If you toss and turn over who’s working on what, what business you need to bring in or if you can afford to negotiate, hire or rent a larger space, you’re not alone. Many agencies struggle to get a grip on what the future holds. Without knowing what tomorrow will bring, it’s easy to make poor decisions or suffer course corrects.
What if you could predict the future using data you already have or can begin gathering? With forecasting, you can. Once mastered, forecasting unlocks a wide range of business insights. It’s something of a skeleton key that can help you gain control of nearly every aspect of your business.
When it comes to forecasting, Rob Harr, Vice President of Sparkbox, has it down to a science. He’s spent the last few years figuring things out and putting processes in place for a web design and development firm with more than three dozen people working from two offices and remotely.
Rob has helped many shops in the Bureau community to optimize forecasting for better sustainability and sleep at night. Looking forward to our Financial Metrics, Forecasting & Operations Workshops this fall, we caught up with Rob for a quick intro on what forecasting is, why it’s a worthwhile investment and the basic steps to get started.
The Business Benefits of Forecasting
As one of Rob’s early mentors and business advisors used to say, “You won’t be in control of your business until you can accurately predict it.” With forecasting, you can dig deeper into an assortment of business-critical decisions including:
Cash Flow: Zero in on future cash flow to make better decisions.
Sales: Sell projects according to your available capacity and skills.
Pricing: Factor in utilization rate before making discounts or negotiating.
Hiring: See where the ebbs and flows are, and hire accordingly.
Internal Projects: Foresee slowdowns, and schedule valuable internal projects during lulls.
Estimating: Get better at estimating to improve margins.
Join Rob for a Financial Metrics, Forecasting & Operations Workshop in New York City (Aug. 29–30), Seattle (Sept. 12–13) or San Francisco (Nov. 4–5).
Three Steps to Get Started
Ready to get started? Rob recommends three steps:
Grade and adjust
Step 1: Measure Yesterday
As Rob says, hindsight is 20/20…if you find ways to measure it. To predict the future accurately, you’ll need to be able to say with certainty what happened yesterday. And that starts with time tracking. While you may not bill in hours, it’s still important to track time spent, so you have an idea of how long things take, and why.
In terms of metrics, Rob recommends paying attention to two key metrics:
Capacity: What is your overall capacity for doing work, both billable capacity and total capacity?
Utilization: What is your billable and total utilization across your team?
Step 2: Predict Tomorrow
To predict tomorrow, you want to try to predict three things:
On which projects during the week
Time out of the office for team members
You’ll need this data to move forward. Without it, you’re stuck. There may be pushback from your team on tracking time, but without capturing hours you won’t have a clear view into your business and future. Project managers should have some idea of who’s working on what, for how long, and what the tasks are. This is a good foundation to build on. Side note, forecasting is an operations exercise, not a project management exercise. You’ll need to involve the entire team for it to work.
Step 3: Grade & Adjust
At Sparkbox, the team uses letter grades as a simple way to rate efforts on a project basis, PM basis and top-level basis. A prediction that’s 90% accurate or more earns an “A,” while hitting 60% or below is an “F.” The idea is to analyze efforts and ask good questions such as, “Why did we miss? Why is this different than what we expected it to be? What can we change?” The trick is to be as precise as possible, without giving up accuracy.
Putting a Plan Together
Forecasting takes time and effort. You’ll be frustrated. Your team will be frustrated. As Rob says, “Getting good at forecasting is the hardest thing we’ve done as a company.” But being really bad at something is the first step to getting good at it. Take the three steps outlined above, and work them into a process that works for your team.
At Sparkbox, they follow this cadence:
ForecastBot runs at 9:00 AM (ForecastBot is an internal tool Sparkbox built to run through forecasts and put everyone's hours expectations into Slack for them).
Timesheets are due by 9:30 AM, covering everything from the previous week.
Wednesday: MicroCash sheets are updated using invoicing and expense forecasts to predict operating account balance on any given day as far out as Sparkbox can predict.
Friday: Project managers update forecasting by COB.
Start with a small group of operations and project management folks, and highlight all of the things that aren’t working. Forecasting reveals where your time is going and what little visibility you had prior to measuring. It can be painful to scrutinize what you’re doing and where you’re losing. But with time, you’ll get better, and forecasting will become easier.
Be sure to celebrate the small wins. If you move from an “F” to a “D,” or a “C” to a “B,” that’s progress, and something to be excited about. When you’ve worked out the kinks, roll forecasting out to your entire team. Remember, the goal is optimizing for sustainability and sleeping at night. Everyone will benefit.