5 Reasons Your Clients Need a Monthly Prediction

Mar 11, 2024 by Roger Scherping




I’ve spent most of my career helping my clients or employers see their financial future because I’ve seen what happens when small companies don’t know what their next 12 months look like, or when they don’t understand the financial impact of their business decisions.

So, for all of you trusted financial advisors, I’ve put together 10 reasons why your clients need a monthly prediction. I explain reasons 1-5 today, and I’ll explain reasons 6-10 next week. The following week I’ll explain the 5 ways that helping your clients do a monthly prediction will benefit you!

Here are the first 5 reasons your clients need a monthly prediction:

1. Troubled companies need a path
I start with this one because it was when I was turning around small companies that I realized the importance of doing predictions. I took over several companies that were in danger of closing their doors, and I was always successful at getting them back on the tracks and moving forward again. I realized later that was because I was always able to figure out what was going to happen. I’d figure out what our revenue was going to be and our costs, and then I was able to project our profit and our cash flow. That told me whether we were going to have enough cash or need a bank loan and when things would begin turning around and we could expect to start generating positive cash flow.

Those predictions helped guide our decision making as we got the company back on its feet. They told us how much we had to raise sales. They told us what we’d need from our vendors. They told us what we could afford to spend and when. And they helped me sleep at night; I would never have gotten any sleep without knowing that we had a clear plan to get us out of trouble.

Your troubled clients need to always look 12 months out. Instead of just helping them look backwards with their financial statements, do a monthly prediction with them so that they have a clear plan to get out of trouble.


2. Peace of mind
I hear this one a lot from our customers. They are considering starting a business, but they can’t answer questions like, Can I make money at this? So they cross their fingers and take the leap, full of fear and uncertainty. Or they have an existing business and are uneasy not knowing what lies ahead. Maybe they are uneasy because they don’t know where the path that they are on will take them in the next 12 months.

A prediction gives these people peace of mind. By seeing their future, they relax because they can look 12 or 24 months out. Then, with a clear mind, they can put their worries behind them because they have a clear vision of their future.


3. Lack of planning is a leading cause of business failure
This could be number 1 on this list because it is so true. There are lots of great quotes on planning. My favorites are:
 
“Planning is bringing the future into the present so that you can do something about it now.”   Alan Lakein

“In preparing for battle I have always found that plans are useless, but planning is indispensable.”    Dwight D Eisenhower

 “Planning is an unnatural process; it is much more fun to do something. The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression.”   John Harvey-Jones

The best way to plan for business success is by doing a monthly prediction. Someone told me recently, “You can’t call your banker on Thursday night and say, ‘Uh, I can’t make payroll tomorrow.’” It just doesn’t work that way. You’ve got to plan ahead if you want to succeed.


4. Client wants to grow?
Nothing taxes a business’s resources more than sales growth. A growing company will need capital for inventory and receivables, capital expenditures, additional personnel, and working capital. If your clients plan are to grow this year, do they know how much cash they’ll need? The worst thing would be that their growth was suddenly strangled by a lack of capital.

Actually, banks love to work with growing companies. They are always happy to lend on receivables, inventory and capital purchases. They will even lend on projected cash flow. So make sure your clients understand the financial impact that their growth plans will have and the amount of capital they will need. Do a prediction.


5. Understand the numbers of the business
Most small business owners can read and understand an income statement pretty well. Fewer have a solid understanding of what their balance sheet says. Fewer still understand that a cash flow statement explains that elusive concept of the difference between profits and cash!

When a trusted advisor works with a client on a monthly prediction, the trusted advisor works closely with their client. The business owner knows their business better than anyone, so they can tell their trusted advisor how much equipment they intend to purchase, how much their loan payments are, and how much cash they would like to take out of the business.

When the prediction is complete, the owner sees the prediction report with the numbers that they contributed, and that gives the owners a whole new insight into the analysis. This isn’t just some number-crunched, esoteric report. They can see their business plans in the numbers, and it makes the report much more meaningful to them.


Those were the first 5 reasons why your clients need a monthly prediction. Next week I’ll give you 5 more reasons, and the week after that I will give you the 5 reasons why helping your clients do a monthly prediction will benefit you! Stay tuned.


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 eliminated 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 to 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 ProjectionSmart here.

 

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