The hardest part of being a solopreneur is that LITERALLY everything falls on you. The web site gets hacked? Your problem to fix or find a web tech to help! Bookkeeping needs doing to send off to the accountant? Time for you to start sorting and scanning! The clock is ticking on a major deadline? That would be your department as well.
It’s easy to see how between the day-to-day doing and handling whatever else crops up (good, bad or ugly) that you lose track of your sales funnel. You know, that constant stream of leads that you are supposed to be generating and eventually closing to keep the business cash flow positive. Oh, yeah…THAT.
It’s why many solopreneurs experience cash flow crunches. Usually this revenue gap comes shortly after an extremely busy sales cycle where the biggest challenge is keeping up with the demand generated by the sales success. That’s probably why you neglected to follow-up with prospects that expressed mild interest or work on generating any new leads.
Now, if your lifestyle business plan is to take time off between contracts, this cycle of ups and downs probably suits you just fine because you have (hopefully) planned for the cash flow lull. But if you depend on a steady income to pay the mortgage, you need to balance your time between client delivery and managing sales.
That’s where a simple sales forecast is essential. It doesn’t need to be fancy. It just has to provide you with enough information to give you an idea of what is (or isn’t) coming down the pipe so you can take action early. Here’s what you need to include in your sales forecast:
- Current Projects — List all your current projects. These are the contracts that are already closed and on your project roster. Make sure to include all relevant details, such as anticipated completion date, total project value and outstanding billing amount.
- Pending Contracts — Include all the contracts you expect to close in the near future. These are the contracts that are already approved, but waiting for the official sign-off. Again, include anticipated start date, total project value and any billing milestones.
- Potential Sales — Add any contracts that are still in negotiation. Because this revenue isn’t guaranteed, you will want to differentiate between the ones that are likely and the ones that are more of a long-shot by adding a probability score to the total project value.
Using this information, you can estimate your cash flow by month, remembering not to count on the full amount of the potential sales or entering them as a separate category altogether. Now, you will be able to anticipate shortfalls before they happen and either try to finish up more of your current projects and/or add more prospects to your potential sales category to ensure you have a steady flow of revenue coming in.
Get in the habit of setting aside an hour at the beginning of every month to review where you are in your sales forecast, adding new potential sales, and removing ones that are either completed or lost so you have an accurate tally of what is going on in your business. As much as sales slumps suck, it’s better to see them coming early so you can take action to avoid running into a cash flow crunch.