Your CFO approaches you and asks, how much revenue will your team make next month, the next three months and out until the end of the financial year? Where do you start. I’ll use an example of a professional services (PS) team of several people. This team could be lawyers, accountants, knowledge workers, etc. Not only does forecasting assist the CFO at banking what the team may earn in the upcoming month, it also allows you as the team manager to resource and make sure you have the people to deliver on the work.
Start by understanding the pipeline, which is the steady (or not depending on your sales team) stream of incoming work, how quickly it converts, and how much each project or task is worth. Since services revenue is tied directly to the billable hours your people deliver, the forecast typically begins by estimating the amount of work that will land in the month ahead. This estimate often comes from the sales pipeline, incoming demand patterns, and conversations with account managers. By assigning expected value to each incoming project and pairing it with available capacity, leaders can build an initial “top-down” picture of the month’s revenue potential before a single hour is billed. In the pipeline you might look to committed work, which is generally signed off, then there could be 80% likely which to the sales team means 100% but to anyone else it might mean awaiting client signoff. Your forecast may include committed sales but could include an uplift if the 80% deals move into commit.
