On a recent backpacking trip, I made a wrong turn within 100 yards of the trailhead.  I went over a mile out of my way before I finally consulted my map and realized my error.  Forecasting and analyzing your business numbers are like using a map and compass: they guide you to your destination, help you avoid pitfalls, and ensure you stay on the right path. Similar to how a map tells you where you are, the numbers don't lie.

Benjamin Franklin wisely said, "If you fail to plan, you plan to fail."  December and January is a great time to build a business plan for the coming year.  Are you happy with what you are getting?  If so, you probably don't need to plan and don't need to read this article. 

The planning process is crucial if you want to make a change, grow, and achieve 10x goals.  I believe in Eisenhower's quote, "In preparing for battle, I have always found that plans are useless, but planning is indispensable."   I believe so strongly in this. I am hosting a workshop for our best clients in January to walk through a planning process.  

Navigating Business Growth: The Importance of Planning

What I will share with you here is a high-level understanding of how your numbers help you plan for growth. 

If you want to dive deep into your numbers, I highly recommend you connect with an expert like Ruth King.

Key Questions for Business Expansion

In October, I wrote an article titled "Taking Business Inventory - Is Your Business Ready to Grow?"  In that article, two of the items on the checklist are:

- Do we have a detailed budget forecast for the coming year?
- Have we identified the resources needed (additional employees, marketing, trucks, tools, inventory, etc.) to achieve our plan?

Some of the most common questions I get asked related to growth are: 

- When do we need to add a service tech or an install crew? 
- How much marketing should we do?

Creating a Dynamic Growth Plan

The numbers don't lie and will help you answer all those questions.

Just like a backpacking trip, where do you want to go? Start with the end in mind; how much do you want to grow for the coming year?  It's easy to say you want to grow by 10% or 20% but by what means will you do this?  Understanding your numbers and building a forecast is like creating a map of where you want to go.  Imagine going on a long journey without a map.

The following work is best done in an Excel spreadsheet.  

1.    Identify your revenue goal for the year.
2.    What is your monthly sales curve? What percent of your annual sales fall into each month of the year?
3.    What is your mix between install and service/maintenance? Do you forecast that this mix will stay the same or change? A common mix is 70-75% install and 25-30% service/maintenance.
4.    What is your average install ticket? Do you forecast that this will stay the same or go up this year?
5.    What is your average job length?  1 day? 2 days? 1.5 days?

With these numbers, you can now calculate how many install crews you will need to hit your revenue goal this year.

- Revenue goal: $3,000,000
- Install Revenue Goal at 75% of your mix: $2,250,000 ($3,000,000 Revenue Goal *.75 Install Mix)
- Average Ticket: $18,000
- Number of Installs: 125 ($2,250,000 Install Goal/$18,000 Average Ticket)
- Average job length: 1.5 days
- Number of install crews needed: .75 ((125 Installs * 1.5 days per install)/250 working days)

However, that is not the true and full picture.  Your business is probably seasonal.  You should spread out your install revenue goal over each month based on your sales curve.  Based on this information and the number of working days per month, you can calculate how many crews you will need per month.  In this scenario, you will most likely find months when you will need a second crew.  

This might pose some interesting questions:

- What do I do during the months when I only need a partial crew?
- How do I deal with the seasonal demand?

If the math shows you are getting close to adding crew, you might need to set a higher goal to ensure that crew stays busy.  This information might also inform your pricing and marketing strategy to keep crews busy during shoulder seasons.

You can do similar math on the service side of your business to determine how many service techs you need.

- Revenue goal: $3,000,000
- Install Revenue Goal at 25% of your mix: $750,000 ($3,000,000 Revenue Goal *.25 Service Mix)
- Average Revenue per service Tech: $250,000
- Number of service techs needed: 3 ($750,000 service goal / $250,000 per average truck)

As with the install example above, the best way to calculate the number of techs needed is monthly.

Mastering Your Marketing Budget

What about marketing?  How do you know how much to spend on marketing?

How many leads will you need to generate the number of installs in your plan?  First, look at leads from your maintenance agreements.  Divide your total number of maintenance agreements by 15.  That is approximately how many leads you will get from your maintenance agreements.  The average life of a system is 15 years, so assuming you have a normal distribution of ages in your maintenance base, 1 in 15 is a good ratio to use.  Your close rate on a lead from one of your maintenance customers should be 85%, so take the number of leads from maintenance X .85.  Subtract this from the total number of installs you need.  

- Install Goal: 125
- Maintenance agreements: 1050
- Installs from Maintenance customers: 1050/15 X .85 = 60
- Installs needed from Marketing: 125-60=65
- Take your remaining number of installs and divide by your close rate on marketed leads. This will give you the total number of marketed leads you will need. 
- Close rate on marketed leads: 40%
- Number of leads needed: 65/.40= 163 Leads

Now, you can take this to the next level and calculate the number of leads needed monthly.  Looking back over the last year, what was your average cost per marketed lead?  This amount times the number of leads you need will give you a starting point for your annual marketing budget.  

Just like a hiker setting off without a map, navigating your business growth without a clear plan can leave you lost, unsure of where you stand or where you're headed. The numbers you forecast are your guide, giving you the direction and confidence to reach your destination. They don’t lie—they reveal the truth about what’s working, what’s needed, and where you should go next.

Remember, forecasting isn't just about setting targets—it's about creating a dynamic plan that adapts to the rhythms of your business. By analyzing and planning, you ensure that your growth journey is intentional and strategic, not left to chance. With a solid plan and a commitment to execution, the numbers will reveal your path to success. 

Ryan Kalmbach is the CEO of Johnstone Supply, The Orion Group with 12 locations and 125 employees in California. He has more than 20 years of experience in operating a family distribution business. The core passion at The Orion Group is to partner with its customers and employees to help them to grow. Contact Ryan at ryank@johnstonesupply.com or https:/www.powerofjsog.com/.