When I talk about pipeline, I’m not talking about surfing, although the idea of hitting the beach this close to summer is inviting. I am referring to your revenue pipeline for 2013/2014.
For a professional service firm, your pipeline at any point in time is made up of the following parts:
- Current revenue: current jobs/matters that are incomplete
- Pending revenue: proposals/fee agreements sent but not signed off
- New revenue: Leads and opportunities where you haven’t yet sent a proposal/fee agreement
What’s the value of your pipeline at the moment? Most firms wouldn’t have a clue. Do you? In driving your revenue growth, this is by far the most important information you can have. If you know what your starting point is, you can then guage what you need to do. If you could estimate the revenue value of each component as it is today, that will tell you what you already have in your pipeline for next year. You’ll have client work that automatically comes in. This will always happen next year because it always has happened. Let’s call this your reactive revenue. So if your revenue target was $1,500,000 for 2013/21014 and you knew that:
- Current revenue = $250,000
- Pending revenue = $140,000
- New revenue = $100,000
then you need to at least find another $1,010,000 of revenue for next year. If you averaged say $1,100,000 in revenue the last few years, of which $1,000,000 was reactive revenue, then it would be reasonable to expect that at least another $500,000 of revenue would be coming in next year. That leaves $510,000 to proactively find.
Here’s what you need to do before 31 December:
Step 1: If you can’t pull this info out of your practice management software, then put together a spreadsheet that has the following information:
- All jobs/matters open and not finalized
- Total of estimate in fee agreement or estimated fee for the matter/job (don’t get hung up on the $ amount, a good estimate will do)
- Total billed to date and currently in WIP
- Subtract 3 from 2 and this will give you the value of your current work in the office still to do
- Enter a date when you want the work finished
- Enter the name of the fee earner responsible
Step 2: Prepare a separate list of the same information for all matters/jobs where the fee agreement has been sent out, but has not come back signed
Step 3: Prepare another list of the same information for all opportunities by client/prospect that you currently have in the pipeline, but you haven’t issued a fee agreement for yet
When you total it up, it will give you an estimate of:
- How much work you have signed up and in the office and what your workflow program priorities need to be to get it finished – focus on getting this finished ASAP so it brings your revenue forward
- What revenue you have that you must close ASAP (i.e. signed fee agreements) to get the work into your workflow program – get those agreement signed so that there is plenty of work to go on with
- What you need to work on to drive your future revenue based on the opportunities that currently exist. – get those fee agreements out and returned signed and then develop your startegies for new revenue
At first, this might seem like a big task, but it is critical in terms of focusing on the numbers. What you can measure, you can manage! If you don’t have time, that’s no excuse, have one of your team put it together. This is something that you should update every month as a minimum. You will find it amazing the impact this has in terms of your action planning and focus on achieving results.
This is a basic revenue pipeline planner, and once you know where you are at now, you can then start planning what you need to do. You might just be amazed at what revenue you already have in the office and yet to complete + what is in the pipeline.
Remember, Albert Einstein defined insanity as doing the same thing over and over and expecting a different result. Don’t be insane in 2013!