22
Jul
13

Revenue projections will always be a best guess

Revenue projections will always be a best guessWhen it comes to projecting revenues, there are only two absolutes: first, when you hit or exceed your revenue goal, you’re a business genius. And second, when you miss your revenue goal, you’re overly optimistic and pinning too much hope on help from the business gods. Nevertheless, no matter how frustrating, every business must do revenue projections.

The key is to remember that revenue projections, no matter how scientific, will always be a best guess of how your company will perform in the future. I’ve seen leaders create elaborate spreadsheets with formulas that incorporate every contingency and operational scenario only to discover that reality didn’t cooperate and they fell short of their goal. In contrast, I’ve seen leaders take “wild-ass guesses” (called WAGs) and achieve the same hit or miss results.

Here are some no-compromise strategies to help you keep your business’ revenue projections in perspective:

  • Even the best projections are flawed: What looks totally doable on a spreadsheet doesn’t always translate into a win. Consider that some very brilliant people put together projections for the world’s best companies and miss the mark. I don’t need to tell you, for example, how consistently the U.S. Government blows its budget projections. This doesn’t mean that you shouldn’t put effort into achieving the best projections – it just means you must do the best projections that your ability allows. It will always be your best guess.
  • Many forces are at play: The best projections can be blown apart by just about anything. If you don’t keep cheering on your team to victory or if drama finds its way into your culture, you can easily miss a goal. Likewise, if your team’s sense of urgency is not dialed up to the intensity needed to achieve a goal, you will fall short. If your information flow systems fail to keep everyone on the same page, you’ll likely miss a goal again. Leaders that rapidly respond to negative forces always have the best chance of achieving revenue goals.
  • Complacency and comfort zones: Too often, revenue projections fail to address the current state of the company’s culture, systems, and accountability. A slow and complacent culture will wreck otherwise achievable revenue projections. I always say that every company has 20% growth waiting for it…if it can rise to the challenge. A company can blow revenue projections away just by getting on its collective game. Simply put, hitting revenue goals demands levels of leadership that are in sync with projections.
  • Projections and information flow: Business is a game of strategies, coordination, systems, and execution. More often than not, your business is playing against itself to hit a goal or to beat last year’s numbers. Information-flow systems connect your team to your projections. Daily huddles, scoreboards, team rallies, progress reports, and good old cheerleading maintain focus and a sense of urgency throughout the company, building momentum for your business. Information flow makes revenue projections achievable because your team believes they are achievable.
  • Guess better next time: Too often, I see leaders freeze and say, “But what if my projections are wrong?” My response is always, “Then you’ll make a better guess next time.” Every business needs targets to strive for. Projections should set the bar just high enough to make a company stretch. The longer you do projections, and the more your company stretches to achieve them, the more proficient you’ll get at projecting revenues. Doing projections is a non-negotiable in business.
  • It’s about believing: Leaders and companies that believe they can win have a powerful advantage over those that don’t. It’s easier to coach “the little engine that can” versus “the little engine that can’t.” Believing drives company performance past ordinary and towards extraordinary. When a leader or company stops believing, achieving ordinary is a challenge. If times are good, believe in what once seemed impossible. If times are tough, believe in what’s possible if you’re willing to try.

Revenue projections are nothing more than a proposed destination. Most likely, you will encounter roadblocks and setbacks requiring course changes and new tactics. You may fall short of your destination – but what you learn on the journey is invaluable and worthy of celebration. And for those times when you drive non-stop to reach your goal – cherish the win, as these triumphs may be few and far between.

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