Management Marketing Small Business

Can you predict future revenue?

Lightning arrives before thunder.

In the book, “The Go-Giver”, Bob Burg uses thunder and lightning to illustrate the before/after of delivering value and receiving revenue.

It’s a good analogy to explain that relationship – particularly for first-time clientele. There’s another revenue relationship that you need to have under control: You should generally be able to predict a reasonable percentage of your future revenue.

Yes, you should be able to predict future revenue.

How do I predict future revenue?

In most cases, we’re talking about data that you probably already have some gut feel for.

Funeral homes managers know the death rate per thousand or per million people and can extrapolate how busy they’ll be based on that data combined with the population of their service area, plus historical information.

Most restaurant owners can likely predict how many tables they’ll turn on Mother’s Day. Liquor store owners can typically predict their sales volume on college game day, Super Bowl weekend and major holidays. Depending on their business, some can probably do so most days of the week – thanks to “regulars”.

These measures depend solely on historical data, and while that data is useful for predicting some types of business, it can be inaccurate depending on other things going on in the market. It also doesn’t tend to take into consideration the effects of new business and planned recurring business.

That last one is the one that you really have to work on.

Planned recurring and follow-on sales and service allow you to predict future revenue and do so with a fair amount of accuracy. The question is, are you tracking it?

If you sell cars, you should know how long it will be before certain types of buyers will return for another. Will you wait until they return, or will you remind them of critical crossroads of the age and/or mileage of their rigs so that they can maximize trade in and/or resale value?

Likewise, if you provide preventative service for those cars, you should know how often that service should occur and remind the owners to get that work taken care of, much like a dentist would send a reminder card that it has been six months since your last visit.

Reminding isn’t enough.

While reminding is a nice courtesy, some portion of your clients have a firm enough schedule that they may allow you to schedule those appointments well in advance.

You may be thinking that they might no show or they may wish to avoid scheduling something so “trivial” three to six months in advance. The thing is, they do it for a number of other things because those things are important, serious, of value, and for other reasons.

Some portion of your customer base might be willing to purchase those services and make appointments in advance, or have them automatically paid when the appointment is set, particularly if there is some value added in the process.

I’d prefer a value add to a discount simply because the value received in a value added as a reward is preferable to slicing a piece of profit right off the top. It’s like exchanging a little extra touch for the high value (to you) of knowing that revenue is already going to occur.

You’ve seen other businesses do this. Restaurants have birthday clubs, for example. We’ve talked about those before. Learn from the little things others are doing successfully and think about how you can leverage those to your advantage and to your clients’ benefit. They’ll almost certainly need a tweak to make them your own, but that’s OK.

Build a baseline

The key is not so much what others are doing, but that you are doing *something* that allows you to look at the calendar for next month, the month after and so on, and have a good, dependable idea of the revenue you will receive for that month.

If this predictable “future banked” revenue meets or exceeds your minimum required revenue for a specific period, then the stress of worrying about making payroll next week or next month evaporates.

What’s that worth to you? What would you be able to focus on if you weren’t running about the place trying to chase down enough sales to make next week’s payroll?

What can you do for your clientele that will allow you to future bank revenue generating events?

Management Marketing Sales Small Business Strategy

Tick, tick, tick. What are spare minutes costing your business?

So how much is each minute costing you? Now is not the time to be letting them slip away unused.

If you own an quick lube oil change store and it takes you 11 minutes on average to change the oil in each customer’s car, your store loses $39.95 every time there isn’t a car waiting to pull in behind the one that just pulled out.

Empty bays cost money. Can you put a finger on how many times a day there isn’t a car waiting to pull in?

Let’s say that your 2 bay quick lube changes 6 cars per hour on an average work day. If you just do regular changes with no upsells, that’s about $240 an hour in gross revenue. Not too bad I suppose, but what are you missing out on?

6 cars times 11 minutes = 66 minutes. That leaves 54 minutes that go unused that hour. $240 per hour is about $4 per minute, so that 54 unused minutes works out to about $216 in potentially lost revenue.

$216 per hour, that is. $1696 per 8 hour day. And that’s if you have just 2 bays.

  • In a 6 day week, that’s $10176.
  • In a 24 day work month, $40704.
  • In a year, over $488,000.

And then there are the additional sales possible on each vehicle from things like annual services (transmission or radiator flushes, air filters and the like). If on average, you manage just $1 per car in upsells, that adds $13284 to your annual revenue. Naturally, every dollar you raise that average results in an additional $13k per year.

On the other hand, increasing the number of cars per hour per bay by just ONE does EXACTLY the same thing, while adding another $639 in revenue per day. Do it for an entire year and see your bottom line increase by over $184,000.

By adding one more car, per bay, per hour. Doesn’t seem like much of a goal, does it?

And it isn’t just the quick lube shops:

  • Got a barber shop? Empty chairs have the same kind of cost.
  • Small engine mechanics on your staff? Unbilled time can’t be recovered.
  • Stylists in a floral shop? If they aren’t arranging….

The list goes on, no matter what you do.

Your marketing needs to be filling those chairs, mechanic hours, empty bays or whatever you can’t monetize once it is gone.

A day that might normally seem busy, when examined for unbilled time or unused equipment, suddenly seems a little empty when you realize each unused minute means a potential lost of $4, day in, day out.