A little known fact but true: every business owner has the ability to predict the future. And our success depends on how well we develop this skill and put it to use.
To predict the future, let’s start with what we know for sure. Things like:
• If we don’t make sales calls (or have clicks on our website) we can predict that our sales will be $0.
• If we don’t send invoices to our customers, we can predict that they won’t send us any money.
• If our product is lousy and our service sucks, we can predict that we won’t get any re-orders or word-of-mouth referrals.
“Hey,” you say. “That’s not predicting the future; that’s just common sense.”
Okay, I say, then let’s flip those things on their head:
• If we make LOTS of sales calls (or have lots of clicks on our website) we can predict exactly what our sales will be.
• If we send invoices to customers, we can predict exactly how much money we’ll receive.
• As our product and service improves, we can predict exactly the number of re-orders and word-of-mouth referrals we’ll get.
“Not true,” you say. “I THINK those things should work, but there’s no way to make an EXACT prediction.”
Actually, there is.
We need to track the activity in our business by logical flows and create “prediction models”.
For example, let’s look at how our invoice flow accurately predicts how much cash comes in. First, let’s identify all the steps in the flow of activity:
- We provide a service to a customer.
- We send them an invoice.
- They send us money.
Second, we’ll track the details for each step. After a while we may notice that 94% of our customers pay (and 6% don’t). They pay us, on average, 42 days after we do the work. Now we can predict our future bank balance from the work we’re going to do next month:
- We’ll invoice $25,000.
- We’ll get paid $23,500.
- The $23,500 will trickle in over the next two months.
- Our Accounts Receivable at the end of this month will be $35,000.
- Our bank balance at the end of next month will be it’s usual $5,000.
Very accurate prediction, right? If you want to go one step further and improve this predicted future, click here.
Example 2: Predicting Sales Flow
In another example, let’s look at our sales flow, also called a sales funnel. Let’s imagine that we use Facebook ads to drive traffic to a website where we want people to ultimately buy something from our store.
(BTW, this could just as easily have been placing an ad in the newspaper to drive people to our retail store where we want them to buy something.)
The beauty of selling and marketing online is that everything can be accurately tracked with well known metrics like views, clicks and closes. In addition, every webpage a person visits is also known to us.
So, for example, let’s say our Facebook marketing budget for this campaign was $100 and we achieved this:
- Our ad was viewed 20,000 times.
- 200 people clicked on it and landed on a landing page on our website.
- 14 people clicked on our “Buy” button.
- 5 people purchased an item worth, on average, $37.
We received $185 in sales for a $100 investment in Facebook ads. Pretty good – what would happen to our sales if we double how much we spend in Facebook ads next month? Want to use sales flow information to drive up our sales? Click here.
Every business owner CAN predict their future because…
…every business can be divided into activity flows both large and small, both short-term and long-term. Sales, marketing, production, customer satisfaction, employee retention, and so on. The wise business owner identifies these flows very early, tracks key numbers, and reviews them with staff and suppliers regularly.
Over time, these flows become increasingly accurate. Over time, you’ll learn how the flows of your business connect to each other. I think you’ll find that your business is like the inside of an old pocket watch. Everything is connected, everything is turning, everything somehow works together to tell the time perfectly, or – in the case of your business – to create strong, predictable cash flow.