Nexstar Coach's Blog
Creating a Basic Budget for 2017
So here we are, already several weeks into 2017 with spring just a few weeks away. How’s the year going for you? Better yet, how’s the year going to end for you? Do you have a budget and a plan; have you seen what your future will become? If not, then now is the perfect time to build a basic budget to ensure that 2017 will end just the way you want it to.
Budgets are important, they define the win and give us our daily and monthly goals to help us keep track along the way. Do you know what your numbers need to be for 2017? Going into a year without even a simple budget can leave us hoping for the best instead of acting with focus and purpose. An easy way to create a top-line revenue budget is to build the formula from last year’s performance numbers. All you’ll need is the number of calls you ran, how many calls converted into more than a dispatch fee, and your average ticket. Multiply those three things together and you should come up with a number fairly close to last year’s total revenue. Now that you know the ingredients that created last year’s results, you can tweak them to create this year’s target.
Start considering how you can influence those three numbers:
- What increase in calls run will you shoot for this year? A typical organic growth rate is 10 percent, so will you be happy with that? Or do you plan on being a bit more aggressive, spending more on marketing, and trying to get that to 15-20 percent?
- How about your technician’s conversion rate? Can you raise it an extra 5 percen? If so, how will you achieve that increase? Will that mean more training or trading some of your low performers?
- And lastly, your average ticket? What will you get that to this year? Will you have a price increase that will help? Will you have more incentives or contests to drive your techs to maximize each opportunity?
Once you’ve set new goals in each of these areas, then do the math again to see what revenue you’ll achieve in 2017. Remember, the formula to get total revenue is: (number of calls ran) x (percentage of calls converted) x (average ticket dollars).
Now Dec. 31 is still a long way off, so for this budget to be of real value to us, we’ve got to break it down into smaller time frames. The first thing we can do is create your monthly budget, but it’s not as simple as dividing the total number by 12. You would probably agree that not all months are created equal, especially so if you are in the heavily weather-influenced HVAC business. We’ll need to factor in some seasonality. The easiest way to do this is to find what percentage of revenue was earned each month over the last three years, and then apply that to your new revenue budget. The math looks like this:
- (January 2014 revenue + January 2015 revenue + January 2016 revenue) ÷ (2014 annual revenue + 2015 annual revenue + 2016 annual revenue) = Historical January percentage of revenue
- (Historical January percentage of revenue) x (2017 total revenue) = 2017 January revenue budget
You can then take that same monthly percentage and multiply it by your annual call count to determine how many calls need to be run each month. From there you can whittle your goals down to the day by dividing your monthly revenue and call count totals by the number of working days in that month.
Now you’re empowered with a basic budget, all the way down to the day, that will ensure you know exactly how many calls you need to run, how many you need to convert, and what average ticket you need to achieve to win each and every day of the year.
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