Blog Topic

Bottom Up
Posted by: John D. Walls
April 21, 2011

A new client asked the other day what I meant by "bottom up forecasting." It is best explained by examining what it isn't.

"According to XYZ metrics, the market has grown from $125 million in 2006 to $147 million in 2007 and $163 million in 2008. We are conservatively projecting a 5% share of this market in two years."

Does this shed any light on the who, how, what, why and when of landing that first sale? No. That information may have been gathered, but this macro approach doesn't require any rigor.

A different approach makes sure you pay attention to what's important.

A bottom up financial forecast includes of the price, the cost, and projected sales for each month. To price your product or service, you must know your costs and how you compare to competition. Your pricing strategy affects your marketing strategy which affects your sales strategy which leads to your sales forecast. A good business plan template takes you through the steps to validate your idea as an opportunity, and then leads you through developing the interacting marketing and sales strategies.

Great words alone can describe an awful business. Only by translating the words into numbers (the financial forecast) will you and others know whether this idea will make money.

What if the forecast says you can't make money with this idea? Your plan and forecast will have done you a great favor: you found out the bad news on paper, not by losing a bunch of money. You can modify the business model (and reforecast) until you see results you like or give up on the idea.

If you'd like to continue this conversation, I'd love to hear from you. Contact me at cmcevoy@gowingspan.com or visit http://www.gowingspan.com/.

Chris McEvoy is the President of Wingspan Thinking, LLC.

Permalink

Why He Missed His Best Opportunity
Posted by: John D. Walls
April 21, 2011

I know an advisor who specializes in establishing 401k and pension plans for businesses. We'll call him Al. He was talking to a friend of mine who owned a small business. We'll call him Bill. Bill's business had one full-time employee and one part-time employee, both of whom were secretarial with low to average compensation. Al knew that Bill was just shopping around to see what his options were. It would be a brand new plan with small contributions. In other words, no rollover to earn a commission on and very small monthly contributions. Al calculated the estimated commissions in his head and the amount of time required to set up the plan. He quickly determined it was not worth his time and began the process of retreating. Bill relayed this story to me for a reason. His wife was the personal assistant to the founder and president of one of the most successful local businesses. In the past two years the company had grown from less than 200 employees to over 500. Because of this growth they had outgrown their old pension plan. The president asked his personal assistant, Bill's wife, to find a new pension advisor who could provide them with an updated plan. Al missed out. He thought he had read Bill and his situation properly, then he made a judgment call. However, you do not know who they know. Al did not know who Bill knew. Al missed out on what would have likely been the largest case of his life because he did not take the time to find out who else the business owner knew. He committed the cardinal sin of poor networking. He tried to make a sale when he should have tried to make a relationship.

Steve Lawson

Steve Lawson Consulting

317-708-3770

http://www.stevelawsonconsulting.com/

http://www.starteamnetwork.com/

Making Advisors More Successful

Permalink