As a service-based business owner, your clients and customers pay for you for your skills and expertise. Whether you’re a plumbing business, a software development firm, or a solo project management consultant—you’re a service business.
Growing a service business requires a very different approach to a products-based business. The key to business growth for a service-based business is to plan ahead and to attempt to accurately forecast where your business might be in the weeks and months to come.
In the absence of a crystal ball, how exactly do that? It’s called forecasting.
In this article, we’ll explain what business forecasting is, why it’s important for your service business, and how to make better projections to fuel growth.
What is Business Forecasting?
Business forecasting is the process of analyzing past and present data and industry trends to predict future business performance.
This data is collected and analyzed via quantitative or qualitative models. During the analysis process, you will be able to identify patterns that will give you insights into how to handle various business operations.
With the data collected you can gauge how much revenue your service company stands to earn for a particular time frame. Based on these revenue projections, you can make better, more strategic decisions about how and where to spend your money. On the other hand, if revenue is on the diminishing end, then you’ll be better equipped to come up with revenue generation strategies.
Additionally, forecasting allows you to better plan how to allocate and manage your resources as well as plan strategically for upcoming projects, activities, and related costs.
Why Forecasting is Fundamental for Business Growth
Planning is the foundation of every successful services business. But how can you plan when you’re not aware of what you’re planning for?
Forecasting enables you to set reasonable and measurable business goals based on current and historical data. Armed with SMART goals, a service business can evaluate progress and make changes where necessary.
For a service business, forecasting allows you to look at how past projects performed and identify any bottlenecks that may have affected successful executions. By seeing what held you back in the past, you can easily anticipate setbacks and prevent them before they occur in future projects.
To truly grow your service-based business, you must continuously offer your customers what they need. Forecasting allows to take a good look at your current service offerings and determine whether they align with current industry trends. You may realize that some of your services are no longer in demand due to changes in the industry. If this is the case, then it makes better business sense to bench or update such services.
Additionally, having insights into trends and their shift patterns enables you to predict possible changes in your industry. This allows you to be active and plan for contingencies instead of reacting to them.
7 Tips for Better Business Forecasting
Analyzing past performance and current trends can help service business leaders make informed projections on how to plan for the future. However, business forecasting can feel like challenging process if you’ve never done it before. Follow these seven tips to get started:
1. Set clear goals
Before you embark on business forecasting, be clear on why you’re doing it.
- Why does your service business need forecasting?
- Do you want to see how the industry has been performing in the past?
- Are you interested in learning how your customers feel about your services?
- Do you want to see how your resources have been fairing on?
When you have clear goals, you’ll be able to focus your forecasting activities to achieve those goals specifically. Additionally, clear overarching business goals give you an accurate foundation upon which to base the findings of your forecasts.
2. Adjust forecasting processes to suit current market status
The pandemic has been a clear indication of how fast things can change in the business world. It’s now more necessary than ever to be aware of new trends and other market changes that might affect your service business.
While previously, a quarterly forecast may have worked, now you may have to forecast monthly or even weekly. Make your forecasting as flexible as possible to allow for changes and move with the pace of your industry. If you need to re-do your forecast more often, then be flexible enough to allow for that.
It makes sense to forecast what will happens several months down the line instead of just a few weeks especially if you’re planning for long term goals. But, the best predictions are based on current data. Forecasting on the regular, even on an ad hoc basis, can help you get more accurate forecasts.
This allows you to make big business decisions—such as whether to pivot your service business— based on what is happening now, not what happened way back when.
Make ongoing forecasting a habit to enable better, quicker decision-making for your business.
4. Involve all departments
For a service business, your talent and skill i.e. human resources are your most important resource. Your chances of accelerating business growth increase when everyone is working towards the same goal. It’s therefore important, that all departments—not just finance—are involved in the forecasting process whenever necessary.
This puts all stakeholders on the same page and makes it easier for everyone to embrace the forecasting process.
5. Plan for growth opportunities
Mention forecasting and most people assume it’s about looking at what went wrong in the past and how to forecast better to prevent that from happening again.
While it’s vital to look for worst case scenarios when forecasting, it’s also important that you look out for best case scenarios. Keeping your mind focused on potential problems might blind you to growth opportunities that could be a game-changer for your service business.
6. Make room for the unexpected
It’s safe to saw that almost nobody foresaw the pandemic. But when it happened, it threw many businesses off balance.
Pandemics aren’t the only events that can change a service business’s course. One of your most profitable key accounts could transfers their business elsewhere unannounced. A large number of your key personnel could quit at the same time unexpectedly.
Not trying to scare you! We’re just saying it’s important to leave room in your business strategy for unexpected occurrences. Plan for the unplannable, so to speak. Create a robust contingency plan with the help of forecasting efforts so you’re never caught off guard.
7. Ease the process with technology
Forecasting is great. However, the problem is forecasting can also yield a lot data which, can be overwhelming to analyze and actually put to work. Surprisingly, only 10% of companies rely on technology to support the complexities of forecasting.
Yet there are many software solutions that can take away the drudgery of data analysis and do the work for you. In fact, these tools generate accurate predictions with less chance of human error. Besides, this software is not only accurate, it can also be automated to help make forecasting a regular, streamlined practice for your service business.
Get Better at Forecasting with Mission Control
Business forecasting is essential for service businesses. Good forecasting can minimize your exposure to risk. Most importantly, it can facilitate accurate decision making and accelerate business growth.
Needless to say, to realize these benefits, your service business forecasting needs to be as accurate as possible. Proper software increases forecasting accuracy by taking away guesswork and of course, human error.
Mission Control can help you gather accurate performance insights to enable you to plan better and drive growth for your service business.
Request a demo for a real-time view of how Mission Control can help you improve your business forecasting process.