me if we had enough work lined to reach our sales goals and the second was our finals sales for the month based on work we had completed. The first number though represented our revenue plan.

So our revenue plan was the total amount of potential billings we had for a certain period of time and also where the work was coming from. On my white board I would write our monthly goal at the top. Underneath I would list each client that we had a work order from and the amount in dollars of work we were projected to do for them and at the bottom would be the total of projected work we had lined up. This was a running total that would usually change on a daily basis. But what it always told me was how much our final sales for the month could be if we stayed on schedule.

This was our revenue plan or revenue projection. For a manufacturing or service business it can be a good way of keeping track of your potential billings. You set your monthly, quarterly or yearly goal and then you see if you can determine exactly where the sales are going to come from. If you’ve been in business for a couple of years and have an established clientele then you’ll have an idea of how much each client spends with you each year. This information will help you project your revenue using solid figures and not just assumptions.

For myself this was always a worthwhile exercise as it helped me make sure we stayed on track and we were more easily able to hit the goals we had set for the business.

When revenue planning ask yourself a couple of questions.

1. What is my goal financiallt for the month, quarter, or year?

2. What work orders do I already have lined up?

3. How much is each of my customers worth?

4. How many of these work orders can we reasonably expect to fulfill during the current month?

5. And how much is my current work load worth?

Trust me when I say that this little exercise will help you tremendousley when it comes to hitting the financial goals you have set for the business.

Originally posted 2010-04-08 05:44:12. Republished by Blog Post Promoter