Small business owners can’t see into the future, so they do their best to predict what might happen. Though educated guesses are the best entrepreneurs can hope for, accuracy is nonetheless important -forecasts made today help shape professional plans for tomorrow. In particular, revenue and spending projections provide the basis for business budgeting, growth, and profitability. With so much riding on financial forecasts, setting and meeting realistic revenue targets is essential for your small business success.
Your small businesses may lack the financial resources to offset revenue shortfalls, so you don’t want to miss the mark, projecting revenue and cash flow potential. Various metrics can help you measure and forecast revenue, with the greatest possible degree of accuracy. When actual revenue figures fall short of expectations, you may have to take steps to get back on track.
Solving Revenue Shortfalls
Small business owners commonly devise annual budgets during or prior to the first quarter of the year. The projections often assign quarterly revenue targets spanning the year, though predicting monthly revenue totals is also a widespread practice. A single month dip may not be cause for concern, particularly if annual revenue numbers remain strong. A quarterly drop, on the other hand, may require a comprehensive response.
The Young Entrepreneur Council recently responded to the prospect of missing revenue projections, providing insight for entrepreneurs looking to reverse unsustainable revenue trends. The group offered several tips for turning things around and making your revenue targets.
- Scale Inbound Marketing Efforts – Small businesses spend a lot of time searching for new customers. Inbound marketing emphasizes bringing customers to your business, rather than expending resources going out to get them. For the best results improving inbound marketing, identify your ideal customer, and then refine your website, aiming directly at your target market. The more useful content you create the higher level of engagement you’ll get from site visitors (prospects). If you apply one of the essential tenets of effective marketing: become the solution, you’ll improve inbound marketing and generate revenue.
- Get to the Heart of the Matter – What’s behind your revenue shortfall? Answering this essential question is easier said than done, but identifying the root cause of your problem may be the only way to correct lagging revenue and earnings. Reverse-engineering works wonders when vexing conditions leave you stymied. Peeling back layers exposes the core of the problem, enabling you to directly address the issue. Have you lost customers? Are you failing to recruit enough new business? Answering questions such as these exposes the next layer of your revenue dilemma. For example, if you are losing customers, why are they leaving? Each revelation carries you one step closer to a solution.
- Cut Costs – Healthy commercial finances strike a balance between earnings and expenditures. When revenue figures slide below expectations, cutting costs can help you re-establish equilibrium. Depending upon the severity of your problem, it may be necessary to press the pause button, re-evaluating financial priorities and putting non-essential projects on hold. In many cases, getting back to basics and focusing on core revenue potential is enough to turn things around, after which you can restart paused projects.
- Evaluate Selling – Is your organization following up on every lead? Closing a sale typically requires more than one communication with a potential customer. If your sales team doesn’t adequately pursue leads, you may be leaving revenue on the table. When poor performance warrants a look, evaluate your sales procedures and offer additional training and coaching, as necessary.
- Keep Customers – If you have knowledge illustrating the trend or suspect a revenue dip directly relates to lost customers, prompt action is required – you may be driving them away. Studying drop points can help you determine the point at which potential customers drop out, rather than following through with purchases. When recognizable patterns exist, correcting customer care shortfalls may be enough to boost revenue to an acceptable level.
- Heed Customer Feedback – Your customers are a valuable resource, providing vital feedback for improving your business. Failing to address customer concerns, or to make adjustments that better serve your client base are critical mistakes, which can diminish your revenue stream. As indicated above, retaining customers is crucial for meeting revenue projections; their feedback makes the job easier, but only if you take action to improve your customers’ experience. When revenue figures turn south, tap social media and other outlets for direct feedback, and then use the information to fine-tune your approach.
- Expand Your Market – Your niche business may present opportunities to expand your market. Though deliberate expansion may not be necessary during prosperous times, a revenue downturn may warrant the effort. Is your current market unable to sustain your revenue targets? If so, is it possible to sell in another region, or expand your marketing presence online?
- Reassess Your Goals and Metrics – Missing revenue projections is disappointing, but it doesn’t always mean you’re not competitive. It is also possible your metrics are off, leading to inaccurate data-driven conclusions. Your projections may also play a role in unmet expectations. Are you asking too much of your sales structure? Before throwing out your revenue strategies, evaluate the ways you analyze and track data, as well as your methods for devising revenue targets. Dialing-in your metrics may paint a more realistic picture of what’s happening in your organization.
Revenue and spending projections help keep your commercial finances in balance. The figures provide a financial basis for planning growth, expansion, capital investment, and other elements of your venture. When revenue falls short of expectations, these strategies can help you get back on track.