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As your firm heads into the fourth quarter and starts looking forward to next year, it's important to start to think about sales planning and revenue planning, for your firm in the coming year.
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Some firms do this.
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All too many, though, just cross their fingers and pray that next year is gonna work out just fine.
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All right.
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Welcome to another episode of Breaking Biz Dev.
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I'm John, he's Mark.
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And Mark, We are entering Q4 it is planning season, as we like to say in the agency world.
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you have some perspective on some best practices and some traps that firms might fall into.
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And I'm excited to, to do this one with you today, Mark, because, you've got some cool visuals to share and, uh, I like the way that you've approached this.
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Yeah.
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the concept of, planning, strategic planning, God, that, that word just, just drives me crazy,
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know.
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tis the season, right?
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As we, as, summer's in the, just about in the rear view mirror and we start, start looking forward for sure.
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and I think we've actually talked a little bit about revenue planning, sales planning and, in many different ways.
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this is a specific framework.
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and it's actually a widely adopted sort of way to look at, planning for revenue and sales, in the coming year.
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And it, brings together, stuff you've already got on a contract, stuff that is, pie in the sky, and pipeline and all that.
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So it brings it together in a more orderly sort of structure and framework in here.
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But Mark,
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yeah.
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aren't, aren't they the same thing, revenue planning and sales planning?
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No, they're not.
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They're not.
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And, and and honestly, This gets me tripped up a, a lot with some of my clients because most of my clients and rightfully so, are, very focused on revenue, right?
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And revenue is the work you work and then you bill it and then you, get paid and there's your, there's your revenue.
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all makes sense, right?
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I kind of introduce and lean heavily on sales planning, and sales planning just, pushes us, pushes our eyeballs further out into the, into the future.
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So revenue planning's obviously important, right?
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It's usually built around sort of a monthly cadence.
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A lot of firms that I work with develop sort of a, a target number, right?
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So What do we need to bill every single month in order to, hit our target throughout the course of our 12 months ahead, right?
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So this, this drives, how many employees you have, their salaries, other operating expenses, discretionary spending, all different kinds of things, right?
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This is, this is, this, this funds the machine, right?
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So sales planning pushes our, our eyes a little bit further out onto the horizon.
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Sales planning is more about growth and intention and areas of focus, right?
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Where, where is the market moving?
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How do we need to change and grow our, our business in a particular area?
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if you're an organization who has different types of services, maybe there are certain services that are opportunities for growth and others may be less so.
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So sales planning starts to take in all of this and actually, instead of just running the machine, it starts to, steer the ship potentially in slightly different directions.
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So it's different.
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It's further out.
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and this exercise that we're gonna talk through today kind of marries those two things, I think, well, so that we're talking both sort of the real nuts and bolts of revenue, but also the, the, future sort of contract values and sales that you're hoping to close.
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that's a really great way to, to think about it, Mark.
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the sales planning is really the desired outcomes of the activities that you're going to put into place to steer the firm in the direction that you wanna go.
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And I, I'm curious, like those conversations that you have with clients, how far along into, into that, that like strategy conversation are they?
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Or is it, is this happening at the same time as strategies are being developed?
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Or is this something to where like a strategy is defined and then it's how does that translate into dollars?
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Well, I think we've talked about this a little bit in the past in, in that I, I think this informs better strategy because it's, it's, it's focused on real dollars and cents, Right.
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It's focused on revenue dollars and cents and also sales, you know, contract values, So it's, it grounds all of that, and frankly, it builds a stronger foundation, underneath any type of strategy or, future ideas of, of growth and change that you, that you want to pursue in the future.
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this grounds everything, this exercise, and this is, this should not be your only exercise that you do in the course of all of your planning.
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Right.
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you should have, a group of individuals come into a room with, empty whiteboards, You should run through what-ifs.
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You should, shoot for the stars, or change things or, acquire a- another firm All of that should be happening as well, but this, is an important component of that that informs other things.
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And you can do this a couple different ways.
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A lot of times planning when it comes to dollars and cents is done two ways fundamentally.
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One is from the top down, and the other is from the bottom up.
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This favors a bottom-up approach, because the top-down approach just says,"All right, we have X number of mouths to feed.
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We have..." and in professional services, a lot of times this means,"We have X amount of time to work." when I do my, division and my multiplication and everything else, what's the big number I get at the bottom?
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Understanding all my people and what we're gonna charge for their expertise, all that stuff.
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So that's a top-down approach, and this what we'll talk through today is kind of bottom up for sure.
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So what tools do clients have in place to be able to get started with this process?
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some financial tools will have, this framework built into them.
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sometimes CRM systems will have this tool built into them.
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CRM systems will lean a little bit more towards the future sales, planning, and your financial tools probably will lean a little bit more towards, kinda on the revenue end of things.
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some CRM systems may actually have this in place.
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So go look at that and see what framework you currently have to work with.
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And other, other financial platforms, will likely have some component in them that lets you start to plan what the future looks like, you know, whether it's a, a, a, resource management tool or a, sales and revenue tool or whatever else it is.
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So, so some of those tools exist already.
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Without that, I mean, heck, I've just done this with an Excel spreadsheet, with some of my clients.
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It's like, all right, so we're gonna, we're gonna just do our, do our rows and columns, and our, our columns start to look like, different chunks of time, and our, our, our rows are different projects, right?
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And then we're gonna start to sort those projects relative to, our three buckets here, and we can dig into those buckets now.
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Let's do it.
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Great segue, Mark.
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So you've got these three buckets that you use to, define the, the, the new sales revenue.
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I guess we can call it that,
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Yeah, it's both.
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It's both actually.
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It's both.
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It's, it's, it's, um, it's, revenue to be bill worked and billed, and it's also this more speculative sort of sales end of stuff.
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the first one is...
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committed.
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There's a bucket called committed/backlog, The second one is called probable, and the third is called possible.
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And not to confuse,'cause we'll stick with these three for our conversation today, but sometimes I've even seen people put in four, And the fourth one would be sort of pie in the sky.
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but the three that we talked about here, committed, probable, and possible are both inclusive of, stuff that's already under contract, revenue that you are expecting to, to bill and bring in the door, all the way to the, big sort of maybes, the speculative stuff.
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So, for sure.
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Let's...
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Cool.
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But let's take them one at a time, John.
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yeah, that, that's great.
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So the, those three buckets, committed, probable, and possible, let's start with the committed bucket.
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And Mark, you have these, I think they're fantastic visuals, and I'm a visual learner myself, so when you shared these with me, I, it kinda clicked it into a new level of understanding.
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And so I think let's, if, let's put these up on the screen for our audience, and they can follow along with us as we break it down
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John, is this a shameless plug for our YouTube channel?
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well, and not a shameless plug.
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I mean, I, I think it's, I think it's fascinating.
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but yeah, I guess maybe it is a shameless plug.
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So let's, uh, follow along on YouTube and check out these awesome visuals.
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Who knows?
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Who knows?
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So if you've only experienced John and I, you know, kind of whispering in your ears when you take your dog walk, head on back to your, desktop and take a look at us on YouTube as well.
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So on occasion, we have some episodes that are, um, kind of a little bit better, uh, to be viewed visually, and I think at least this part is, is a good one.
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So sure, so committed, right?
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So the graph and, and, and for, for people who, don't have access or whatever else, aren't gonna, aren't gonna spend the time pulling it up on YouTube, John, we're looking at a graph, right?
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X-axis, Y-axis, and so we've got a, an X-axis, which is kind of the horizontal axis over time.
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This could be months, could be weeks, whatever the heck it is, right?
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It's just over time.
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And then our Y-axis, our, our, our vertical axis is some percentage of revenue or capacity or w- w-whatever else, right?
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So, that's our graph.
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Monthly recurring
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Monthly recurring revenue.
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clients or, whatever else.
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their, their, their slope looks a little bit different.
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But needless to say, people who are focused on monthly recurring relationships, retainers, whatever else it might be, see churn, right.
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They will lose clients over time.
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So if you take all, everything you have under contract right now and map it out over time, it's hopefully looking great today, but as time goes on, it starts to, starts to diminish, right?
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There's a slope, right?
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Some folks say there's a cliff or, whatever.
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There's a slope, right?
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At some point in the future, John, if you're a professional services firm and you do nothing, if you sign no more contracts, at some point you will hit zero, right?
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So we're at
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All the projects will come to an end, all of the client work eventually will sunset, and then in this graph, we've got it over six, let's call it months.
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By, month six, you're gonna be at 15% of the revenue that you're at right now.
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Let's just call this all these projects together, we'll call that committed, right?
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And that's your, that's your backlog, right?
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So, and hopefully you will capture 100% of that.
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You will not, so when we are planning with all this and you're looking at the backlog, everything you have, under contract, don't take for granted that you're gonna close 100% of those dollars, right?
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Sometimes that, those dollars might increase a little bit with little changes or adjustments or...
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But sometimes there'll be others that, lo and behold, you don't get paid, or, whatever.
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They're, they're de- you're being delayed in, in payments and whatever else.
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so that's, that's your backlog.
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Now, to be clear, if you have certain, projects, clients in there that, have Maybe there's a project you're working on now with- within an, an, an initial, some initial work, and then there's some future, some future thing, like a phase two or a, a, a, a bigger, a bigger chunk of work some- somewhere down the road.
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This is, this is not in there, right?
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We're only talking about stuff that has literally been, inked, right?
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John closed, contracted, right?
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So that is, that is your committed backlog work.
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We got that mapped out.
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Good.
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Okay.
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So that's that's important.
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When we take your probable, which is
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So that's what we're layering on here, right?
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yeah, we layer on this additional, these additional projects, And so this stuff is probable.
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Now, probable and pipeline are not the exact same thing, but all of your probable, work, all of your probable contracts will come from your pipeline
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And so in terms of like a percent, if we were looking at like our sales process, right?
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And if we assign, percent likelihood, like would you say that probable is over 50%, over 75?
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Is that irrelevant?
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it's super relevant.
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So I think what a lot of people will do is they'll immediately just take 100% of their pipeline and layer it on top of their backlog and say, Okay we're good." But with this exercise, we're looking at something slightly different.
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So we've got our, our committed backlog work.
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We take a percentage of our pipeline work and layer it on top of that.
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And to your question, John, it depends.
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It depends on your business, it depends on how successful you are sort of overall, with your new business pursuits.
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If you have an extremely high sort of win rate or close rate, then you can be, you know, a little more optimistic with this.
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conversely, if your win rate is, is lower, you should be conservative with this.
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So again, we're not gonna take the entire pipeline and just layer it on here and put that under probable, because probable, carries a, significant amount of weight with it, right?
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It's, it's, this is something that we're going to be-- that we're gonna start planning around as soon as six months from now, right?
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we don't wanna sneak random speculative stuff in here.
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We don't want to be planning in the fairly near term, three, six months out, whatever it might be.
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We don't wanna be creating plans around stuff that's super speculative, so we need to weight that appropriately.
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So, and, and ideally, this stuff's gonna contract pretty soon.
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Pretty soon is, it could be in the next two months or three months, or heck, maybe six months or whatever else it is.
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But pretty soon.
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Six months is a little bit long.
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I would prefer, something in that, like you mentioned earlier, right?
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It's, it's, you know, something that's closing in the next 90 days or 120 days or whatever your sort of close rate, typical close rate is for your pipeline.
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so this, again, layers on top, but just like your contracted work, that committed work, it fades over time, right?
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So now we've got these, that big sort of pipeline, and now we've got this sort of probable, which is part of your pipeline, stuff that's hopefully more likely.
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you know, just to use a ballpark, folks, let's go 60% possible.
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60% likely, maybe.
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This needs to change with time.
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so there we go.
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We've got our two layers there on our graph
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Yeah.
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So we've got our committed revenue, our backlog in blue.
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We've got our probable revenue.
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These are deals in the pipeline that are a high likelihood of closing.
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Yeah.
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So the next bucket that you have is possible
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You're listening to breaking biz dev
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the podcast that beats up, breaks down, and redefines business development for the professional services firms of tomorrow.
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Your hosts are John Tyerman, founder of Red Cedar Marketing, the podcast marketing company for experts and professional services firms,
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And Mark Wainwright, principal consultant and founder of Wainwright Insight, the fractional sales manager and sales consultant to professional services firms.
00:16:05.238 --> 00:16:10.738
If you find this podcast helpful, please help us by following the show and leaving a review on Apple podcasts
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and now back to the show.
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Yeah, this is possible.
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Possible is the part of your pipeline that didn't quite make it into probable, and then sometimes we can sneak in some other stuff, Because we want our pipeline to be active sales opportunities that we are working now, that we have some level of confidence that they're gonna close in the next four, three to six, whatever, whatever months, right?
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We don't want our pipeline to be, and I've used this in the past, John, our pipeline is not a storage tank, right?
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Our pipeline is a pipeline, so it needs to flow, right?
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So we want opportunities to enter the pipeline and to move along at, at an appropriate pace, and then contract or not.
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We don't, we don't want them sitting there.
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So a lot of these possible sort of pie in the sky things can be something if you're sitting here, what, September, October, and you're, wanting to put something in, in, probable that's not gonna close for a year, no.
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No.
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That needs to be, that needs to be possible.
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And the exercise that I will undertake with a lot of individuals that I work with are, are just sales projections, and I call them projections because they don't-- they're not things that, that are in the pipeline.
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They could be related to things that are in the pipeline.
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maybe they have like a phase one, they're a bit of work in the pipeline now, and then there's the second phase that's gonna come along in, eight months.
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So we do that.
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And again, simple spreadsheets are easy tools.
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a lot of times we'll look at these quarterly.
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So we'll say first quarter, what do you think?
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There's these clients, this, this work, second quarter, third quarter, fourth quarter, and some of it can get pretty, pretty speculative.
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Some of it can be, I'm not even sure there's a there there yet.
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I'm not even sure there's a, there's some work.
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the great thing about possible is that it starts to help how you plan, right?
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So I've got, got our backlog.
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We're working that work Right now.
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Some clients are great, others are a pain in the neck, whatever.
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you've got your pipeline that is, is hopefully filtered in a way that, the great clients are rising to the top.
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The clients that you would prefer not to work with are not in your pipeline or getting filtered out.
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and this possible layer should contain great ideal clients, folks that we are going to chase after,
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and I think that's such an important point for this exercise is this is where you can stretch, right?
00:18:49.166 --> 00:19:02.317
This is where you can influence the direction of the firm overall with this possible category because it, it-- I asked about it earlier about when, you know, w- where does this happen, and it's all happening simultaneously.
00:19:02.646 --> 00:19:14.277
This is a great kind of bridge or pin to put in this and then have conversations with your marketing department, with your operations team, and then kind of understand, is this the direction that we want to go?
00:19:14.287 --> 00:19:18.467
What if we were able to land this kind of an ideal client?
00:19:18.916 --> 00:19:27.787
And then that opens up a whole new conversation around resource planning, and then all of a sudden the firm's getting closer and closer to a strategy that everyone can get behind.
00:19:27.912 --> 00:19:28.301
yeah, yeah.
00:19:28.352 --> 00:19:32.852
Because you've built this great foundation of sort of reality, right?
00:19:32.902 --> 00:19:45.912
Sure, there's some speculative stuff that we've put into this possible category, but the probable stuff is highly likely, and the possible stuff is made up of a bunch of ideal clients, that we either know or we don't know.
00:19:45.912 --> 00:19:51.692
But, it's a direction that we went ahead as a firm and, you know, here's some real dollars, or at least the best that we can do.
00:19:51.701 --> 00:19:58.092
You know, here's an educated guess at some reasonable dollars that we could capture, from these particular clients down in possible there.
00:19:58.102 --> 00:20:07.392
So, and this stuff from a time perspective, we've talked, backlog is, committed backlog is now, probable is sooner rather than later in the next few months or so.
00:20:07.392 --> 00:20:09.352
Possible, this can stretch out a ways, right?
00:20:09.352 --> 00:20:13.612
This is gonna stretch out all the way to your end of your coming, fiscal year.
00:20:13.961 --> 00:20:16.832
this can be stuff that, yeah, I don't think that's gonna happen for another 11 months.
00:20:16.832 --> 00:20:17.721
You're like,"Okay, cool.
00:20:17.811 --> 00:20:22.721
Let's get it in possible there." And we're gonna, we're gonna, weight it, very low.
00:20:22.832 --> 00:20:24.862
You know, we're not gonna give it a high probability.
00:20:25.172 --> 00:20:27.652
we're not gonna stake the entire future of our firm.
00:20:27.765 --> 00:20:43.755
for the folks that are either picturing this along or looking on the screen here, we are building these layers on this graph, and we are, step after step, we are seeing the white space, on this graph disappear, right?
00:20:44.644 --> 00:20:50.684
Be obscured by, what we've got now, what we'll have soon, and what we hope to have longer term.
00:20:51.164 --> 00:21:00.510
And that fleshes out the picture of a firm, an individual, a profit center, a group, a practice area, whatever else it is, right?
00:21:00.510 --> 00:21:09.790
So this, this now has built their picture of revenue and sales for the coming months.
00:21:10.111 --> 00:21:15.250
And yes, folks, the hard part is just simply executing on this plan, right?
00:21:15.990 --> 00:21:22.748
Of course, particularly in this example, you know, that we've got here, that I have built here, is that there is still white space, right?
00:21:22.817 --> 00:21:26.968
There's still some graph showing, and that's a question mark, right?
00:21:27.038 --> 00:21:29.198
That's what we need to go get.
00:21:29.288 --> 00:21:38.104
we could have that speculative area really start to cover more and more of that But, is not a hyper-rigid plan.
00:21:38.104 --> 00:21:48.983
This is, we've got our eyes on these dollars, and then there's that other area that we need to kind of make up as we go
00:21:51.173 --> 00:21:55.804
I think these visuals are fascinating and here's everything all kinda laid out so folks can see.
00:21:56.364 --> 00:22:13.733
I'm a visual learner and just seeing all of this, kinda stack on itself, it's a good motivating tool, for people that are in a business development or a marketing seat to be able to see this and really contextualize the urgency, I guess?
00:22:14.074 --> 00:22:17.903
Maybe that's the right word of, of building out the pipeline, right?
00:22:18.157 --> 00:22:27.718
from day one, John, this has been a mantra of ours, is, is that, look, sales and marketing are not this sort of ambiguous, mysterious world of everything.
00:22:27.728 --> 00:22:40.877
these are, practices that happen inside organizations, professional services firms that need to have organization and discipline, and frameworks, and, you know, clear goals and, you know, all of that stuff.
00:22:40.877 --> 00:22:46.738
So, and this is a visualization of, the committed work is, That's your delivery.
00:22:46.798 --> 00:22:49.577
Those are your folks that are actually doing the work and delivering on that work.
00:22:49.798 --> 00:22:56.587
But the next part that probable stuff is tied very closely to sales, for sure.
00:22:57.018 --> 00:23:04.938
And then when we wander off into possible, and even into that white space, we're definitely talking about sales and marketing, right?
00:23:05.057 --> 00:23:10.107
So this is, these are these three components, and there is a flow here.
00:23:10.137 --> 00:23:20.678
There is an ideal flow of all of this, We want the possible work to transition to probable in your pipeline.
00:23:20.951 --> 00:23:27.611
We want the probable work in your pipeline to transition to committed work, right?
00:23:28.010 --> 00:23:32.500
And then we want that committed work to translate to revenue, right?
00:23:32.691 --> 00:23:37.730
So that is the flow, and these graphs sort of show how that whole thing happens.
00:23:37.921 --> 00:23:58.519
And, to highlight another point on this is that this shows, particularly our friends who are the doer-sellers, who are responsible for dollars in every single layer that we've kind of built here, that they need to be spending equal time on all of these things, over time, right?
00:23:58.729 --> 00:24:53.393
So we want the doer-sellers thinking,"What am I doing today to deliver great work at a great margin for our firm that drives, future clients or, future contracts that I can, start to flesh this, this graph out further?" We want them to think,"What am I doing tomorrow to advance pipeline opportunities to a successful close?" we also want them to, to be thinking,"What am I doing after that to move these maybes, these possible new business opportunities into my pipeline with well-planned and well-executed marketing and sales, strategies and tactics?" And, Yeah, it's a hard job, but once you start organizing it- It gets a little clearer and easier for sure
00:24:54.391 --> 00:25:03.351
Well, one thing that just got a little bit clearer for me as we're talking about this is how you tied each of these layers to a business function, right?
00:25:03.351 --> 00:25:06.820
So the committed revenue is all about delivery.
00:25:07.401 --> 00:25:15.631
The, probable revenue is all about sales management, and then the possible revenue is all about marketing and lead generation.
00:25:15.949 --> 00:25:16.189
yeah.
00:25:16.378 --> 00:25:17.179
Yeah, for sure.
00:25:17.278 --> 00:25:17.709
For sure.
00:25:17.770 --> 00:25:17.990
up.
00:25:18.979 --> 00:25:24.159
a little on the tactics end of thing is that definitely this should be done on, in the, in the fourth quarter for sure.
00:25:24.679 --> 00:25:31.608
It is important to, to do this exercise both with individuals and as a group, so everybody can kinda come, come back together.
00:25:31.638 --> 00:25:37.138
But I do this with individuals, and I talk to them about,"All right, tell, let's, let's figure out what you've got under contract Right.
00:25:37.138 --> 00:25:37.479
now.
00:25:37.729 --> 00:25:45.828
Let's look at your pipeline, see what we're going to put into possible, probable and then possible." We talk about some pie in the sky stuff, right?
00:25:45.828 --> 00:25:49.568
That finds its way into possible as well.
00:25:49.769 --> 00:25:54.439
whether they're known clients, or maybe just folks you wanna introduce yourself to.
00:25:54.598 --> 00:26:01.138
So I build these with individuals that all roll up into, into, kinda one big, one big plan.
00:26:01.138 --> 00:26:03.229
So this is that bottom-up, right, process.
00:26:03.828 --> 00:26:32.499
I like this approach because we're addressing the, the priority of concerns in sequence, and when you address the committed revenue planning and you address the probable revenue planning, and I'm speaking from a marketer's point of view, then the, the people in the room when you are talk- talking about the possibilities are in the right head space because we've already covered the, the dollars and cents that are today and tomorrow,
00:26:32.519 --> 00:26:32.798
Good.
00:26:33.088 --> 00:26:33.378
so
00:26:33.749 --> 00:26:38.459
a c- a couple little other little, little tidbits here, not so small and sometimes, right?
00:26:38.848 --> 00:26:53.759
People need to make an honest assessment, They need to bring a a heavy dose of reality to this process, Right We cannot have endless pie in the sky stuff, like f- like 100, 100 what-ifs, Right It's just not gonna...
00:26:53.939 --> 00:27:10.959
That doesn't show any focus, that doesn't show any discipline, and, it, it can disrupt things, I mean, even though we are taking these long-term really speculative opportunities and, you know, weighting them y- pretty minimally, you know, you put enough speculative stuff in there, it's gonna start to, put, put a thumb on a scale a- little bit.
00:27:10.959 --> 00:27:16.308
So, you need to bring a level of reality to this, working through this exercise.
00:27:16.608 --> 00:27:22.608
and here's the note on that, is that it's never gonna be right the first time, and heck, the second time you do it, it's probably not gonna be great either.
00:27:22.858 --> 00:27:23.818
it takes iterations.
00:27:23.838 --> 00:27:37.868
The painful part is that this takes, some years to actually get pretty good at this, Because, over time you learn, what am I gonna include in my, possible stuff at the beginning, at this fourth quarter now?
00:27:38.578 --> 00:27:42.989
And then how am I going to execute on that throughout the course of the year, right?
00:27:43.169 --> 00:27:46.618
And am I actually seeing the flow that Mark talked about, right?
00:27:46.818 --> 00:27:53.769
Am I actually seeing the, flow between the possible to the probable, and from the probable to the, committed backlog?
00:27:53.989 --> 00:27:54.868
am I seeing that?
00:27:55.118 --> 00:27:56.709
Am I seeing those, those things happen?
00:27:57.189 --> 00:28:02.499
and are you gathering enough data to be able to, project out conversion rates, right?
00:28:02.519 --> 00:28:19.669
And I think that's like the big piece of the, the possible revenue, and that's a big unknown in a lot of firms that I, at least I talk to, is they don't really understand or know what the conversion rate is from lead to opportunity to under contract to close
00:28:20.204 --> 00:28:22.904
And those conversion rates are important because that determines our weighting,
00:28:23.325 --> 00:28:23.865
Exactly,
00:28:23.914 --> 00:28:28.795
are you weighting your, your, your probable stuff at 60% or is it, you know, less than that?
00:28:28.795 --> 00:28:30.694
Or, you know, how are you, how are you dealing with that?
00:28:31.134 --> 00:28:35.724
this should be done sort of in parallel with some top-down exercises that the firm is doing.
00:28:36.055 --> 00:28:42.234
the financial end of things is happening with all the other, costs, that you, that you have.
00:28:42.234 --> 00:28:44.654
So these things need to be done in, in parallel.
00:28:44.664 --> 00:28:48.005
And more than likely, you're gonna end up with a gap, right?
00:28:48.065 --> 00:28:50.595
You're gonna have some top-down exercise that has some big number.
00:28:50.595 --> 00:28:53.365
You're gonna do a bottom-up exercise, then you're not quite gonna get there.
00:28:54.179 --> 00:28:54.419
And
00:28:54.484 --> 00:28:55.015
So you're gonna have a
00:28:55.159 --> 00:29:00.308
introduces new edge cri- criterion conditions to where, okay, what needs to be adjust- adjusted?
00:29:00.318 --> 00:29:01.288
Do we need more leads?
00:29:01.288 --> 00:29:01.739
Do we need to,
00:29:01.810 --> 00:29:02.191
Yeah.
00:29:02.278 --> 00:29:03.028
close rate?
00:29:03.128 --> 00:29:03.699
Exactly.
00:29:04.131 --> 00:29:22.051
And I will tell you, I mean, not to overemphasize this, but man, when individuals in a firm go through this exercise, doing a, an honest, realistic bottom-up exercise like this and come up with a number, that number is way more reliable than any top-down number that you're gonna be given,
00:29:22.551 --> 00:29:22.951
That's true
00:29:23.271 --> 00:29:25.412
And people are bought into it.
00:29:25.751 --> 00:29:26.551
People believe it.
00:29:26.951 --> 00:29:28.432
People said,"Okay, I made my own plan.
00:29:28.461 --> 00:29:31.031
I know I'm gonna go execute on my own plan." Right?
00:29:31.041 --> 00:29:33.231
So it's, it's a really, really good exercise.
00:29:33.231 --> 00:29:45.102
Top-down stuff, sure, you need to do that as well, but this is, this is a much stronger motivator for ind- individuals who are in these doer/seller seats, who need to balance their time and prioritize certain opportunities and not others.
00:29:45.751 --> 00:29:46.682
sure, this is a good one.
00:29:47.481 --> 00:30:00.432
this should be revisited at least quarterly, and revisited quarterly in a number of different ways, i.e., we need to remind people,"Hey, you had these four different things that were in there as possible.
00:30:00.432 --> 00:30:02.442
What activities have you done now
00:30:02.963 --> 00:30:03.273
yeah
00:30:04.402 --> 00:30:08.771
in order to, move those into the pipeline in the third quarter?" Like you said, right?
00:30:08.771 --> 00:30:16.511
"So what, what's happening now in order to make that happen?" Revisiting is also, you can make sometimes, you can make adjustments to it.
00:30:16.571 --> 00:30:22.412
It's not critical, because I think that it takes a year to sometimes execute on these bigger plans.
00:30:22.821 --> 00:30:27.362
So I don't think at the six-month point you're gonna be radically making big changes.
00:30:27.362 --> 00:30:30.551
"Oh, this big sort of speculative chunk of work here that we thought was...
00:30:30.642 --> 00:30:39.301
It's not happening, so we're just gonna erase it." Like, I don't, You have to have something, next time around to look at and say,"I don't th- that's in the plan.
00:30:39.311 --> 00:30:40.701
We didn't execute on that properly.
00:30:40.771 --> 00:30:41.682
Are we gonna keep it there?
00:30:41.682 --> 00:30:54.951
If so, we need to change how we're gonna, market and, and, and sell to kind of close that work." So I don't think people should make wholesale changes to this, every quarter, but I think you need to kind of come back to it and revisit it for sure.
00:30:55.521 --> 00:31:06.122
and you know, this, this, the, like I said before, the possible stuff is just fantastic fuel, fantastic content for future planning, being able to chart the course of the, of the firm.
00:31:06.382 --> 00:31:07.471
so there you go, John.
00:31:07.481 --> 00:31:11.780
That's committed/backlog, probable, and possible.
00:31:11.780 --> 00:31:22.601
Those are our three buckets that brings together revenue planning and sales planning, and heck, even, starts to drag in, marketing planning to this whole process as well.
00:31:22.601 --> 00:31:27.661
So it stitches those things all together in a, in a, a picture that I think makes some sense.
00:31:28.480 --> 00:31:28.810
Totally.
00:31:28.810 --> 00:31:33.530
Well, revenue is oxygen to any business, so it makes sense that it would be all interconnected.
00:31:33.611 --> 00:31:39.240
And I like the way that you articulated the bottom up approach, and it's because everyone's involved in the
00:31:39.588 --> 00:31:39.848
Yep.
00:31:40.790 --> 00:31:42.010
the key ingredient to it all.
00:31:42.179 --> 00:31:42.578
Yeah, yeah.
00:31:42.638 --> 00:31:44.058
There's good buy-in for this, for sure.
00:31:44.296 --> 00:31:46.306
Well, Mark, I think this was fantastic.
00:31:46.306 --> 00:31:47.756
I love the visuals that you shared.
00:31:47.855 --> 00:31:53.236
I learned something new in this conversation, and I'm sure that our viewers and listeners did as well.
00:31:53.746 --> 00:31:59.756
So, if you made it this far, please, subscribe to the show, follow us on YouTube, LinkedIn, wherever you get your podcasts.
00:32:00.296 --> 00:32:02.576
And, uh, Mark, until next time
00:32:03.087 --> 00:32:03.438
Thanks, John.
00:32:03.498 --> 00:32:04.107
Until next time
00:00:00.133 --> 00:00:13.378
As your firm heads into the fourth quarter and starts looking forward to next year, it's important to start to think about sales planning and revenue planning, for your firm in the coming year.
00:00:13.519 --> 00:00:15.807
Some firms do this.
00:00:16.126 --> 00:00:21.841
All too many, though, just cross their fingers and pray that next year is gonna work out just fine.
00:00:41.191 --> 00:00:41.600
All right.
00:00:41.600 --> 00:00:44.790
Welcome to another episode of Breaking Biz Dev.
00:00:44.820 --> 00:00:46.331
I'm John, he's Mark.
00:00:46.381 --> 00:00:53.359
And Mark, We are entering Q4 it is planning season, as we like to say in the agency world.
00:00:53.777 --> 00:01:00.857
you have some perspective on some best practices and some traps that firms might fall into.
00:01:00.857 --> 00:01:08.487
And I'm excited to, to do this one with you today, Mark, because, you've got some cool visuals to share and, uh, I like the way that you've approached this.
00:01:09.103 --> 00:01:09.463
Yeah.
00:01:09.480 --> 00:01:14.311
the concept of, planning, strategic planning, God, that, that word just, just drives me crazy,
00:01:14.352 --> 00:01:14.653
know.
00:01:14.760 --> 00:01:15.950
tis the season, right?
00:01:15.950 --> 00:01:21.647
As we, as, summer's in the, just about in the rear view mirror and we start, start looking forward for sure.
00:01:21.677 --> 00:01:26.878
and I think we've actually talked a little bit about revenue planning, sales planning and, in many different ways.
00:01:27.117 --> 00:01:28.748
this is a specific framework.
00:01:28.757 --> 00:01:37.558
and it's actually a widely adopted sort of way to look at, planning for revenue and sales, in the coming year.
00:01:37.558 --> 00:01:45.597
And it, brings together, stuff you've already got on a contract, stuff that is, pie in the sky, and pipeline and all that.
00:01:45.867 --> 00:01:50.968
So it brings it together in a more orderly sort of structure and framework in here.
00:01:51.414 --> 00:01:52.063
But Mark,
00:01:52.487 --> 00:01:52.808
yeah.
00:01:52.884 --> 00:01:56.004
aren't, aren't they the same thing, revenue planning and sales planning?
00:01:56.067 --> 00:01:57.037
No, they're not.
00:01:57.078 --> 00:01:57.518
They're not.
00:01:57.518 --> 00:02:06.100
And, and and honestly, This gets me tripped up a, a lot with some of my clients because most of my clients and rightfully so, are, very focused on revenue, right?
00:02:06.100 --> 00:02:12.760
And revenue is the work you work and then you bill it and then you, get paid and there's your, there's your revenue.
00:02:13.281 --> 00:02:14.320
all makes sense, right?
00:02:14.381 --> 00:02:22.091
I kind of introduce and lean heavily on sales planning, and sales planning just, pushes us, pushes our eyeballs further out into the, into the future.
00:02:22.741 --> 00:02:26.501
So revenue planning's obviously important, right?
00:02:26.570 --> 00:02:31.401
It's usually built around sort of a monthly cadence.
00:02:31.450 --> 00:02:35.920
A lot of firms that I work with develop sort of a, a target number, right?
00:02:35.931 --> 00:02:45.270
So What do we need to bill every single month in order to, hit our target throughout the course of our 12 months ahead, right?
00:02:45.341 --> 00:02:53.600
So this, this drives, how many employees you have, their salaries, other operating expenses, discretionary spending, all different kinds of things, right?
00:02:53.600 --> 00:02:56.760
This is, this is, this, this funds the machine, right?
00:02:56.781 --> 00:03:04.461
So sales planning pushes our, our eyes a little bit further out onto the horizon.
00:03:04.461 --> 00:03:10.531
Sales planning is more about growth and intention and areas of focus, right?
00:03:10.531 --> 00:03:12.691
Where, where is the market moving?
00:03:12.700 --> 00:03:17.330
How do we need to change and grow our, our business in a particular area?
00:03:17.711 --> 00:03:26.080
if you're an organization who has different types of services, maybe there are certain services that are opportunities for growth and others may be less so.
00:03:26.080 --> 00:03:37.570
So sales planning starts to take in all of this and actually, instead of just running the machine, it starts to, steer the ship potentially in slightly different directions.
00:03:37.570 --> 00:03:38.360
So it's different.
00:03:38.721 --> 00:03:39.501
It's further out.
00:03:39.841 --> 00:03:54.651
and this exercise that we're gonna talk through today kind of marries those two things, I think, well, so that we're talking both sort of the real nuts and bolts of revenue, but also the, the, future sort of contract values and sales that you're hoping to close.
00:03:54.832 --> 00:03:56.772
that's a really great way to, to think about it, Mark.
00:03:56.823 --> 00:04:06.103
the sales planning is really the desired outcomes of the activities that you're going to put into place to steer the firm in the direction that you wanna go.
00:04:06.782 --> 00:04:18.773
And I, I'm curious, like those conversations that you have with clients, how far along into, into that, that like strategy conversation are they?
00:04:18.773 --> 00:04:22.913
Or is it, is this happening at the same time as strategies are being developed?
00:04:22.913 --> 00:04:28.322
Or is this something to where like a strategy is defined and then it's how does that translate into dollars?
00:04:28.788 --> 00:04:40.048
Well, I think we've talked about this a little bit in the past in, in that I, I think this informs better strategy because it's, it's, it's focused on real dollars and cents, Right.
00:04:40.048 --> 00:04:57.819
It's focused on revenue dollars and cents and also sales, you know, contract values, So it's, it grounds all of that, and frankly, it builds a stronger foundation, underneath any type of strategy or, future ideas of, of growth and change that you, that you want to pursue in the future.
00:04:57.819 --> 00:05:05.538
this grounds everything, this exercise, and this is, this should not be your only exercise that you do in the course of all of your planning.
00:05:05.745 --> 00:05:05.975
Right.
00:05:06.298 --> 00:05:12.499
you should have, a group of individuals come into a room with, empty whiteboards, You should run through what-ifs.
00:05:12.499 --> 00:05:23.399
You should, shoot for the stars, or change things or, acquire a- another firm All of that should be happening as well, but this, is an important component of that that informs other things.
00:05:23.399 --> 00:05:25.689
And you can do this a couple different ways.
00:05:26.178 --> 00:05:30.579
A lot of times planning when it comes to dollars and cents is done two ways fundamentally.
00:05:30.579 --> 00:05:34.569
One is from the top down, and the other is from the bottom up.
00:05:34.769 --> 00:05:43.689
This favors a bottom-up approach, because the top-down approach just says,"All right, we have X number of mouths to feed.
00:05:43.829 --> 00:05:55.269
We have..." and in professional services, a lot of times this means,"We have X amount of time to work." when I do my, division and my multiplication and everything else, what's the big number I get at the bottom?
00:05:55.519 --> 00:06:00.329
Understanding all my people and what we're gonna charge for their expertise, all that stuff.
00:06:00.329 --> 00:06:06.059
So that's a top-down approach, and this what we'll talk through today is kind of bottom up for sure.
00:06:06.156 --> 00:06:12.533
So what tools do clients have in place to be able to get started with this process?
00:06:12.721 --> 00:06:17.052
some financial tools will have, this framework built into them.
00:06:17.502 --> 00:06:20.451
sometimes CRM systems will have this tool built into them.
00:06:20.451 --> 00:06:31.012
CRM systems will lean a little bit more towards the future sales, planning, and your financial tools probably will lean a little bit more towards, kinda on the revenue end of things.
00:06:31.351 --> 00:06:33.591
some CRM systems may actually have this in place.
00:06:33.601 --> 00:06:36.581
So go look at that and see what framework you currently have to work with.
00:06:36.581 --> 00:06:50.682
And other, other financial platforms, will likely have some component in them that lets you start to plan what the future looks like, you know, whether it's a, a, a, resource management tool or a, sales and revenue tool or whatever else it is.
00:06:50.682 --> 00:06:52.802
So, so some of those tools exist already.
00:06:53.081 --> 00:06:58.351
Without that, I mean, heck, I've just done this with an Excel spreadsheet, with some of my clients.
00:06:58.351 --> 00:07:10.391
It's like, all right, so we're gonna, we're gonna just do our, do our rows and columns, and our, our columns start to look like, different chunks of time, and our, our, our rows are different projects, right?
00:07:10.391 --> 00:07:16.661
And then we're gonna start to sort those projects relative to, our three buckets here, and we can dig into those buckets now.
00:07:16.978 --> 00:07:17.617
Let's do it.
00:07:17.617 --> 00:07:18.468
Great segue, Mark.
00:07:18.468 --> 00:07:26.148
So you've got these three buckets that you use to, define the, the, the new sales revenue.
00:07:26.418 --> 00:07:27.548
I guess we can call it that,
00:07:27.732 --> 00:07:28.281
Yeah, it's both.
00:07:28.281 --> 00:07:29.041
It's both actually.
00:07:29.041 --> 00:07:29.471
It's both.
00:07:29.471 --> 00:07:38.327
It's, it's, it's, um, it's, revenue to be bill worked and billed, and it's also this more speculative sort of sales end of stuff.
00:07:38.327 --> 00:07:40.257
the first one is...
00:07:40.728 --> 00:07:41.478
committed.
00:07:41.877 --> 00:07:49.365
There's a bucket called committed/backlog, The second one is called probable, and the third is called possible.
00:07:50.656 --> 00:07:58.745
And not to confuse,'cause we'll stick with these three for our conversation today, but sometimes I've even seen people put in four, And the fourth one would be sort of pie in the sky.
00:07:58.805 --> 00:08:18.966
but the three that we talked about here, committed, probable, and possible are both inclusive of, stuff that's already under contract, revenue that you are expecting to, to bill and bring in the door, all the way to the, big sort of maybes, the speculative stuff.
00:08:18.966 --> 00:08:20.165
So, for sure.
00:08:20.386 --> 00:08:20.896
Let's...
00:08:21.255 --> 00:08:21.536
Cool.
00:08:21.605 --> 00:08:23.225
But let's take them one at a time, John.
00:08:23.336 --> 00:08:24.245
yeah, that, that's great.
00:08:24.245 --> 00:08:30.045
So the, those three buckets, committed, probable, and possible, let's start with the committed bucket.
00:08:30.125 --> 00:08:40.285
And Mark, you have these, I think they're fantastic visuals, and I'm a visual learner myself, so when you shared these with me, I, it kinda clicked it into a new level of understanding.
00:08:40.625 --> 00:08:49.316
And so I think let's, if, let's put these up on the screen for our audience, and they can follow along with us as we break it down
00:08:49.932 --> 00:08:51.981
John, is this a shameless plug for our YouTube channel?
00:08:52.379 --> 00:08:53.840
well, and not a shameless plug.
00:08:53.840 --> 00:08:56.809
I mean, I, I think it's, I think it's fascinating.
00:08:57.159 --> 00:08:59.480
but yeah, I guess maybe it is a shameless plug.
00:08:59.490 --> 00:09:03.419
So let's, uh, follow along on YouTube and check out these awesome visuals.
00:09:03.807 --> 00:09:04.307
Who knows?
00:09:04.317 --> 00:09:04.658
Who knows?
00:09:04.658 --> 00:09:16.134
So if you've only experienced John and I, you know, kind of whispering in your ears when you take your dog walk, head on back to your, desktop and take a look at us on YouTube as well.
00:09:16.153 --> 00:09:28.423
So on occasion, we have some episodes that are, um, kind of a little bit better, uh, to be viewed visually, and I think at least this part is, is a good one.
00:09:28.443 --> 00:09:31.563
So sure, so committed, right?
00:09:31.573 --> 00:09:41.724
So the graph and, and, and for, for people who, don't have access or whatever else, aren't gonna, aren't gonna spend the time pulling it up on YouTube, John, we're looking at a graph, right?
00:09:42.114 --> 00:09:50.403
X-axis, Y-axis, and so we've got a, an X-axis, which is kind of the horizontal axis over time.
00:09:51.024 --> 00:09:53.264
This could be months, could be weeks, whatever the heck it is, right?
00:09:53.264 --> 00:09:54.283
It's just over time.
00:09:54.533 --> 00:10:02.583
And then our Y-axis, our, our, our vertical axis is some percentage of revenue or capacity or w- w-whatever else, right?
00:10:02.614 --> 00:10:04.533
So, that's our graph.
00:10:04.803 --> 00:10:05.583
Monthly recurring
00:10:05.936 --> 00:10:07.086
Monthly recurring revenue.
00:10:07.086 --> 00:10:08.686
clients or, whatever else.
00:10:08.936 --> 00:10:11.905
their, their, their slope looks a little bit different.
00:10:12.806 --> 00:10:20.946
But needless to say, people who are focused on monthly recurring relationships, retainers, whatever else it might be, see churn, right.
00:10:20.946 --> 00:10:22.225
They will lose clients over time.
00:10:22.225 --> 00:10:34.975
So if you take all, everything you have under contract right now and map it out over time, it's hopefully looking great today, but as time goes on, it starts to, starts to diminish, right?
00:10:34.975 --> 00:10:36.306
There's a slope, right?
00:10:36.625 --> 00:10:39.015
Some folks say there's a cliff or, whatever.
00:10:39.166 --> 00:10:40.395
There's a slope, right?
00:10:40.535 --> 00:10:50.716
At some point in the future, John, if you're a professional services firm and you do nothing, if you sign no more contracts, at some point you will hit zero, right?
00:10:50.875 --> 00:10:51.985
So we're at
00:10:52.562 --> 00:11:01.121
All the projects will come to an end, all of the client work eventually will sunset, and then in this graph, we've got it over six, let's call it months.
00:11:01.471 --> 00:11:07.731
By, month six, you're gonna be at 15% of the revenue that you're at right now.
00:11:08.464 --> 00:11:13.244
Let's just call this all these projects together, we'll call that committed, right?
00:11:13.244 --> 00:11:15.344
And that's your, that's your backlog, right?
00:11:15.344 --> 00:11:19.173
So, and hopefully you will capture 100% of that.
00:11:19.183 --> 00:11:29.724
You will not, so when we are planning with all this and you're looking at the backlog, everything you have, under contract, don't take for granted that you're gonna close 100% of those dollars, right?
00:11:29.974 --> 00:11:33.803
Sometimes that, those dollars might increase a little bit with little changes or adjustments or...
00:11:34.033 --> 00:11:39.453
But sometimes there'll be others that, lo and behold, you don't get paid, or, whatever.
00:11:39.453 --> 00:11:42.683
They're, they're de- you're being delayed in, in payments and whatever else.
00:11:43.094 --> 00:11:46.303
so that's, that's your backlog.
00:11:46.344 --> 00:12:05.433
Now, to be clear, if you have certain, projects, clients in there that, have Maybe there's a project you're working on now with- within an, an, an initial, some initial work, and then there's some future, some future thing, like a phase two or a, a, a, a bigger, a bigger chunk of work some- somewhere down the road.
00:12:05.433 --> 00:12:07.024
This is, this is not in there, right?
00:12:07.024 --> 00:12:10.734
We're only talking about stuff that has literally been, inked, right?
00:12:10.744 --> 00:12:12.703
John closed, contracted, right?
00:12:12.703 --> 00:12:18.774
So that is, that is your committed backlog work.
00:12:19.464 --> 00:12:20.474
We got that mapped out.
00:12:21.524 --> 00:12:21.833
Good.
00:12:21.953 --> 00:12:22.254
Okay.
00:12:22.254 --> 00:12:23.714
So that's that's important.
00:12:23.863 --> 00:12:27.842
When we take your probable, which is
00:12:28.576 --> 00:12:30.527
So that's what we're layering on here, right?
00:12:30.852 --> 00:12:38.403
yeah, we layer on this additional, these additional projects, And so this stuff is probable.
00:12:38.673 --> 00:12:51.876
Now, probable and pipeline are not the exact same thing, but all of your probable, work, all of your probable contracts will come from your pipeline
00:12:52.068 --> 00:12:58.678
And so in terms of like a percent, if we were looking at like our sales process, right?
00:12:58.708 --> 00:13:04.568
And if we assign, percent likelihood, like would you say that probable is over 50%, over 75?
00:13:04.609 --> 00:13:05.479
Is that irrelevant?
00:13:05.663 --> 00:13:06.663
it's super relevant.
00:13:06.663 --> 00:13:17.153
So I think what a lot of people will do is they'll immediately just take 100% of their pipeline and layer it on top of their backlog and say, Okay we're good." But with this exercise, we're looking at something slightly different.
00:13:17.913 --> 00:13:20.493
So we've got our, our committed backlog work.
00:13:20.793 --> 00:13:25.212
We take a percentage of our pipeline work and layer it on top of that.
00:13:25.273 --> 00:13:28.863
And to your question, John, it depends.
00:13:29.092 --> 00:13:35.572
It depends on your business, it depends on how successful you are sort of overall, with your new business pursuits.
00:13:35.572 --> 00:13:42.403
If you have an extremely high sort of win rate or close rate, then you can be, you know, a little more optimistic with this.
00:13:42.582 --> 00:13:47.513
conversely, if your win rate is, is lower, you should be conservative with this.
00:13:47.513 --> 00:13:58.452
So again, we're not gonna take the entire pipeline and just layer it on here and put that under probable, because probable, carries a, significant amount of weight with it, right?
00:13:58.452 --> 00:14:06.232
It's, it's, this is something that we're going to be-- that we're gonna start planning around as soon as six months from now, right?
00:14:06.302 --> 00:14:09.503
we don't wanna sneak random speculative stuff in here.
00:14:09.832 --> 00:14:16.682
We don't want to be planning in the fairly near term, three, six months out, whatever it might be.
00:14:16.812 --> 00:14:24.633
We don't wanna be creating plans around stuff that's super speculative, so we need to weight that appropriately.
00:14:24.863 --> 00:14:27.432
So, and, and ideally, this stuff's gonna contract pretty soon.
00:14:27.592 --> 00:14:33.682
Pretty soon is, it could be in the next two months or three months, or heck, maybe six months or whatever else it is.
00:14:33.682 --> 00:14:34.783
But pretty soon.
00:14:34.783 --> 00:14:35.783
Six months is a little bit long.
00:14:35.783 --> 00:14:38.743
I would prefer, something in that, like you mentioned earlier, right?
00:14:39.123 --> 00:14:46.842
It's, it's, you know, something that's closing in the next 90 days or 120 days or whatever your sort of close rate, typical close rate is for your pipeline.
00:14:46.923 --> 00:14:55.602
so this, again, layers on top, but just like your contracted work, that committed work, it fades over time, right?
00:14:55.692 --> 00:15:08.202
So now we've got these, that big sort of pipeline, and now we've got this sort of probable, which is part of your pipeline, stuff that's hopefully more likely.
00:15:08.643 --> 00:15:12.763
you know, just to use a ballpark, folks, let's go 60% possible.
00:15:13.052 --> 00:15:14.403
60% likely, maybe.
00:15:14.663 --> 00:15:15.903
This needs to change with time.
00:15:16.763 --> 00:15:17.232
so there we go.
00:15:17.232 --> 00:15:20.513
We've got our two layers there on our graph
00:15:20.900 --> 00:15:21.150
Yeah.
00:15:21.150 --> 00:15:25.780
So we've got our committed revenue, our backlog in blue.
00:15:26.520 --> 00:15:28.181
We've got our probable revenue.
00:15:28.191 --> 00:15:33.951
These are deals in the pipeline that are a high likelihood of closing.
00:15:34.155 --> 00:15:34.405
Yeah.
00:15:35.131 --> 00:15:38.696
So the next bucket that you have is possible
00:15:39.168 --> 00:15:40.998
You're listening to breaking biz dev
00:15:41.163 --> 00:15:47.537
the podcast that beats up, breaks down, and redefines business development for the professional services firms of tomorrow.
00:15:47.667 --> 00:15:55.206
Your hosts are John Tyerman, founder of Red Cedar Marketing, the podcast marketing company for experts and professional services firms,
00:15:55.423 --> 00:16:04.956
And Mark Wainwright, principal consultant and founder of Wainwright Insight, the fractional sales manager and sales consultant to professional services firms.
00:16:05.238 --> 00:16:10.738
If you find this podcast helpful, please help us by following the show and leaving a review on Apple podcasts
00:16:11.095 --> 00:16:12.835
and now back to the show.
00:16:13.908 --> 00:16:15.298
Yeah, this is possible.
00:16:15.727 --> 00:16:38.142
Possible is the part of your pipeline that didn't quite make it into probable, and then sometimes we can sneak in some other stuff, Because we want our pipeline to be active sales opportunities that we are working now, that we have some level of confidence that they're gonna close in the next four, three to six, whatever, whatever months, right?
00:16:38.351 --> 00:16:44.511
We don't want our pipeline to be, and I've used this in the past, John, our pipeline is not a storage tank, right?
00:16:45.152 --> 00:16:48.812
Our pipeline is a pipeline, so it needs to flow, right?
00:16:48.812 --> 00:16:55.611
So we want opportunities to enter the pipeline and to move along at, at an appropriate pace, and then contract or not.
00:16:55.662 --> 00:16:56.761
We don't, we don't want them sitting there.
00:16:56.772 --> 00:17:14.511
So a lot of these possible sort of pie in the sky things can be something if you're sitting here, what, September, October, and you're, wanting to put something in, in, probable that's not gonna close for a year, no.
00:17:14.942 --> 00:17:15.192
No.
00:17:15.251 --> 00:17:17.372
That needs to be, that needs to be possible.
00:17:17.561 --> 00:17:28.981
And the exercise that I will undertake with a lot of individuals that I work with are, are just sales projections, and I call them projections because they don't-- they're not things that, that are in the pipeline.
00:17:29.501 --> 00:17:31.541
They could be related to things that are in the pipeline.
00:17:31.652 --> 00:17:37.442
maybe they have like a phase one, they're a bit of work in the pipeline now, and then there's the second phase that's gonna come along in, eight months.
00:17:38.662 --> 00:17:39.412
So we do that.
00:17:39.422 --> 00:17:42.288
And again, simple spreadsheets are easy tools.
00:17:42.828 --> 00:17:45.318
a lot of times we'll look at these quarterly.
00:17:46.739 --> 00:17:48.519
So we'll say first quarter, what do you think?
00:17:48.548 --> 00:17:55.439
There's these clients, this, this work, second quarter, third quarter, fourth quarter, and some of it can get pretty, pretty speculative.
00:17:55.439 --> 00:17:58.378
Some of it can be, I'm not even sure there's a there there yet.
00:17:58.719 --> 00:18:00.929
I'm not even sure there's a, there's some work.
00:18:01.398 --> 00:18:08.568
the great thing about possible is that it starts to help how you plan, right?
00:18:08.689 --> 00:18:10.729
So I've got, got our backlog.
00:18:10.969 --> 00:18:12.348
We're working that work Right now.
00:18:13.459 --> 00:18:16.259
Some clients are great, others are a pain in the neck, whatever.
00:18:16.538 --> 00:18:22.348
you've got your pipeline that is, is hopefully filtered in a way that, the great clients are rising to the top.
00:18:23.689 --> 00:18:28.048
The clients that you would prefer not to work with are not in your pipeline or getting filtered out.
00:18:28.519 --> 00:18:41.318
and this possible layer should contain great ideal clients, folks that we are going to chase after,
00:18:42.086 --> 00:18:49.057
and I think that's such an important point for this exercise is this is where you can stretch, right?
00:18:49.166 --> 00:19:02.317
This is where you can influence the direction of the firm overall with this possible category because it, it-- I asked about it earlier about when, you know, w- where does this happen, and it's all happening simultaneously.
00:19:02.646 --> 00:19:14.277
This is a great kind of bridge or pin to put in this and then have conversations with your marketing department, with your operations team, and then kind of understand, is this the direction that we want to go?
00:19:14.287 --> 00:19:18.467
What if we were able to land this kind of an ideal client?
00:19:18.916 --> 00:19:27.787
And then that opens up a whole new conversation around resource planning, and then all of a sudden the firm's getting closer and closer to a strategy that everyone can get behind.
00:19:27.912 --> 00:19:28.301
yeah, yeah.
00:19:28.352 --> 00:19:32.852
Because you've built this great foundation of sort of reality, right?
00:19:32.902 --> 00:19:45.912
Sure, there's some speculative stuff that we've put into this possible category, but the probable stuff is highly likely, and the possible stuff is made up of a bunch of ideal clients, that we either know or we don't know.
00:19:45.912 --> 00:19:51.692
But, it's a direction that we went ahead as a firm and, you know, here's some real dollars, or at least the best that we can do.
00:19:51.701 --> 00:19:58.092
You know, here's an educated guess at some reasonable dollars that we could capture, from these particular clients down in possible there.
00:19:58.102 --> 00:20:07.392
So, and this stuff from a time perspective, we've talked, backlog is, committed backlog is now, probable is sooner rather than later in the next few months or so.
00:20:07.392 --> 00:20:09.352
Possible, this can stretch out a ways, right?
00:20:09.352 --> 00:20:13.612
This is gonna stretch out all the way to your end of your coming, fiscal year.
00:20:13.961 --> 00:20:16.832
this can be stuff that, yeah, I don't think that's gonna happen for another 11 months.
00:20:16.832 --> 00:20:17.721
You're like,"Okay, cool.
00:20:17.811 --> 00:20:22.721
Let's get it in possible there." And we're gonna, we're gonna, weight it, very low.
00:20:22.832 --> 00:20:24.862
You know, we're not gonna give it a high probability.
00:20:25.172 --> 00:20:27.652
we're not gonna stake the entire future of our firm.
00:20:27.765 --> 00:20:43.755
for the folks that are either picturing this along or looking on the screen here, we are building these layers on this graph, and we are, step after step, we are seeing the white space, on this graph disappear, right?
00:20:44.644 --> 00:20:50.684
Be obscured by, what we've got now, what we'll have soon, and what we hope to have longer term.
00:20:51.164 --> 00:21:00.510
And that fleshes out the picture of a firm, an individual, a profit center, a group, a practice area, whatever else it is, right?
00:21:00.510 --> 00:21:09.790
So this, this now has built their picture of revenue and sales for the coming months.
00:21:10.111 --> 00:21:15.250
And yes, folks, the hard part is just simply executing on this plan, right?
00:21:15.990 --> 00:21:22.748
Of course, particularly in this example, you know, that we've got here, that I have built here, is that there is still white space, right?
00:21:22.817 --> 00:21:26.968
There's still some graph showing, and that's a question mark, right?
00:21:27.038 --> 00:21:29.198
That's what we need to go get.
00:21:29.288 --> 00:21:38.104
we could have that speculative area really start to cover more and more of that But, is not a hyper-rigid plan.
00:21:38.104 --> 00:21:48.983
This is, we've got our eyes on these dollars, and then there's that other area that we need to kind of make up as we go
00:21:51.173 --> 00:21:55.804
I think these visuals are fascinating and here's everything all kinda laid out so folks can see.
00:21:56.364 --> 00:22:13.733
I'm a visual learner and just seeing all of this, kinda stack on itself, it's a good motivating tool, for people that are in a business development or a marketing seat to be able to see this and really contextualize the urgency, I guess?
00:22:14.074 --> 00:22:17.903
Maybe that's the right word of, of building out the pipeline, right?
00:22:18.157 --> 00:22:27.718
from day one, John, this has been a mantra of ours, is, is that, look, sales and marketing are not this sort of ambiguous, mysterious world of everything.
00:22:27.728 --> 00:22:40.877
these are, practices that happen inside organizations, professional services firms that need to have organization and discipline, and frameworks, and, you know, clear goals and, you know, all of that stuff.
00:22:40.877 --> 00:22:46.738
So, and this is a visualization of, the committed work is, That's your delivery.
00:22:46.798 --> 00:22:49.577
Those are your folks that are actually doing the work and delivering on that work.
00:22:49.798 --> 00:22:56.587
But the next part that probable stuff is tied very closely to sales, for sure.
00:22:57.018 --> 00:23:04.938
And then when we wander off into possible, and even into that white space, we're definitely talking about sales and marketing, right?
00:23:05.057 --> 00:23:10.107
So this is, these are these three components, and there is a flow here.
00:23:10.137 --> 00:23:20.678
There is an ideal flow of all of this, We want the possible work to transition to probable in your pipeline.
00:23:20.951 --> 00:23:27.611
We want the probable work in your pipeline to transition to committed work, right?
00:23:28.010 --> 00:23:32.500
And then we want that committed work to translate to revenue, right?
00:23:32.691 --> 00:23:37.730
So that is the flow, and these graphs sort of show how that whole thing happens.
00:23:37.921 --> 00:23:58.519
And, to highlight another point on this is that this shows, particularly our friends who are the doer-sellers, who are responsible for dollars in every single layer that we've kind of built here, that they need to be spending equal time on all of these things, over time, right?
00:23:58.729 --> 00:24:53.393
So we want the doer-sellers thinking,"What am I doing today to deliver great work at a great margin for our firm that drives, future clients or, future contracts that I can, start to flesh this, this graph out further?" We want them to think,"What am I doing tomorrow to advance pipeline opportunities to a successful close?" we also want them to, to be thinking,"What am I doing after that to move these maybes, these possible new business opportunities into my pipeline with well-planned and well-executed marketing and sales, strategies and tactics?" And, Yeah, it's a hard job, but once you start organizing it- It gets a little clearer and easier for sure
00:24:54.391 --> 00:25:03.351
Well, one thing that just got a little bit clearer for me as we're talking about this is how you tied each of these layers to a business function, right?
00:25:03.351 --> 00:25:06.820
So the committed revenue is all about delivery.
00:25:07.401 --> 00:25:15.631
The, probable revenue is all about sales management, and then the possible revenue is all about marketing and lead generation.
00:25:15.949 --> 00:25:16.189
yeah.
00:25:16.378 --> 00:25:17.179
Yeah, for sure.
00:25:17.278 --> 00:25:17.709
For sure.
00:25:17.770 --> 00:25:17.990
up.
00:25:18.979 --> 00:25:24.159
a little on the tactics end of thing is that definitely this should be done on, in the, in the fourth quarter for sure.
00:25:24.679 --> 00:25:31.608
It is important to, to do this exercise both with individuals and as a group, so everybody can kinda come, come back together.
00:25:31.638 --> 00:25:37.138
But I do this with individuals, and I talk to them about,"All right, tell, let's, let's figure out what you've got under contract Right.
00:25:37.138 --> 00:25:37.479
now.
00:25:37.729 --> 00:25:45.828
Let's look at your pipeline, see what we're going to put into possible, probable and then possible." We talk about some pie in the sky stuff, right?
00:25:45.828 --> 00:25:49.568
That finds its way into possible as well.
00:25:49.769 --> 00:25:54.439
whether they're known clients, or maybe just folks you wanna introduce yourself to.
00:25:54.598 --> 00:26:01.138
So I build these with individuals that all roll up into, into, kinda one big, one big plan.
00:26:01.138 --> 00:26:03.229
So this is that bottom-up, right, process.
00:26:03.828 --> 00:26:32.499
I like this approach because we're addressing the, the priority of concerns in sequence, and when you address the committed revenue planning and you address the probable revenue planning, and I'm speaking from a marketer's point of view, then the, the people in the room when you are talk- talking about the possibilities are in the right head space because we've already covered the, the dollars and cents that are today and tomorrow,
00:26:32.519 --> 00:26:32.798
Good.
00:26:33.088 --> 00:26:33.378
so
00:26:33.749 --> 00:26:38.459
a c- a couple little other little, little tidbits here, not so small and sometimes, right?
00:26:38.848 --> 00:26:53.759
People need to make an honest assessment, They need to bring a a heavy dose of reality to this process, Right We cannot have endless pie in the sky stuff, like f- like 100, 100 what-ifs, Right It's just not gonna...
00:26:53.939 --> 00:27:10.959
That doesn't show any focus, that doesn't show any discipline, and, it, it can disrupt things, I mean, even though we are taking these long-term really speculative opportunities and, you know, weighting them y- pretty minimally, you know, you put enough speculative stuff in there, it's gonna start to, put, put a thumb on a scale a- little bit.
00:27:10.959 --> 00:27:16.308
So, you need to bring a level of reality to this, working through this exercise.
00:27:16.608 --> 00:27:22.608
and here's the note on that, is that it's never gonna be right the first time, and heck, the second time you do it, it's probably not gonna be great either.
00:27:22.858 --> 00:27:23.818
it takes iterations.
00:27:23.838 --> 00:27:37.868
The painful part is that this takes, some years to actually get pretty good at this, Because, over time you learn, what am I gonna include in my, possible stuff at the beginning, at this fourth quarter now?
00:27:38.578 --> 00:27:42.989
And then how am I going to execute on that throughout the course of the year, right?
00:27:43.169 --> 00:27:46.618
And am I actually seeing the flow that Mark talked about, right?
00:27:46.818 --> 00:27:53.769
Am I actually seeing the, flow between the possible to the probable, and from the probable to the, committed backlog?
00:27:53.989 --> 00:27:54.868
am I seeing that?
00:27:55.118 --> 00:27:56.709
Am I seeing those, those things happen?
00:27:57.189 --> 00:28:02.499
and are you gathering enough data to be able to, project out conversion rates, right?
00:28:02.519 --> 00:28:19.669
And I think that's like the big piece of the, the possible revenue, and that's a big unknown in a lot of firms that I, at least I talk to, is they don't really understand or know what the conversion rate is from lead to opportunity to under contract to close
00:28:20.204 --> 00:28:22.904
And those conversion rates are important because that determines our weighting,
00:28:23.325 --> 00:28:23.865
Exactly,
00:28:23.914 --> 00:28:28.795
are you weighting your, your, your probable stuff at 60% or is it, you know, less than that?
00:28:28.795 --> 00:28:30.694
Or, you know, how are you, how are you dealing with that?
00:28:31.134 --> 00:28:35.724
this should be done sort of in parallel with some top-down exercises that the firm is doing.
00:28:36.055 --> 00:28:42.234
the financial end of things is happening with all the other, costs, that you, that you have.
00:28:42.234 --> 00:28:44.654
So these things need to be done in, in parallel.
00:28:44.664 --> 00:28:48.005
And more than likely, you're gonna end up with a gap, right?
00:28:48.065 --> 00:28:50.595
You're gonna have some top-down exercise that has some big number.
00:28:50.595 --> 00:28:53.365
You're gonna do a bottom-up exercise, then you're not quite gonna get there.
00:28:54.179 --> 00:28:54.419
And
00:28:54.484 --> 00:28:55.015
So you're gonna have a
00:28:55.159 --> 00:29:00.308
introduces new edge cri- criterion conditions to where, okay, what needs to be adjust- adjusted?
00:29:00.318 --> 00:29:01.288
Do we need more leads?
00:29:01.288 --> 00:29:01.739
Do we need to,
00:29:01.810 --> 00:29:02.191
Yeah.
00:29:02.278 --> 00:29:03.028
close rate?
00:29:03.128 --> 00:29:03.699
Exactly.
00:29:04.131 --> 00:29:22.051
And I will tell you, I mean, not to overemphasize this, but man, when individuals in a firm go through this exercise, doing a, an honest, realistic bottom-up exercise like this and come up with a number, that number is way more reliable than any top-down number that you're gonna be given,
00:29:22.551 --> 00:29:22.951
That's true
00:29:23.271 --> 00:29:25.412
And people are bought into it.
00:29:25.751 --> 00:29:26.551
People believe it.
00:29:26.951 --> 00:29:28.432
People said,"Okay, I made my own plan.
00:29:28.461 --> 00:29:31.031
I know I'm gonna go execute on my own plan." Right?
00:29:31.041 --> 00:29:33.231
So it's, it's a really, really good exercise.
00:29:33.231 --> 00:29:45.102
Top-down stuff, sure, you need to do that as well, but this is, this is a much stronger motivator for ind- individuals who are in these doer/seller seats, who need to balance their time and prioritize certain opportunities and not others.
00:29:45.751 --> 00:29:46.682
sure, this is a good one.
00:29:47.481 --> 00:30:00.432
this should be revisited at least quarterly, and revisited quarterly in a number of different ways, i.e., we need to remind people,"Hey, you had these four different things that were in there as possible.
00:30:00.432 --> 00:30:02.442
What activities have you done now
00:30:02.963 --> 00:30:03.273
yeah
00:30:04.402 --> 00:30:08.771
in order to, move those into the pipeline in the third quarter?" Like you said, right?
00:30:08.771 --> 00:30:16.511
"So what, what's happening now in order to make that happen?" Revisiting is also, you can make sometimes, you can make adjustments to it.
00:30:16.571 --> 00:30:22.412
It's not critical, because I think that it takes a year to sometimes execute on these bigger plans.
00:30:22.821 --> 00:30:27.362
So I don't think at the six-month point you're gonna be radically making big changes.
00:30:27.362 --> 00:30:30.551
"Oh, this big sort of speculative chunk of work here that we thought was...
00:30:30.642 --> 00:30:39.301
It's not happening, so we're just gonna erase it." Like, I don't, You have to have something, next time around to look at and say,"I don't th- that's in the plan.
00:30:39.311 --> 00:30:40.701
We didn't execute on that properly.
00:30:40.771 --> 00:30:41.682
Are we gonna keep it there?
00:30:41.682 --> 00:30:54.951
If so, we need to change how we're gonna, market and, and, and sell to kind of close that work." So I don't think people should make wholesale changes to this, every quarter, but I think you need to kind of come back to it and revisit it for sure.
00:30:55.521 --> 00:31:06.122
and you know, this, this, the, like I said before, the possible stuff is just fantastic fuel, fantastic content for future planning, being able to chart the course of the, of the firm.
00:31:06.382 --> 00:31:07.471
so there you go, John.
00:31:07.481 --> 00:31:11.780
That's committed/backlog, probable, and possible.
00:31:11.780 --> 00:31:22.601
Those are our three buckets that brings together revenue planning and sales planning, and heck, even, starts to drag in, marketing planning to this whole process as well.
00:31:22.601 --> 00:31:27.661
So it stitches those things all together in a, in a, a picture that I think makes some sense.
00:31:28.480 --> 00:31:28.810
Totally.
00:31:28.810 --> 00:31:33.530
Well, revenue is oxygen to any business, so it makes sense that it would be all interconnected.
00:31:33.611 --> 00:31:39.240
And I like the way that you articulated the bottom up approach, and it's because everyone's involved in the
00:31:39.588 --> 00:31:39.848
Yep.
00:31:40.790 --> 00:31:42.010
the key ingredient to it all.
00:31:42.179 --> 00:31:42.578
Yeah, yeah.
00:31:42.638 --> 00:31:44.058
There's good buy-in for this, for sure.
00:31:44.296 --> 00:31:46.306
Well, Mark, I think this was fantastic.
00:31:46.306 --> 00:31:47.756
I love the visuals that you shared.
00:31:47.855 --> 00:31:53.236
I learned something new in this conversation, and I'm sure that our viewers and listeners did as well.
00:31:53.746 --> 00:31:59.756
So, if you made it this far, please, subscribe to the show, follow us on YouTube, LinkedIn, wherever you get your podcasts.
00:32:00.296 --> 00:32:02.576
And, uh, Mark, until next time
00:32:03.087 --> 00:32:03.438
Thanks, John.
00:32:03.498 --> 00:32:04.107
Until next time
