Lead-to-Sale Forecasting

A dream becomes a goal when action is taken toward its achievement.

A forecast is a small piece of that action. It is the moment you stop hoping the next quarter will be busy and write down what your own records say it will probably be.

In the lesson on how many leads you need, we worked backward from customers to leads. This lesson goes forward: from leads, through customers, to revenue. There is a free Lead-to-Sale Forecast spreadsheet on the Resources page that does the arithmetic, but the thinking matters more than the sheet, so let’s walk through it.

Forecast from what actually happened

There are two ways to forecast. One starts from what you wish would happen, and the other starts from what did happen. Only the second one is a forecast. The first is a goal wearing a forecast’s clothes.

Pull the last six months, or as many as you have. For each month write down four things: leads, customers won, average job or sale size, and how many days passed between the first inquiry and the money arriving. If you use a CRM this is a five-minute export. If you don’t, it is an evening with your inbox and your invoices, and a good reason to start one.

Here is a labelled example. Say a small plumbing company had 240 leads across six months and won 36 customers. That is 15%. Say the average job was $2,000. That means 40 leads a month, 6 customers a month, and $12,000 a month in sales. Check it: 40 × 0.15 = 6, and 6 × $2,000 = $12,000. These numbers are made up to show the method.

Then make it conservative

Owners tend to forecast on their best month. I would rather you forecast on your ordinary month, or even your weak one, because surprises upward are pleasant and surprises downward are the ones that bounce payroll.

In the example, suppose the weakest month had 30 leads and the weakest stretch closed at 12%. Thirty leads at 12% is 3.6 customers, so call it 3. This stacks two bad numbers on purpose, so treat it as a worst case, not a prediction. Three customers at $1,800, a bit under the average, is $5,400. So the plan says $12,000 is the normal month and $5,400 is the cautious one. You can run the business on the cautious number and treat the rest as a bonus.

A few other habits keep the forecast honest. Do not count a new channel until it has produced leads of its own. Do not assume the close rate will improve because you intend to follow up better. If something changes, such as a price increase or a new ad, change one thing in the forecast at a time so you can see what did it.

Watch the seasons, and the delay between the lead and the cash

One more piece of history worth writing down is the seasons. If your work is busy in spring and slow in January, a flat monthly average will lie to you twice a year. Look at the same months in past years if you have them, and let the forecast rise and fall the way your business actually does. If you have no past years, say so in the sheet and stay cautious until you do.

A lead in March may not pay until May. That lag is why a good sales month can still leave you short of cash. Once you have a revenue forecast, feed it into your cash plan. Building a 12-Month Cash-Flow Forecast shows where those dollars land month by month.

Then compare forecast to actual every month, because that is how you learn which assumption is wrong. If you keep missing in the same direction, the forecast is telling you where to look.

I would also keep a note beside each forecast about what you assumed: the close rate, the average sale, the number of leads. When a month comes in far from the plan, the note tells you where to look. Without it, you only know you missed, not why.

Set it up this week

Open the Lead-to-Sale Forecast spreadsheet, or a plain sheet with the same columns, and enter your last six months of leads, customers and sales. Calculate the average and the weakest month for each, then build two next-quarter columns: normal and cautious. Plan the business on the cautious one, and write beside each column what you assumed.

What it costs

Setup takes two to three hours if your records are scattered, less if they are tidy. After that, about thirty minutes a month to update and compare. The spreadsheet is free. If the business would not be fine at your cautious number, that is the first thing to fix.