Real Life Adventures in Seeing Your Future, Part 1

Jan 18, 2024 by Roger Scherping



Whether you're starting a business or your business has been around for a while, understanding where your business is going is critical to your success. When I've asked many entrepreneurs how they know it's the right time to expand their business or whether they can afford to hire a new employee, their answer always worries me. It's usually a shoulder shrug followed by, "I just go with my gut."

You're clients have too much riding on their businesses to just go with their gut! Of course, most small business owners don't have a strong finance background, and often they don't even have a controller to help them. Many have no idea how to run the numbers before they make a big decision.

A trusted advisor like you, however, realizes that a good prediction of their business will either confirm what they thought and make them more confident in your decision, or it will stop them from making a choice that will haunt them down the road.


A Turnaround Company

Not long ago I met an online retail company that was completely out of cash. Their bank was beginning the process of pushing them out. They had no way to satisfy the bank, and they owed dozens of vendors thousands in past due invoices. The only numbers they had on their business were a basic income statement and balance sheet.

It was time for a prediction! I started by helping them model their business. We started with a sales forecast for the next 12 months. We then projected what their cost of sales and order fulfillment costs would be. We calculated their inventory needs based on current turns and how many days of inventory they had on hand. We budgeted for their employees and overhead expenses. We forecasted their planned expenditures for website and operating software updates.
We put this all in ProjectionSmart, and when we were done they had, for the first time ever, an idea of what their business looked like 12 months out. They saw just how much worse their cash was going to get if they kept going the way they were going.


Time to Make Changes

They used what the prediction told them to take action. Realizing that their inventory was overstocked, they sold off old inventory that wasn't moving. They priced these goods at whatever they could get for them. Gross margin didn't matter; cash did. That new cash allowed them to pay off some very old and very angry vendors.
With the vendors happy again, they began ordering new merchandise. But this time the emphasis was on what would turn very quickly. Their goal was to more than double the number of inventory turns that they were achieving before.

Over the next 12 months, we updated their prediction every month. We recalculated their inventory turns every month. We reforecasted sales and expenses. This way they always had a good idea of where their ship was headed and where they’d be in 12 months.
It took a long time, but their strategy stabilized things financially. They began making a small profit and got caught up with all of their vendors. Then they started to grow. They are now making a large profit, they are out of their bank, and they can present a nice turnaround picture. Today their prediction shows even better stability and growth ahead.


Do a Prediction
                  
How do you help your clients see their financial future? I believe there is not a better service a trusted financial advisor can provide to their clients.
                         
If you’ve ever created a spreadsheet financial model to do a prediction, you know what is involved in capturing history, creating a budget, and determining what other plans the company has and then creating a multi-tab spreadsheet that creates an income statement, balance sheet and cash flow statement. You worry about whether there is a formula error somewhere or a bad assumption that drives an erroneous result.
                                                     
The good news is that at ProjectionSmart we’ve duplicated the spreadsheet for you and put it in a quick and simple-to-use online tool! Instead of concentrating on cells and formulas, you just concentrate on your inputs and the results. So ditch your spreadsheet!

When you use ProjectionSmart every month with your clients, maybe you are able to bill for an additional hour create their prediction, or maybe you bill them an additional fee for their prediction. It’s up to you.
                                             
With a monthly prediction, your clients will be more successful and more comfortable with their numbers. They will be anticipate and avoid problems, leverage resources more effectively, make more quantitative business decisions, and feel much better about their business’s future – all because of you!

On your side, you will increase your monthly revenue, have happier and longer-term clients, help your clients be more successful, and differentiate your practice.
                                      
After all, who doesn’t want happier and more successful clients and more revenue? Let us help.

Here’s a video to show you how easy ProjectionSmart is to use.                            
                                                 
Try out the new ProjectionSmart here.



 

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