Forecasting for Growth: Revisiting a Client's Growth Journey

Intro 00:00:00 Welcome to the creative Agency Success Show, the go to resource for agency owners looking to scale their business. Join us every week to stay ahead of the curve and position your agency for future success.

Jamie 00:00:14 Hello, everybody. Welcome to today's special episode. We're going to call this a fast Forward episode. So, a long time ago, and I was we talking about a pre-show in 2019, and I can't believe we've been doing these podcasts for that long. Tom came on, and we're, Jodi and I the host are Adam and I, the host at that time, you and Jodi.

Tom 00:00:31 Yeah.

Jamie 00:00:31 So Jodi and I were the host, and I'm. Tom came on and we talked. It was episode 14, using a forecast for growth. Tom came in and talked about one of his clients who at the time was under a really strong growth cycle. And so, 2019, obviously, if you look back at the timeline, we know what happened shortly thereafter. So, we're going to get an update on Tom from this client.

Jamie 00:00:50 And kind of the things we've learned and how that forecast worked. But I would definitely recommend going back and listening to that episode. There's a lot of really good tidbits in there about, about building a forecast. But, Tom, how's the client doing? How are you doing? Yeah.

Tom 00:01:03 So, both are doing really well. So, I would encourage people to listen, but I'll give you, like, the, the 32nd recap of what we said about the client. So, in 2019, the client was $10 million. And what they said is we're going to be 20,000,020 20, and then we're going to be 30,000,000 in 2021. And that's where we talked about the high growth. And I think we had some really good conversations about like, how do you approach a problem like that? I don't know if we talk about that during the podcast, but they also said, and the guy who's leading our business development is not in the right seat. And so, they wanted to make that change. So that was a really big deal.

Tom 00:01:36 So, we continued. Jody said, look at the business model. We happen to have a lot of cash. And as you already mentioned, Jamie. So that was 2019. And then April 2020 is, you know, pandemic hits and everything changed. And so just a couple of things about those numbers wise, they were the same size in 2020. Right. So, they went from ten and stayed at about ten. Then they went to 16 million 2021 and then 21,000,020 22, so well short of their growth. But they did grow. They doubled in one year and then grew 50% in the next year. But it was a wild journey sort of getting to that.

Jamie 00:02:16 So, let's talk about, you know, this is the beauty of forecasting. And this is why we talk about forecasting versus budgeting all the time. Because, you know, when you build a budget, you're basically creating a plan for the next year. And then things happen. Now no one really expects a pandemic to happen.

Jamie 00:02:31 But things do happen. And so, the question is, is how do you adjust and what types of those conversations were you having at the time when, when they were expecting to go from 10 to 20 and they ended up being 10 to 10? So talk about the conversations and how the company felt during that time and how it forecast helped them along the way.

Tom 00:02:48 The forecast helped tremendously. And one of the and I'll mention, one of the mistakes that we have made is knowing about this growth. We decentralized a lot of the budgeting and went out to our and said, hey, if we're growing this much, how many people do you need? And there were probably 15 people on their leadership team across the world making. They put a lot of work into a number of people. Which roles, organization tools, all this kind of stuff. Sort of. As soon as it hit, they then centralized all the hiring decisions and basically said, we're not going to go out and hire for all this growth.

Tom 00:03:16 We can't hire at all. That caused a fair amount of frustration internally from the people who, like, I had all these plans, and I was planning on adding people, and now they're having multiple conversations around, well, reality were not growing. But your question was about the forecast. We updated the forecast very quickly, and it was mostly like the 2- or 3-month term initially where we initially kept the $20 million target. But as you can imagine, not very much growth ended up being huge growth toward the end of the year. Like these months of like, you know, four and five times as big as they are today if you're going to hit that. So that was April. And then then we started backing off to 20 like, okay, this is an unrealistic goal now.

Jamie 00:03:54 So, if you if that company was doing just an annual budget versus doing monthly forecasting, how would of things been different for them, you think?

Tom 00:04:02 It's a great question. If they actually lived to their budget, I think they would have spent according to their budget and probably start hiring people and probably doing some of the internal projects where realistically they said, if we're this big, we need better, like project management and portfolio management kind of tools.

Tom 00:04:19 It's easier when we're small. Now that we're huge, we need tools. They probably would have started spending that money preparing for it and not adjusted would be my guess.

Jamie 00:04:28 Yeah. And that's I think that's the thing. It's about those conversations. Right. So I think in a situation where there's a pandemic or there's something like that, yeah, we probably would have had the conversations and we would have talked about it, but I'm guessing that wouldn't have happened until June or July, when a lot of that money was already spent, where if you're having that conversation and it's part of your routine every month to look at that forecast, you're going to at least buy yourself 2 to 3 months, which in the business world is a big, big difference, especially when it comes to making those big decisions like hiring and other spending costs Yeah.

Tom 00:04:57 And it's funny, as I thought back, some of the things, whether you're growing really fast or not growing at all, a lot of the things around your forecast aren't different.

Tom 00:05:05 You need to be all over your forecasts and understanding that, and it becomes important in sort of those two points that you're looking at that you can handle doing both of those things.

Jamie 00:05:15 So let's talk about next year okay. So, they went from 10 to 10. And then they realized okay now we're going to have that growth. So, the fact that you had that forecast that already existed, that we knew what the growth was going to look like, did you just jump right back into that forecast, or did you do things separately differently the second time around?

Tom 00:05:35 great question. The one learning that we did have is we did more of a centralized forecast. Okay. They said initially, look, we'll manage the growth of the people. So when I think our plan for 2021 was a little bit bigger than the 16 million they hit, I think they hit more like 18 million and sort of what we had forecasted, realizing what we had done the year before, though, I helped them and said, it's going to be about this number of people.

Tom 00:05:56 We're going to I don't remember the numbers exactly, but we're going to go from 100 to say 190 people. And we think it's like in these geographies. And they looked and they said, yes, that's really reasonable. So, we didn't go to the individual team leaders to get that information. And then as we started growing, then we were saying, okay, we're going to hire this many. They had people requesting hires and we were using the forecast. So I think that was one of our really good learnings from that piece.

Jamie 00:06:19 And so do you think that made it easier the second time around was having that centralized hiring program, and it made that a little bit easier for them to get to that. that number they had in the third year.

Tom 00:06:28 It did. It probably put more pressure on the VP of ops, who was one of the owners, that he was making every single individual hire decision, and he was willing, but that meant he was telling a lot of people, no, I think that it probably actually would have been harder for him to just sort of let the reins off and then have other people hiring.

Tom 00:06:45 And then he sorts of felt like that was out of control. The other thing that happened during that time, Jamie, was they also brought in a different sales leader. So during 2020, they got rid of the other person who happened to have been an owner, and that was a sort of painful, emotional thing for them to go through. And then God, who they thought was the right guy. And so, it's good to work with him because he came up with some pretty good initial sales plans around. Here's the organization I need. Here's where we're going to get the work. Like this. Many enterprise customers, this many new. Here's what we can count on from existing. And then it's these many sales calls, qualified leads, things like that. And so, he built a really nice looking plan to start off with, which really helped in my planning side.

Jamie 00:07:24 Yeah, I think that that makes a lot of sense. It's you know, adding that new team members in there sometimes bring in a fresh perspective and especially if depending on where they've come from.

Jamie 00:07:31 You know, I think that's the beauty of business is everybody has different experiences. They can pull from. So, you want I mean just talk about what are some of those experiences that he brought in and some of the things that he may have added to that, to that growth cycle?

Tom 00:07:43 Yeah. Having worked for a bigger company, one of the there's lots of different, I guess, points of tension and companies, but one of them is the real experts who do the work Like the architects and people like that, they get pulled into business development things. So,, there's this tension of I can't get sort of the real work done because sales keep pulling on me. And sales, of course, is saying I can't sell if the experts aren't in here. And he understood that piece. And then as he came in, he said, you don't really have the right people in the role. You've hired some junior salespeople who all they really know how to do is sort of fill out paperwork and ask questions.

Tom 00:08:16 Let's get a few more experienced people who can do some of the upfront technical stuff. And then as things progress, then we can pull in the technical people, but they can at least handle those first couple conversations. And it felt like that was the right move for him to come in and make.

Jamie 00:08:31 Yeah. Then I think that that makes a lot of sense. So that was.

Tom 00:08:34 A really good thing that they had done

Jamie 00:08:36 Yeah, I think you see that. You see that a lot. The tension between sales and the operations and how that works. And so, I think having someone with that outside perspective that's seen it at a small company, the company kind of where they want to get and kind of sees how see how that works is nice to bring in that perspective. So, let's fast forward to today. I was like, okay go ahead.

Tom 00:08:54 The one other point I was going to make, since we talked about our tools, we have our pipeline meeting. One of the real successes that we had there was I was continuing.

Tom 00:09:02 So, as they grew fast, they didn't have enough people for some of the specific kinds of work. And this was tough on the sales guy. He started telling customers we have to wait six weeks to start projects because we don't have the resources. That didn't come out until it was in one of our pipeline meetings, where we review all the pipeline kind of stuff, and I focused on that assumption, said, you know, here's everything we're doing, here's when revenue is going to flow. That same VP of operations literally flipped out during that. And he was sort of in this, you're telling customers or prospects what? And had a good discussion argument that apparently for a couple specific roles, that was true. But in his mind, by and large, for 90% they could start work today. But there are these couple of roles, and that wouldn't have come out if we didn't have these kinds of discussions about what opportunities look like and things like that. And it really made a big change.

Tom 00:09:51 And so as you know, there are times that some of our meetings are just getting people in the right room focused on the data, and they have the kind of conversations that they should be having, but they don't because there's not a form for it.

Jamie 00:10:02 Yeah, I think it's it's the one part that I know we talk about internally a ton, but maybe we don't talk about on this podcast enough, or maybe even to like when we do our presentations, is how closely tied together that pipeline meeting is with the forecasting meeting. Right. Like they you know, we can you can build a forecast. The example I always use is VCRs. Right. Like I could build a forecast tomorrow that says I'm going to sell a million VCRs, right. Like I could easily build that forecast on a spreadsheet. But if there's no demand for VCRs, no one's going to buy VCRs. Like, why would I have that forecast? Right? And so, like, you know, that's kind of what that pipeline meeting is, is it's determining that demand is determining how much are we actually going to have versus our capacity, and what hiring decisions do we need to make, or what other decisions we need to make that are even more difficult? So those meetings really need to be looked at as co meetings in a lot of ways.

Jamie 00:10:48 Yeah.

Tom 00:10:49 Yeah that's a great point. And then you asked for an update on where they are today. Yeah, so that was back in 19. I continued working on them until late last year. So late 2023. We help them grow to where they were $2,223 million for that year, and we help them add some internal team members, helped with their processes, but then realistically got to the point of saying, okay, your business is complicated enough. Also, having a full time person to do this does make sense for us on a fractional basis. Probably didn't make sense. So, we help them with that transition. But they were doing really well and nothing but a success story for my mind.

Jamie 00:11:26 So, let's talk about that. I mean, this I think this is a conversation that obviously we're fractional CFOs. So, we're here to we're here to say fractional CFOs is the way to go. But at some point, it does get to the point where a fractional CFOs are not going to cut it. Like I don't think it's a dollar point that is that what do you feel like are those triggers or it's like, okay, we probably need to start looking to hire a full time person to manage our numbers.

Tom 00:11:48 It's a great question. I agree, I don't think it's just straight dollars. The complexity is one and they did 3 or 4 different types of work, and we're really ensuring the profitability and we could help with that. But they really want to dig in and manage that. And we didn't have the time to say, okay, we can sort of be a CFO on each project and that is what they were looking for. And so, their team got very engaged in the individual projects, and that was one that helped an awful lot. Geographically, they were diverse and that was fine except for you start getting the laws and the individual countries that they wanted help from financial. And it was a little bit more than what I understood. They were mostly Latin American countries, but there were some special banking laws and tax laws and things like that, that they wanted that expertise. So, it was probably more the complexity than anything that was in there.

Jamie 00:12:32 And I agree, I think it's complexity. And I think you'll how you can tell when you get to that point is when the more and more conversations you have, the more finance comes up, right? Like at some point.

Jamie 00:12:43 And again, it doesn't have to do with size. It just has to do with the decisions you're making and how complex you are as a business is that if every day or every couple times a day, you're making a decision like, we need a finance person involved in this conversation. We need a finance person involved in this conversation. That's probably not right to have an outsourced person, cause you're not gonna be able to get hold of them 3 or 4 times a day to have those conversations. But, you know, early on, when you're first developing that complexity once a week is really sufficient because you can kind of hold all those questions, have a meeting, get them all answered, then move on, you know. So I think that's kind of the one thing that I noticed is the clients that get to that point where they're ready to move on. It's like every day they're having these really complex questions where you have to bring in experts, you have to bring in people that just really need to help you answer those questions to move the business forward.

Tom 00:13:25 Yeah, yeah, that's an excellent point. And as they got bigger, they didn't really have systems to help with some of that. So even some easy things like they were never good at time entry kind of stuff. Having a person on the ground for projects who could actually sort of shepherd that along and get it there was really good where I was pointing it out to them. You know, clearly, if you look at your numbers, people aren't entering correctly. And they were saying how hard it was, but they wanted ownership for that. And so an internal employee could take ownership better than us doing it fractionally, where people just didn't listen as much to the external people doing it.

Jamie 00:13:56 All right, so my final question here is let's pretend like I'm a I'm listening to this podcast. I paused it after I was you told me to go back and listen to the original. Now I came back and just listen to it and I'm like, okay, what are the two things that Tom thinks I should take from this story? That where they were, where they ended up and how they got there, like, what are the two things me as a business owner should take from this, this kind of path, this company went down?

Tom 00:14:17 That's an excellent question.

Tom 00:14:19 Let me think for just one second. One of them seems obvious. Okay, I can think of the two. We continue to emphasize the dynamic forecasts. And to me that is huge to have that work and support you in sort of whatever model of the business to be there to where we're then saying, okay, if this is what you want to do, let's make sure this is what it looks like and what are the most important things that are going to keep you from doing that? One I didn't mention, for example, the team growing that much. They were in small enough countries that they literally said, we don't think we can find the talent in that country So this means we moved to multiple countries. Those kind of discussions they probably wouldn't have had. When you throw out a number that sounds nice, you know, 20 20,000,020 20, that's a that is a nice ring to it. That's probably the one. And then I think the other that I would say is I think looking maybe I'm saying some of the same thing, but what are the most important barriers that are going to keep you from hitting that goal and continuing to keep attention on those and saying, can you measure what those things are, if it's growth in people, if it's delayed time, things like that.

Jamie 00:15:18 Yeah, I think both of those are great.

Jamie 00:15:20 And, you know, obviously we talk a lot about the dynamic forecasts. I won't touch much, much on that. But I think the other one is really important. And I think, you know, that's why a lot of companies go towards those and have those have those rocks because it keeps you focused on what are those barriers, what are those 2 or 3 things that are going to keep us from getting to where we want to get, and how do we make sure those don't happen? And again, sometimes they're outside and there's things you can't control about them. But like sometimes it is like we're never going to hit 20 million unless we're able to hire 100 people. That's that's obviously a barrier. So that could be a rock. Like, okay, how can we make sure we can hire 100 people over the next three years? Or, you know, another barrier might be is if we want to grow this company to 25 million, we need an amazing sales team. So how do we put a rock together to not only hire amazing sales people, but build an amazing sales process? And so, to me, that's really the value of iOS that helps you identify what your forecast is, which is what we do build you a forecast, but then what are those goals that you really need to accomplish in order to hit that? And so that's you know, why we, you know, push some types of some type of goal setting, on a pretty frequent basis, whether it's EOS or whatever model you decide to go down.

Tom 00:16:24 Yeah, yeah, I think that's an excellent point to emphasize that what I was pointing out, you can point to those things and say, this is going to be important, but then having them say, okay, this is different than how we behave today. How are we going to chase it? And like your point, if they're not good at setting goals and chasing and that might be one to say, you need to get this in place because this isn't just going to happen sort of on its own, that every everyone kind of rises up to this level, that it won't be that case.

Jamie 00:16:47 Yeah. I think as a business you need to be focused. And I know, Tom, you and I've talked about this several times just talking about, you know, Anders and summit of like sometimes we are like trying to work on 20 things at once and we do a poor job on all 20 of them where it's like, you know, we should just focus on these 3 or 4 things and do an excellent job in those 3 or 4.

Jamie 00:17:03 Make sure we got those wrapped up. Then let's move on to the next ones. And so, I just remember like probably around the time of this podcast, you and I having some of those conversations about, sure. Hey, you know, maybe we should focus the shift our goals a little bit more and focus on some of these things. So, it's there for every business.

Tom 00:17:16 I agree, you take sort of any group business or department and do like a what should we start doing? What should we keep doing? What should we stop doing? Every group is going to have a huge start list like a meeting continue. And they can never think of anything to stop. Yet they'll say we're too busy. But I would argue like the rocks, if you pick 2 or 3 things and actually get them done, you'll be much happier than making a smidgen a project. Progress on like a bunch of things you never done. So that's my favorite. Use rocks. Now I really like it. You and I are working on one now.

Tom 00:17:44 That's great.

Jamie 00:17:45 Yeah, I think that's my favorite thing about, you know, going down that path. This is like every year I can look back and be like, wow, look at the look at the 12 things we accomplished because we beat them, broken down into quarters, complete them in that quarter and then moved on like it's nice to be able to look back and see all the things we've accomplished and how we've changed. And I think that's the only way to grow is to really take that, you know, the expression I use, which I'm sure is pretty common, is there's really only one way to eat an elephant, right? One bite at a time. Like, you can't try to do too much of it. Right. So, that's really the way to do it.

Tom 00:18:15 Wouldn't you agree, though, even though you like that approach? I like that approach. It's still hard when you list the rocks to say, we're not going to focus on certain things.

Tom 00:18:23 It seems like every time we're in one of those meetings, we always have more things that we want to put on the list, right? Our person says, I think no more than seven. And we always will say, yeah, but these 11 sure are important. And I think that's really smart. But it's always hard decisions. There's never really silly things. You're like, yeah, we could easily do without that. Those don't even make the first cut. So, it's not easy.

Jamie 00:18:42 And that's where I think it goes back to having a strong forecast in place, right? Like having a strong forecasting process really should make it easier to eliminate it. Like, you know, okay, this seventh project would be nice to have, but is it really one of the top seven things we need to do in order to hit our goals?

Tom 00:18:59 Great point, great point. Yeah.

Jamie 00:19:01 Cool. Tom. Well, this is this is a fun podcast for me because first off, when we first started talking, I didn't even realize we've been doing podcasts for five years.

Jamie 00:19:07 So, that makes me feel like that's crazy old. And I'm like, I'm surprised I'm not any better at this. After five years, I've just got a little more practice.

Tom 00:19:18 Well, it was fun to go back and listen to it like, wow, five years ago. What? How did I describe these kinds of things? So, it was fun for me to remember it too, for sure.

Jamie 00:19:25 But yeah, I appreciate, you know, coming up with this topic and that's being a chance to revisit it. So, this was fun.

Tom 00:19:30 This was. Yeah. Thanks, Jamie.

Jamie 00:19:32 Yep. Thank you.

Outro 00:19:33 Enjoy this podcast. Visit our website Summit Connect to get more tips and strategies for achieving business success. We're here to be a resource in this ever-changing industry.