Forecast With Confidence
“Forecast” is an interesting word. It’s one of those words that can be used as a verb or a noun. You can forecast revenue or you can create a forecast. This is an important distinction, as we think about how firms operate and approach “forecasting.” We consistently see firms that “forecast their business” are more successful than firms that “look at the forecast.”
Firms need to be continuously working on their forecast. It can’t be a one and done exercise. By treating a forecast as a verb, you’re constantly taking action towards achieving your goals. At Planifi, we always use forecast as a verb. Plan. Manage. Forecast.
So, how can architecture and engineering firms forecast successfully? Well, in most cases, firms rely on their most senior members for forecasting and projections. Senior leadership has the most industry knowledge, understanding of their firm, and of their projects.
Now often times, leadership will use rely on “gut instinct” as a substitute for data, and that may work for a while. However, “gut instinct” without current, accurate data is a catastrophe waiting to happen.
For example, after living in Chicago for 20 years you can probably get around easily without paper or digital maps. By instinct, you know the best way to go. However, your instinct or memory won’t tell you where there is a traffic jam or new construction. Nowadays, to successfully navigate the streets of Chicago, you need current, actionable data from applications like Waze or Google Maps.
Now, take that same thought process and apply it to your firm. With modern technology available from companies like Planifi, shouldn’t you know when traffic jams are coming up for your project deadlines and deliverables?
Here are some tips to help you and your firm forecast your success:
Tip #1: Metrics & Standards
There are a number of ways architecture and engineering firms calculate projected revenue. In this case, it’s most important that your firm aligns to a set of metrics, standards, and process for keeping information up to date. Typically, firms will use a combination of high/low probability opportunities, unbilled work/work-in-progress (WIP), and percent complete.
Tip #2: Staffing vs Backlog
How does staffing mix compare against backlog; do you need to hire? Architecture and engineering firms need their staffing mix to match what’s needed to deliver upcoming work. If your firm expects to win a disproportionate number of opportunities in Higher Ed, for example, maybe you need to hire a few PMs with higher-ed experience. With forward-looking and up-to-date data, you can make smarter hiring decisions and set new employees up for success.
Tip #3: Take Action
Remember, forecast should be used as a verb and you should always be taking action. Keep the data up-to-date and use projections to make adjustments so you aren’t blind-sided by a preventable problem.
To wrap things up, if your approach is to use “gut instinct” in your forecast as a noun, you’re eventually in for a big, expensive surprise. Going back to our driving analogy, it would be like trying to drive down the interstate by watching your rear-view mirror. It might work for a bit, but sooner or later your project is going to go up in flames.
To avoid these kinds of results, you have to look to the future, not to the past.