“Properly plan your sales and estimating so you can reach your revenue goals.”

Today we talk about setting up a Sales Pipeline tracking system to avoid the ups and downs.

Developing a good sales pipeline is a necessary step in meeting revenue goals.

A sales pipeline is a system for tracking and comparing revenue targets with sales goals and current work loads. It gives us a picture of what we have on the books, where we are coming up short and when we need to bid more work.

Having a good system like this allows us to better plan and understand how we are going to meet our revenue goals. The system will help us determine when we need to focus on sales and when we need to slow down to avoid getting overloaded. If managed properly we can control the feast or famine cycle that we often encounter in construction.

To develop a good system you need to start with your revenue projections. How much do you want to bill next year? Break that down into the monthly billings so that you can see how much you need to invoice each month to reach your goals. You should set this up in a spreadsheet that shows each month, January through December.

Now that you have your target revenue you need to list your known revenue. List each project that you already have and the projected billings for each month. Total these projected billings then subtract them from the target revenue to determine you gap or overflow.

[tweetthis]Properly plan your sales and estimating so you can reach your revenue goals[/tweetthis]

The resulting gap will give you a clear picture of what additional work you need to get on the books for any given month. If you have an overflow then you know that you need to curb your sales for that particular month.

Below you gap/overflow summary you need to start the sales portion of the tracking. If you have a gap in a given month then you know you need to sell more for that month. The important thing to remember here is your lead time from bidding to billing. If your average job takes 4 months from the time you submit a proposal to the time that you submit the first invoice then you need to account for that. For instance, let’s say that after setting the top projections portion up you find that you have a $25K gap in the month of May. There is typically a 2 month span between bidding to billing. In order to cover that $25K gap we would need to bid that work in February.

The next step in this process is to determine what potential sales you know are out there. Maybe some of your existing customers have more work coming up or you know of some other projects that you will be bidding on. We need to list all these out and put the estimated billings amounts. I also recommend that somewhere you indicate the confidence you have in winning that project to help decided how much to bid. Okay so in the case above let’s say you have 2 regular clients that have new projects that will be bidding in Jan/Feb. Each of these projects would generate $30K per month in revenue. So getting just one of these would cover your gap right? The problem is we can rely on that alone, what if the project is delayed or you don’t win it. What you need to do is list each of those projects and the % chance that you will win and that it will start in time. Let’s say that we feel that we have a 30% chance of winning these contracts and them proceeding as projected. We would list a sales lead for each of these and the projected monthly revenue would be $9K for each. Total those up and you are at $18K in projected revenue from sales. Now your gap has closed down to $7K.

That remaining gap of $7K is now our concern since we do not have any potential sources to fill that with. This is where you need to start looking at your sales efforts and increasing them to get more leads. So in the next  section of our pipeline we want to calculate our “cold” sales and estimating efforts. If we know that when bidding to new leads we have a 25% success rate of winning more work then we can figure that we need to be bidding enough work to cover $28K in revenue or 4 times what we need. Now, if we have been properly tracking our lead process we would know that it takes 1 month to get a lead in and a bid submitted and it takes 5 leads to get one bid opportunity. If your average project generates $5K then you would need to bid on 6 additional projects in February and to do that you will need to get 30 leads in January.

You see how this all works? Basically we need to plan out each aspect of the sales process so that we start generating necessary leads before we have a problem. For those that have a short sales cycle this can be relatively easy but if you have a long sales cycle then this can get very complex. No mater what you situation is, it is important to implement this process to level those ups and downs. Don’t let the complexity of this scare you. It’s not that hard, it’s just hard to explain. If you at least start working on a plan you will be way ahead of most.

If you would like me to send you a template shoot me an email at TonyB@ContractingCoach.com.

Take-Action Items;

  1. Set up a sales/estimating pipeline plan

  2. Evaluate your shortfalls and plan for correcting

Leave a Reply

Your email address will not be published. Required fields are marked *