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Hi GH! Curious to hear everyone's honest response to a question like this. I'm doing research for some content around goals and performance metrics, and my hypothesis is that most people aren't sure what their business/numbers will look like next month, and as a result, the things they should be doing to influence it. As a result, people default to general, month-over-month improvements as a measure of success. What are your thoughts?

  • SE

    Sean Ellis

    about 1 year ago #

    Hi John, I think it really depends on the typical volume and transaction size for the company. In an early stage company you generally don't have enough volume to be able to have accurate forecasts. But once you get to a certain volume, forecasting becomes much easier. For example, when I was with LogMeIn we had an internal tool called the predictomatic (we jokingly gave it this name to make it sound like from the 1950s). Usually, in the first week fo the quarter, it could accurately predict what our sales number would be for the full quarter based on expected renewals after churn, expected expansion and expected close rate for every stage of the funnel. It took quite a bit of tweaking to get the formulas right, but was surprisingly accurate. Contrast that to my current day-to-day at GrowthHackers. We have some enterprise sales that make our overall sales pretty choppy and hard to predict. So for me, the reliability of forecasting depends on a lot of factors in the business.

    But I actually think that your question brings up a good point. You can't just set a random target without doing the work to think about what needs to happen with each of the variables for you to get to that number. This thought process will help you understand the riskiest parts of your assumptions so that you can try to control these risks and adjust targets as you get more data.

    • MB

      Madhav Bhandari

      about 1 year ago #

      I agree with Sean here.

      In our case, at a very early stage (first 2 years into the company), it was hard to predict how our next month/quarter will perform because we were new into the business. We were still figuring out our long term marketing strategy, behavior of the market (we see a lot of new customers coming in Q1 and revenue expansion from existing customers in the summer) etc. It was unpredictable because one month some strategy worked really well and got us a ton of new customers (eg - an integration partnership launch) and one month where we lost a major customer acquisition channel (quora flagged our account) so it was difficult to predict then.

      Today (6 years into the company), we have a general idea on which periods of the year are typically low or high volume in terms of signups or churn. We're pretty clear about our top 3 customer acquisition channels (that will sustain us for next 3-5 years) and we're always monitoring the performance of these channels. We have specialists in the team who're working to make sure the numbers are always growing in those channels or at the very least steady.

      Because of this, it's a lot easier for us to predict how our next month/quarter will perform. Eg - If search numbers are falling, we know the trials started will be affected in the upcoming months. That being said, even though the unpredictability has gone down, we do have occasional blips in growth which we did not forsee. But those blips are going down as we're maturing as a company.

      Thankfully, for the last 3 years, we've been able to hit our annual revenue goal. It definitely makes it easy to set an achievable annual revenue goal based of trends from data in apps like Baremetrics & ProfitWell.

      To summarise my answer, I think it's more difficult for early stage companies to know how their company will perform in the next month/quarter but it definitely gets easier as the company grows and matures.

  • SZ

    Shannon Zastrow

    about 1 year ago #

    Hi John. What a great question. In my experience as a consultant and agency owner, most small businesses and startups lack adequate rigor and strategy in performance tracking. As Sean pointed out, you need baselines. But once you have baselines for your KPIs, we advise our clients to set growth targets that are tied to strategic deliverables. We adjust for factors like seasonality and changes in channel / advertising spend, then project growth as a result of conversion rate increases. Obviously the key to accuracy of these projections is being realistic and executing every initiative that is tied to growth assumptions. The beauty of this approach vs general MoM improvements is that if you miss the target, you can analyze which assumptions fell short of expectation and adjust accordingly.

  • KN

    KF Ng

    about 1 year ago #

    That's a brilliant idea on the expected close rate for sales funnel. Most of the startups I worked with does not include expected close rate in the formula. Sean, we would love to have some brief formula we could replicate?

  • SF

    Simon Fragopoulos

    about 1 year ago #

    For some strange reasons I can forecast a 6 months period but not a 3 months period. This has been accurate for the last 2 years while the startup is 2 years „old“. 3 months periods vary from „very low“ to „big profit“ and often follow each other directly. Somehow the 6 months forecast or „plan“ works since 2 years while the 3 months forecast seems to be unpredictable. Hope that helps. Cheers

  • VF

    Vitor Ferreira

    about 1 year ago #

    Hey guys. I think we can't predict something when you re in the early stage of your startup. Just because when you're starting, you need to generate exponencial numbers and no predict model without a good dataset will tell you how you can acomplish this number.

    But, another point and a big problem i see here in Brazil is how to collect this data in the better way. In the early stages, we are focus a lot to sales and get traction, but we forget the importance of numbers and how and who we are selling to, etc.

    So, my opinion is: When you're starting, generate many datas and numbers, get the first traction and try to survivor your business. When you have 2 years of good data, now you can play with predicts, machine learning models, and others models to bring more vision to your business.

  • JQ

    Jason Quey

    about 1 year ago #

    For my clients, I set a target traffic goal (e.g. 5,000 visitors to the blog for July). This is less for predictive purposes and more for benchmarks to know my performance.

    For my startup side-hustle, I'm pre-PMF. My goal is mainly keeping consistent content produced, secondarily is traffic, especially organic traffic. I know what most of my flywheel playbook looks like for 2018, so it's mainly a matter of executing. I'm also validating different parts of the business model, some of which I can't directly through the blog (e.g. leads from Slack, from people who read my content).

    You may find this helpful too - https://sumo.com/stories/marketing-strategy

  • BP

    bhola prasad

    about 1 year ago #

    Hi John, to make any kinds of predictions related to anything or in any field, you need to know about Statistics. I am writing a whole series on business analytics & statistics if you are interested to know, how to deal with uncertainty, Please read my latest post here - https://www.lifewithdata.com/blog-1/zero-to-hero-business-analytics-statistics-using-excel-part-3

    If you have any questions, please let me know. I will be more than happy to help you out.

  • JE

    Justin evans

    8 months ago #

    Hi @John Bonini! Being working on a start, I believe its really hard to predict the next/month quarter of your business. But I think an effective marketing strategy can help you to grow your business. The latest technology options available to aid you to automate and advance your business; so that you can formulate your business strategy according to the needs. Here are the business trends suggestions that will help you become a success: https://cabstartup.com/business-trends-to-make-you-a-success/
    Will be glad to know your thoughts on this article.

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