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It’s December and that means we’re talking about budgeting.
Hi, this is Judi Otton, and today, I’m going to talk about where I start when I’m building a budget for my clients. I start at the top and work my way down, which means I start with the revenue section.
Even more specifically, the first thing that I look at is existing contracts and recurring revenue. So existing contracts are contracts that you’ve already sold that you’re in the middle of fulfilling that will go into the next year. So lay that revenue out, and you can put each contract on a line and then total them all up at the bottom.
The next thing is recurring revenue. If you have any subscriptions that renew monthly or annually, put those in, and you can put in each individual client, or you can put in the total monthly recurring revenue depending on what your revenue distribution looks like in your business. One little caveat with recurring revenue is to make sure to take into account your churn ratio, which is the number of clients that leave each month or each year because they don’t all stay forever. That’s just, that’s just a fact of recurring revenue.
The next thing that I look at is the pipeline. What are the opportunities that you have now that you are working on? And the way that I like to do that is very similar to how sales folks do sales forecasting. Depending on where in the pipeline that opportunity lies. Is it someone you just met? Have you had multiple contacts, or have you sent them a proposal, and you’re just waiting to finalize it? So, depending on where in that pipeline they lie is the likelihood that that will close. So you multiply if that contract is worth $10,000 and it’s in the middle of the pipeline with 50% likelihood of closing, put that in at a $5000 rate.
I’ll come back next week and continue talking about revenue. But remember, if you want to get a jump on this, DM me and get my free budget template that will walk you through all of these steps as well. This is Judi Otton with GrowthCast, and I’ll see you next week with a new Fiscal Fitness Tip of the Week.