Dan Martell - October 01, 2018


How To Build a Forecasting Process For Your SaaS Business

Topics
forecasting process
Hosted by
Dan Martell
Mentioned
Todd Herman
How To Deal With Business Competition As a Startup How to Define A Customer Avatar For Your B2B SaaS Company

Episode Stats


Length

11 minutes

Words per minute

203.95

Word count

2,331

Sentence count

102

Harmful content

Hate speech

1

sentences flagged


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

In this episode, I teach you how to build a simple forecasting projection system for your startup that doesn t require a NetSuite or SAP or deal with tons of spreadsheets. It s a system that I use every week with my companies that I coach to help them scale and grow their business and keep their team accountable and on track.

Transcript

Transcript generated with Whisper (turbo).
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Topics generated with Qwen2.5-3B-Instruct.
Hosts, guests, and mentioned names generated with spaCy (en_core_web_sm), reconciled against Wikidata.
00:00:00 Hi there, I'm Dan Martel, serial entrepreneur, investor,
00:00:02 and creator of SaaS Academy and in this video,
00:00:05 I'm gonna teach you how to build a simple forecasting
00:00:08 projection system for your startup that doesn't require
00:00:11 to buy NetSuite or SAP or deal with tons of spreadsheets
00:00:16 and be sure to stay to the end where I share with you how to
00:00:18 get a copy of my weekly sync agenda structure.
00:00:21 It's what I use every week with my companies that I coach
00:00:24 to help them scale and grow their business and keep their
00:00:26 whole team accountable and on track.
00:00:30 So when I was building my company Flowtown,
00:00:44 one of the things that I always struggled with,
00:00:47 and maybe you can relate to this,
00:00:48 is setting crazy ambitious goals.
00:00:50 We read these books and they say you gotta define a BHAG,
00:00:53 a big, hairy, audacious goal.
00:00:55 So when we sit down with our team and we're planning,
00:00:56 we're like, all right, we're gonna 10X this year,
00:00:58 we're gonna 20X.
00:00:59 We're gonna crush it in the next three months.
00:01:02 The challenge with that, what I discovered really quickly,
00:01:04 is all of a sudden you start teaching your team
00:01:07 that it's okay to lose.
00:01:08 You set this crazy goal for the next three months
00:01:11 and then you fall short and you have to go back.
00:01:13 And look, it's typically like real legit reasons
00:01:16 that you don't hit your numbers.
00:01:17 The product wasn't done on time,
00:01:19 a key partner didn't do the distribution
00:01:21 the way you thought they did or would
00:01:23 or you didn't hire that key engineer
00:01:24 who's supposed to build that, you know,
00:01:26 artificial intelligent machine learning component
00:01:29 that was gonna change the game for you but what happens is
00:01:32 you make it okay and the last thing you wanna do is get to a
00:01:35 place with your team where they're okay missing their
00:01:39 numbers or they stop believing in some of these crazy,
00:01:43 audacious goals you set anyway and kind of, you know,
00:01:46 glad hand you and say yes, that's great, dude.
00:01:48 I'm gonna accomplish that and then when you turn away,
00:01:50 they're essentially gonna do what they're gonna do anyway.
00:01:52 I wanna teach you how I had to learn this from my investors,
00:01:56 sit down with them and say look, I feel bad because we keep
00:01:59 setting these goals and we're not hitting them and they gave
00:02:01 me a different way of thinking through the problem and built
00:02:04 the solution I'm gonna share with you guys today that allowed
00:02:07 Flowtown to go from literally, you know,
00:02:09 ramen profitable to over 50,000 customers in an 18 month
00:02:14 period so yes, we grew really quick but we also knew how to
00:02:17 set our targets and our forecast so that we could hit
00:02:19 them and build that momentum and that's what I want to share
00:02:21 with you today.
00:02:22 Number one, historical data.
00:02:24 One of the first things I do when I'm coaching a client is
00:02:27 Ask them, you know, whatever their goals is.
00:02:28 I want a 10x over the next 12 months.
00:02:30 I just ask them if they've ever done it before
00:02:32 because historical behaviour is a great indication
00:02:35 of future performance.
00:02:37 So the first thing we want to do is look at the three month
00:02:40 rolling, it's called the R3.
00:02:42 What kind of growth have you accomplished in the last three
00:02:44 months?
00:02:44 What have you done in the last six months?
00:02:47 That's R6.
00:02:48 And then R12 is the previous year.
00:02:50 Now I'm not saying that you can't improve upon that.
00:02:53 I just want to know what the baseline is.
00:02:55 So when you're sitting down with your team and you're
00:02:56 planning your year-end, kind of the next 12-month strategy,
00:03:00 work with them by looking at the historical.
00:03:03 Get them to pull that data forward so that you can start
00:03:05 making some assumptions on, hey, if we improve 20%
00:03:09 quarter over quarter, what would those numbers
00:03:11 start to look like?
00:03:12 So look at the historical.
00:03:13 Number two, resources.
00:03:16 As much as you wanna grow, you're always gonna be limited
00:03:19 by what I call the management bandwidth.
00:03:21 You have to work through your people.
00:03:23 Your people are an extension of who you are and their ability
00:03:26 to execute so if you don't have the resources through people,
00:03:31 through capital, maybe partners, maybe intellectual property,
00:03:34 you gotta look at everything you have so that you can
00:03:37 understand how to properly deploy the resources as you start
00:03:41 thinking strategically about growth and hitting your or
00:03:44 setting some projections for your business.
00:03:47 Number three, go to the end and then work backwards.
00:03:50 If you've ever read the book Seven Habits of Highly
00:03:52 Effective People, one of the habits is begin with the end
00:03:55 in mind, that's the way I think of forecasting
00:03:59 and setting projections.
00:04:00 I wanna go right to the end.
00:04:01 Ideally, three years is the furthest I'm gonna plan out.
00:04:04 Then I'm gonna work it back to one year
00:04:06 and I'm gonna start looking at what are the numbers
00:04:08 I wanna achieve in the next 12 months
00:04:10 and break it down by quarter.
00:04:12 If I wanna hit that number, what's the milestones
00:04:15 on each quarter that I need to hit
00:04:16 to make sure that we're on pace?
00:04:18 Number four, set targets.
00:04:21 Once you know where you wanna go in the next 12 months
00:04:23 and you've broken that down into quarterly goals,
00:04:26 then your job is to start setting the targets
00:04:28 on a monthly basis.
00:04:30 If you think about it, if you start falling off pace
00:04:33 every month, then all of a sudden the quarterly goal
00:04:35 is totally gonna be out of the question
00:04:37 and that just keeps cascading.
00:04:39 So what you do is you set your monthly targets,
00:04:41 then you add, and ideally you have some kind of
00:04:43 scorecard spreadsheet report that you look at
00:04:46 with your team, I have a scorecarding process
00:04:49 that I teach, you can search on my channel,
00:04:51 And what we do is we set the targets for the month,
00:04:53 then the actuals, where you're at so far.
00:04:55 If you're two weeks into the month, there's only four weeks,
00:04:57 then you should be at about 50% of target
00:05:00 and you review it and measure it every week with your team.
00:05:03 So every week you look at the targets for the month,
00:05:06 you set the number that you've accomplished so far
00:05:08 in the previous seven days and measure that every week
00:05:11 and hopefully your actuals based on trend
00:05:14 is gonna allow you to hit your targets for the month
00:05:17 and that's the focus you need with your team
00:05:19 to make sure you actually have a projection process and a way
00:05:23 to set the targets and hit them.
00:05:25 Number five, review monthly.
00:05:27 So there might be a month where you come in and you're off pace
00:05:31 a little bit and maybe it was a strategic challenge.
00:05:34 So you look at your numbers and you work yourself backwards
00:05:36 and say what were the activities that caused these numbers?
00:05:39 So every month I highly recommend that you have a team
00:05:42 meeting to look at the strategy for the quarter and ask
00:05:46 yourself are we focusing on the right things,
00:05:48 on the right initiatives that are actually going to allow us
00:05:50 to hit our numbers.
00:05:51 See, the challenge with business is when we do our planning,
00:05:54 we have a level of confidence and understanding of impact
00:05:58 and maybe some guesses around how easy these strategies
00:06:02 or projects are going to be to deploy,
00:06:03 but we really don't know.
00:06:04 So what I want you to do is give yourself permission
00:06:07 on a monthly basis with the team.
00:06:09 Look at your numbers so far.
00:06:11 If you're off pace, ask yourself,
00:06:13 are there things we need to ramp up?
00:06:14 Are there projects we need a table for later?
00:06:17 Do we need to double down on something
00:06:18 and it might be working really well,
00:06:19 but we should really invest more resources into it.
00:06:22 But don't wait till the end of the quarter
00:06:24 to adjust to realign your monthly goals
00:06:26 because if you fall off, then you're gonna have
00:06:28 to make that time up in month two and three
00:06:30 to make sure you hit your numbers for the quarter.
00:06:32 Number six, iterate quarterly.
00:06:35 So one of the things that I believe in
00:06:37 is that really it's a 90 day sprint.
00:06:39 If we think about performance,
00:06:40 and this is personal or professional,
00:06:42 we want to focus on the next three months in front of us.
00:06:45 Yes, we wanna have goals for three years, one year,
00:06:47 and break it down per quarter, but at the end of the quarter
00:06:50 when we look back at all the progress we've made,
00:06:53 we want to use that information to start planning
00:06:55 the next 90 days.
00:06:57 And when we do that, I want you to give yourself permission
00:07:00 to take all of the projects that you plan on doing.
00:07:03 If you're off pace, those projects are on the table
00:07:06 for being cut.
00:07:07 There's no reason that, and I see this all the time
00:07:10 with my clients, they're moving forward on strategies
00:07:13 or actions that they know will probably not work
00:07:16 because the stuff that they've been working on
00:07:18 have not performed either.
00:07:19 So what you wanna do through a kind of a forecasting
00:07:22 and a target process is to teach your team
00:07:27 how to hit plan, how to be accurate,
00:07:30 how to set the projections and hit the target.
00:07:33 And I think that on a quarterly basis,
00:07:35 you need to give yourself permission
00:07:37 to reset the strategy.
00:07:38 Maybe you're way off in Q1, you need to fix that for Q2,
00:07:42 readjust the projections, and then move forward.
00:07:45 Now, I'm not giving you permission to get off the hook
00:07:47 for your goals if you set them,
00:07:49 but I think that it doesn't serve anybody
00:07:52 to not talk about the big challenges you might be facing
00:07:54 if you're missing your numbers on a quarterly basis.
00:07:57 Number seven, don't teach your team to lose.
00:08:00 I mentioned this at the beginning,
00:08:01 but I think it's probably one of the most important things
00:08:04 that you can do as a leader.
00:08:06 Your job is to work through your people, 0.89
00:08:09 to coach them to success,
00:08:11 and to ensure that they have the ability to forecast
00:08:14 and be consistent on hitting plan.
00:08:17 That, to me, is the sign of a mature management company.
00:08:20 When I see somebody's pro forma or their estimates
00:08:25 and then I look at their actuals
00:08:26 and it kinda goes like this
00:08:27 and there's no consistency in their numbers
00:08:29 or they continue to give me these lofty goals
00:08:32 and always come short about half,
00:08:34 to me, that's not a great sign of great leadership.
00:08:38 That's telling me that you have been okay
00:08:40 with setting goals and teaching your team
00:08:42 that it's okay to lose.
00:08:43 And when you get into this spiral,
00:08:45 if you think about some of the great sports teams out there
00:08:48 that have gotten these spirals of losing streaks,
00:08:51 like it's really tough to get out there
00:08:52 and build this champion mindset, right?
00:08:55 This team that winning is the only option, right?
00:08:59 So if you set these goals,
00:09:00 and one strategy I learned from my buddy Todd Herman
00:09:02 is good, better, best.
00:09:04 Think about it like this is good.
00:09:06 If we hit this, you know,
00:09:07 maybe it's 25% growth for the year.
00:09:09 That's good.
00:09:10 Best would be 50% growth,
00:09:12 or better would be 50% growth,
00:09:14 and then best would be maybe 75% or 100% growth
00:09:17 over the next 12 months.
00:09:18 It depends what that would mean for you.
00:09:20 What would be a stretch?
00:09:21 But you still wanna make sure that you set a good
00:09:24 that is aggressive for your team to grow into,
00:09:27 but allows them to win, and then I always plan for best
00:09:31 so that when I'm talking about strategies,
00:09:33 I'm executing on strategies that's gonna get us best,
00:09:35 and then if my team gets good,
00:09:37 then they feel great about our progress
00:09:39 because at the end of the day,
00:09:41 you are the person curating, hiring the people that they're
00:09:44 gonna work with, funding the resources they're gonna need to
00:09:47 execute and you wanna make sure that they don't feel like
00:09:50 you're asking them to do the impossible without giving them
00:09:52 the resources and support they need.
00:09:54 So I highly recommend that you try to be accurate in your
00:09:58 projections and allow your team to hit them and win.
00:10:01 You don't wanna teach them to lose.
00:10:03 So quick recap.
00:10:05 Number one, use historical data.
00:10:07 Number two, review your resources.
00:10:11 Number three, go to the end and then work backwards.
00:10:14 Number four, set targets, measure weekly.
00:10:18 Five, review your monthly progress as a team.
00:10:22 Six, iterate quarterly strategies and tactics.
00:10:26 And seven, don't teach your team to lose.
00:10:30 So as I mentioned at the beginning of this video,
00:10:31 I wanna share with you an exclusive resource
00:10:33 called the Weekly Sync.
00:10:34 It's my agenda structure and it's got a bunch of details in it.
00:10:37 You can click the link below to download it.
00:10:39 but it's how I manage my team on a weekly basis.
00:10:43 In there, there's a line item for scorecard.
00:10:45 That's where you would actually put your numbers,
00:10:48 your projections, your targets and measure your actuals on a
00:10:51 monthly forecast basis and also every week have your team lock
00:10:55 those numbers in there.
00:10:56 It's super powerful.
00:10:57 One of my favorite things to do is customer headlines so that we
00:11:00 actually celebrate our customer wins as a group.
00:11:03 So click the link below, download your copy of that.
00:11:06 If you like this video, I would encourage you to share it with a
00:11:09 friend that you care about that might benefit from it,
00:11:11 click the like button and leave a comment.
00:11:13 Let me know what part you feel you need to add
00:11:16 to your planning process and as per usual,
00:11:19 I want to challenge you to live a bigger life
00:11:20 and a bigger business and I'll see you next Monday.
00:11:23 Good.