If you’re a business owner, you’re probably a big-picture thinker. You need to know exactly where you want your business to be in three years’ time and you need a detailed plan to get you there. At its most simple, that plan needs to pin down how many new customers you need to acquire, what percentage of those customers you need to retain and how much they’ll spend over time.
It’s the single sure way to ensure you hit your growth targets. After all, how else can you buy the right volumes of stock, keep your cashflow in good shape and make sure you’re spending the right amount on your marketing?
We talk to retailers of all shapes and sizes – often with ambitious targets – but when we ask for their detailed three-year plan, it tends to be anything but detailed. A robust, detailed sales forecast which places customers as the central driver will show you where you’ll end up if you continue with your ‘business as usual’ approach. Layering this with your growth targets reveals the gap between where you are and where you want to be. Once you know what the gap is, you can build a plan to plug it and allocate marketing budget accordingly.
So, where do I start? Well, the customer is a good place to start.
Using your historic volume trends and spend per customer, we can create a sales forecast and identify your allowable cost per acquisition for each customer cohort. You can test the robustness of your results by using the same logic to model the current year (known results) and refining the assumptions. Once that’s done you can play ‘what if’ with these assumptions to help you understand the level of marketing investment required to reach specific goals.
It’s the first thing we do when we start a relationship with a new client and it’s one of the most valuable lessons a business owner can learn. I can name a number of examples where businesses were going to buy too little stock for the sales volumes projected and others whose marketing spend would not cover the numbers of new customers required. Either of these situations can put a business in serious – and avoidable – hot water.
A robust sales forecast enables ‘what if’ modelling, helps you plan for the future and mitigates risk in the decisions you’re making today. When you have a clear growth plan you can make confident stock purchases, align everyone in the business with the same core metrics and give yourself the best chance of achieving your goals.