Building accurate revenue forecast: A brief how-to guide.

The revenue forecast is an essential part of any commercial landscaping business. It allows business owners to plan for future growth, make informed decisions about hiring and expansion, and ensure that they have enough resources to meet demand. 

More importantly, having comprehensive revenue visibility can help you forecast future revenue. And it equips you with the ability to better manage your business’s cash flow and budget, and conduct sales analysis. This way, you can accurately validate your expected valuation growth to accelerate growth potential further.

In this blog post, we will discuss how to build an accurate revenue forecast for a commercial landscaping business.

Identify your revenue streams

The first step in building an accurate revenue forecast for your commercial landscaping business is to identify your revenue streams. This includes taking a stock of the services you offer, the prices you charge, the locations you target, and the number of clients you have. It's also important to consider seasonal fluctuations in demand, as this can significantly impact your revenue.

You should also focus on understanding which divisions of your business are performing the best. Like how much revenue your maintenance division is bringing. Whether your design and building division is as efficient as it could be. Or how is your irrigation division performing? Here, it’d also be helpful to figure out the upsell and cross-sell potential across these divisions.

For instance, your business database can add at least 50 to 60 new clients each year just by offering an additional service such as irrigation system maintenance. This way, you can vet the requirements of your existing contracts. And you can figure out if they're in the market for irrigation, design installation, tree care, etc., services.

By splitting your attention into monitoring the traction and cash flow across different divisions, ensure that you have enough money coming in to not only cover your expenses but also grow. 

Understand your market for preparing revenue forecast

The next step in building an accurate revenue forecast is to understand your market. Because there are over 632,895 landscaping businesses in the US. Hence, you must research your competition, identify your target market, and grasp the current trends and challenges in the industry. These challenges include labor shortages, supply chain issues, inflation, etc. This information will help you identify potential opportunities for growth and potential risks to your business.

Understanding your target market also allows you to identify the specific needs and preferences of your customers. This information helps you to make informed decisions about your services, pricing, and marketing strategies and lets you tailor your offerings to your target market. By providing solutions that address the unique needs of your target market, you are more likely to attract and retain customers, which in turn helps you to grow your business and prepare an accurate revenue forecast.

It’s also important to account for current labor rates along with material and equipment costs. Owing to the sharp rise in the costs for materials, gas, fertilizer, and landscaping businesses are forced to raise prices anywhere from 10% to 25% depending on the services they offer. Stats indicate that due to the labor shortage, wages have shot up nearly 40%.

Because this directly affects your annual pricing and changes in the same, if any. This way, during renewals you can justify the price hikes. 

Use historical data

Historical data can be a valuable resource when building a revenue forecast. This data can include information on past sales, client demographics, target locations, and other relevant information. By analyzing this data, you can identify patterns that can help you predict future revenue.

Tracking your sales pipeline for the revenue forecast

Your team has to keep track of the money held up at each level of the sales pipeline and what’s your win rate like. You can identify bottlenecks and holes in your sales pipeline by keeping track of the stage that each opportunity is in.

For instance, if your commercial job closing rate is 20%, to attain your target of selling $500,000, you would need to bid $2.5 million annually. 

Besides, if you monitor your sales and predict a significant rise in revenue over the following four months, it could be time to bring on more staff. Alternatively, if a salesman appears to be lagging behind, speak with them and see what you can do to assist.

You can leverage job costing data to track "jobs in progress." By doing this, you can make sure that your projects stay within your budget. Additionally, you need to monitor your current projects and contracts to look for chances to increase revenue. It happens frequently that a client will say they're thinking about hiring you for more work in the future. You should keep track of this so that you can get in touch with them later on.

Additional Read: Are you running a Profitable Landscaping Business?

By keeping track of your leads, you can identify where there are drops in your sales pipeline and pinpoint any areas that may not be performing as effectively as others. If you don't monitor the progress of your leads, you could overlook one in your sales funnel or a significant problem in your sales strategy.

Hence, you are essentially using your sales pipeline as a revenue forecast tool.

Tracking the financial performance

It’s crucial to understand that by analyzing past financial performance, you can gain insights into seasonal trends, customer behavior, and other factors that can impact your revenue. This information can be used to create a baseline for future performance and make informed predictions about future revenue.

For example, if you see that your revenue is highest during the spring and snow removal months, you can use this information to plan for increased staffing or supplies during these times. Similarly, if you observe that a certain type of service is particularly popular among your clientele, you can prioritize that service in your forecasting and budgeting.

Additionally, historical data can also help you identify any inefficiencies or areas for improvement in your business operations. This can include things like underperforming services, unprofitable clients, or inefficiencies in your workflow. By using this information to make changes and improvements, you can help to increase your overall revenue and improve the accuracy of your revenue forecast.

Create a budget

Creating a budget is an important step in building a revenue forecast. This budget should include all of your projected expenses, including wages, materials, overhead sales, marketing, and operating costs. By comparing your budget to your projected revenue, you can identify any potential shortfalls and make adjustments as needed.

Here, as mentioned above, you must account for market rates especially as the green industry is facing supply chain issues, a labor shortage leading to rising wages, and gas price hikes.

This will help you set financial goals and track your progress toward achieving them. 

Summing up your guide to building a revenue forecast

It’s important to remember that building an accurate revenue forecast is an ongoing process. As your commercial landscaping business evolves, so will your revenue forecast. Hence, review and update your forecast regularly to ensure that it remains accurate. This will allow you to make adjustments as needed and leverage new opportunities as they arise.

Regularly communicate with your team about your financial performance and goals. This will help them understand the financial health of your business.

Keep a detailed record of all of your sales, including the services offered, new services added, the pricing, and client information. This data can be used to identify patterns in sales and customer behavior, which can help you predict future revenue.

By implementing these steps, you will be able to improve revenue visibility for your commercial landscaping business.

In conclusion, building an accurate revenue forecast is an essential part of running a successful commercial landscaping business for understanding the financial health of the company and making informed decisions about growth and expansion. By understanding your market, identifying your revenue streams, using historical data, and creating a budget, you can ensure that your business has the resources it needs to meet demand and grow.

FAQs

How can forecast revenue helps a small business explain?

For commercial landscaping businesses, revenue forecasting is crucial as it helps in estimating the expected income over a specific period. Accurate revenue forecasting allows business owners to plan their growth strategies and make informed decisions around factors such as seasonal fluctuations in demand, weather conditions, and competition.

How do you prepare a revenue forecast?

Businesses can develop a comprehensive understanding of the market, conduct historical data analysis, and gain insights from industry experts for accurate revenue projections. By creating revenue forecasts, landscaping businesses can plan their resources, staff, and equipment requirements, ensuring efficient operations and growth.

What is the importance of accurate revenue forecasts?

Revenue forecasts that are accurate are crucial for commercial landscaping businesses as they assist in making informed decisions and planning growth strategies. Additionally, it enables the effective allocation of resources, appropriate staffing, and efficient operations.