Forecasting & 8 Figures-3 Things You May Not Be Doing

May, 26th 2024

The biggest PROBLEM for 80% of agency owners is this

THEY'RE NOT LEVERAGING DATA!

They're running on autopilot–without planning for:

• Capacity

• Hiring

• Churn

Most Agencies start out finding ways to get clients.

But most of them never prepare for deliverables, when to hire talents, churn, and the maximum number of clients they can effectively service.

As a result, their growth quickly leads to disasters like:

• Overwhelming workloads

• Late deliveries

• Negative reviews

• Massive churn

• And loss of credibility which leads to a bad reputation something that no business owner wants to associate with.

Here's how you can use my forecasting model to plan & take control of your business with ease:

There is a crisis in the agency space!

More than half (probably closer to 80%) of agencies below 2M ARR don’t know how to forecast & leverage data to hire and bring in new talent.

Now you may ask,

“What should I be forecasting in my business?”

When it comes to forecasting here are the most obvious things to look out for: 

• P&L.

• Org chart. 

• Capacity.

These 3 different models will help you:

• Scale and run a good profit.

• Know when to hire and who to hire. 

• How to avoid damaging your operation.

Now, let’s break down this model and learn how to use & analyze data to forecast the hiring process (in the reverse order).

1. Capacity 

Let’s say that you run an SEO agency—where each pod consists of 20 clients. 

Here are the questions you need to ask yourself:

•  What is 100% capacity (here, it's 20)?

•  What is the ideal capacity (might be 17 or 18)?

Now, here’s what we need to look at: 

• Where are we today? 

• Where are we gonna be over the next 3 months? 

This is where the capacity equation comes in, which takes us to the value steam equation.

Using the value stream equation, you can assess capacity month after month:

• What’s our capacity today?

• What’s our capacity next month?

• And the month after….(and so on)?

At this point, it’s crucial that you assess the current state capacity & current state clients.

A. Churn

Then, comes the key player we can’t afford to ignore “churn”.

Let’s say you have 100 clients, and your churn is 5% per month.

This means you end up with 95 clients in any given month.

But, you also need to consider your sales pipeline.

This means, if you onboard 10 clients every month, you’re left with 105 clients after churn. 

Doing the math, you can now start to build a forecasting model for the next few months or a quarter, at least.

I preach this to business owners always, the holy grail is knowing:

When to hire, anticipate churn, when clients will flock in, and you are prepared, you can easily scale to 2M ARR without stress.

Speak with one of my Executives, they will guide you on how to have this running in your agency.

So nothing catches you unaware.

B. Divide clients into pods

Once you have an idea of your maximum and ideal capacity.

You need to divide the number of clients and place them in a pod.

If you have 120 clients and each pod can take 17 clients—you need 6 pods in total.

This allows you to divide your clients to build a manageable system. 

Say you have 120, 140, 160, or 180 clients coming in; you need to baseline and forecast the months it's going to happen.

After you do this, you need to compound this next to your org chart model.

2. Org chart 

After forecasting the number of clients in any month. 

You need to analyze what your org chart looks like today, and what it’s going to look like tomorrow. 

This enables you to be conscious of the talent you need and to look for it beforehand.

EXAMPLE

If you know you’ve hit 120 clients, you know that you need an SEO writer or a quality assurance content editor. 

At 140, you may need a project manager.

This gives you an idea of:

• What roles do you need to hire for &?

• When you need to hire them?

If you know that you need a project manager 3 months down the line, you need to start sourcing now because you also have to onboard & train them. 

This process is simple but tells you what to source & when to source. 

I can’t stress enough that your org chart is a powerful tool.

If you set it up well, and connect it to goals/KPIs/expectations you will thrive.

3. P&L

Your P&L shows you how to plan to be profitable by telling you:

• Do you need to increase rates?

• Are you hitting a specific margin?

• Are you paying talent correctly & justly?

Then you just simply put all of these in conjunction with the HR and plan on:

• A quarterly basis.

• A semi-annual basis.

• An annual basis.

If you are forecasting revenue & total talent needed as you scale, it is SO easy to see what you can forecast in terms of profit as you grow.

That’s it!

That’s how you effectively forecast.

Good news at 8F we’ve installed a system that monitors and forecasts these data in our agency and over 800 agencies.

This system helps:

• Forecast growth and prepare for growth

• Know the perfect time to hire new Talent.

• Anticipate churn and provide a solution before it escalates.

👉🏼 Book a call with one of 8F’s Executives today to get this system installed in your Agency.