All Right … What’s It Gonna Be? Accurately Forecasting in 2012

2012 Scenario 1:  Small business will focus on the fear of going under.

2012 Scenario 2:  Small business will focus on growing.

So which is it? Forecasting revenue is always tough, but ever since 2008 it’s been the most taxing in more than 50 years. To get it right in 2012, you’ll need to “Change the way you look at things and the things you look at will change.”

Try a new set of glasses to look at 2012, and get a view of revenue growth you can predict and control.  The glasses are new, produced by using the science of “Revenue Generation,” giving you a clear look at the path to revenue success in this decade.

The old glasses were designed just after WWII and based on a fulfillment strategy. Those glasses showed clearly that no other place in the world could produce products, technology, education, leadership and services like North America.

North America had a solid political structure, effective banking, lots of raw material, energy, and an educated workforce that had just supplied products and services to winning armies worldwide. The rest of the world was bombed out, broke, in political turmoil, and just starting to put business and society back together.

Everyone in the world who had a need for goods or services turned to North America — and their needs were satisfied by a highly productive community building more capacity every day. The glasses that North America used to view the revenue path showed success as more capacity! Virtually everything that North America could build, someone, somewhere in the world would consume. As long as the quality was good enough, there was a growing worldwide middle and upper class to pay for it.

Sometime in the 70s, the glasses started to fog when Japan and Europe starting building GREAT cars, TVs, computers, appliances, etc. Not only were they building great stuff, it cost less than the North American version. Still, the glasses showed the roadmap to be more capacity — but this time, with workers making less per hour.

At the time of the dot bomb, a new set of glasses hit the market and those glasses “changed the way we looked at things” and “those things we looked at changed.”

This is what we saw:  The world had way too much capacity, the world had new middle and upper classes everywhere, and everyone was outsourcing, offshoring, using the same software, technology and production best practices. So, after 50 years, the playing field was level and in North America we had expensive labor, outdated business models and high cost structures.

However, the new glasses clearly showed North America the road to success and it still required all the skills developed in the middle of the 20th century, plus the lessons learned from the global community at the end of the 20^th century, as well as a new science and discipline called “Revenue Generation.”

This new science of “Revenue Generation” rewards those B2C companies that practice the science, with a return of up to 10 net margin points, and it rewards the B2B companies with 20 or more net margin points. Those with the new set of glasses were observing the Science of “Revenue Generation” and the power it has to dominate markets and predictably deliver profitable revenue. That level of success in 2012 starts with continuing to execute world-class manufacturing, logistics, supply chain, and financial practices combined with great leadership just to get in the game.

Once in the game, the winners master “Revenue Generation” and go-to-market. For a lot of products the largest expense is the combination of sales, marketing, advertising, customer service, product development, and other forms of revenue support. Often, this cost for “Revenue Generation” is larger than all the rest of the expenses. Going forward, this must be mastered.

Today, not only is the cost of go-to-market high, but the efficiency is low, and the real variable for proving revenue success is based not on science, but luck. Two critical metrics to remove the need for luck are the “Cost of Chaos” for producing revenue and the “Cost per Sales Hour.” Those two factors, combined with the 10 key process metrics from the revenue roadmap, give you control over both cost and top-line growth. These metrics allow predictability and forecasting the future as well as measuring the past.

If small and mid-sized business get new glasses, they should focus on:

1. Going beyond the 20^th-century definition of a good company;
2. The science of “Revenue Generation” to win the go-to-market war;
3. Driving out the costs built in to support aimless capacity:
4. Developing a revenue strategy; and
5. Getting serious about removing the “Cost of Chaos,” managing the “Cost Per Sales Hour” and the 10 KPIs of the Revenue Roadmap.

Doing so will help ensure that they’re accurate in their forecasts over the next decade, while those with the old glasses will live in fear, and slowly slip away.

This topic and more are included in the Vistage Connect™ CEO peer advisory sessions. Learn more.

Rick McPartlin is the CEO of The Revenue Game and is a revenue generation consultant and Vistage speaker. McPartlin was a Vistage member development chair from 2002 to 2009.

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