We’re in month 2 of the calendar year already.   We’ve stopped writing 2016 in the year field and we should already be well under way with what we want to achieve in 2017.

However, as with previous years – it seems to be the time where the reality of what we want to achieve in 2017 starts to bite.   That moment where everything that looked so straightforward when the plans were put together starts to look a little bit shaky.  

Planning and reporting on plans was something I hoped I’d get past when I got promoted to senior roles.  I used to spend an inordinate amount of time getting information into spreadsheets to compare with information in other spreadsheets to demonstrate we were doing what we were supposed to be doing when we weren’t doing stuff with spreadsheets.

I was wrong.  The only difference is that I became the one asking for new information, new comparisons, new data and asking what everyone has been doing (when they’ve not been doing stuff with spreadsheets).

Thankfully technology has made things a bit easier for the people manning Excel (sometimes they don’t even need to go into a spreadsheet).  

Why does the plan come undone so early?  Clearly the plan is never going to be a perfect prediction – but surely we should know a little bit about what’s happening a few months into the future.

The problem is that the plan usually involves something changing.  An increase in revenue, an increase in sales or a reduction in cost.   The figures all add up in the plan and the underlying assumptions all make sense.  But somehow one of a number of things happens:

• The figures at the end of month 1 are no different to the previous year and a gap starts to open up
• Someone asks a question in a meeting that causes an assumption to unravel – and suddenly the numbers don’t add up quite so well
• Activities that should have started to take place on day 1 are still being debated a few weeks into the year – they weren’t as straightforward as hoped and it’ll be a few weeks before they happen.   Suddenly the increased figure has to be delivered in 9 months rather than 12 and beads of sweat are starting to break out

Forecasting isn’t necessarily a statistical function.  A lot of it is applied knowledge.  But the problem is that it doesn’t get applied in the planning phase.   The numbers are driven by logic, formulas and tweaking until they all add up.

Just doing the numbers can lead to a lot getting missed.  A 5% increase in revenue from existing customers doesn’t sound much until the reality of getting them all to pay 5% more is thought through.   Is it a price rise?  Is there a new product? Are there cross-selling opportunities?

The numbers should actually be the last element after all of the activities are put together.  The activities – the stuff that drives the numbers – are what should be planned, forecast and measured.

A lot of sales, marketing and business planning is projecting forward.  Where will be in 3, 6, 12, 24 months time.    Doing it smarter should be working backwards.   If we’re here in 12 months time, what has just happened yesterday?  And what happened last week that made that possible?  And so on.

Taking the “Double Digit Growth in 2017” plan and looking at the total value and number of payments received by 22 December 2017 (last Friday before Christmas this year!) is a good start.  If the typical payment terms are 30 days – how many invoices were issued by the end of November?  What was the average value?   

How many invoices were for existing customers and how much for new business?

How much new business did we close by the end of October to invoice in November?  And if the typical sales cycle is 3 months – how many qualified leads did we turn into engaged opportunities by the end of July?

If we need that many qualified leads by July, what will marketing have to deliver in the first half of the year?   

If that’s more than marketing are currently delivering, what’s changing with the activity?   If it’s a change of approach, when does the testing take place?  When will we know that it’s successful?  

Have we got the operational capacity at the times when there will be peaks in demand?  

Working backwards forces the realisation that lines aren’t smooth.  And also that change doesn’t just happen.  There is always a preceding activity.

I’ve had so many years where cash to make big developments happen has only been released on the first day of the year, and the launch of the development has dictated that pattern of the rest of the year.

At its worse I’ve seen 60% of forecast sales in the last quarter of the year – meaning that on paper and in the numbers, not much needed to happen until September.   

In the case where not much happened until just before the big spike in numbers, everything had changed by January 1st the following year – including the MD.

In the years where we delivered it successfully, it was because we knew all of the activities that added up to the numbers.  We also did a lot of validation of the assumptions behind the numbers in the first 3-6 months – so there were no surprises.

Finally, although we knew we couldn’t predict accurately too far into the future – we’d been working on the plan for 18 months by the time we got there.   We also knew what the 18 months on the other side of the spike looked like.   We focused on what we could control in the space we could control it – but kept an eye on the longer term implications.

A consultant we worked with at the time called it “creating a future history”.  I denounced it as typical consultancy jargon at the time.  But looking back on it – they described it perfectly.