Trick or Treat! Bottom Up can be Sweet

bottom upMaybe demand-driven model isn’t for you, but today is Halloween so like pillowcases filled with candy, 9DOTS offers a lot of options.  A bottom up approach is a focus on resource SUPPLY. Estimate potential sales revenue of a product in order to establish the total sales figure.

Answers questions like “how many hours of work can I bill?,” “how many widgets can I get produced?” and “how much crop will my fields yield?”

“Known as an operating expense plan, bottom up forecasts examine factors such as production capacity, department-specific expenses, and addressable market in order to create a more accurate sales projection. Many experts believe this approach is more realistic than top down because bottom up forecasting employs actual sales data, the resulting forecast may be more accurate, which enables you to make better strategic decisions moving forward. (quickbooks)”

Calculate revenue by individual employee based on hours, cost rates, multiplier and utilization rates. 9DOTS provides the functionality to calculate and aggregate these figures to a fiscal year revenue model. Store values for each individual’s hours, expected revenue, direct and indirect labor costs by fiscal period and then calculate and aggregates those values and deliver them to the budget reports. This entire process simplifies and automates previously labor-intensive activities. So, have the pillowcase full of candy and eat it too!

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Hocus Pocus is TOP DOWN Your Focus?

Our last blog post was a quick run down about how to make it through budgeting season (the worst season of all!) There are tools to make budgeting season easy peasy & it only requires a LITTLE BIT of Halloween Hocus Pocus. You may be able to make a huge change for next year to gain competitive advantage. Tool number one: the Top Down approach.

top down

“Top-down forecasting works well when the market forces on various product items or sales areas are similar. For example, if the markets for baseballs and baseball bats move together, it makes sense to predict their sales together. Many times, individual products will not generate sufficient data for forecasters to make meaningful predictions.The larger amount of data on more items will make patterns easier to see and provide a more accurate forecast. Top-down forecasting works well for budget and strategy planning because it successfully predicts the big picture of overall sales.”

“One of the benefits of top-down financial forecasting is that it avoids statistical outliers—the data-swings—common to lower-level facts and figures. Because of this, a top down approach offers companies a broader picture of revenue potential and can help them identify sales patterns.” (quickbooks)

A top down approach is driven on market demand. Keeping track of historical trending data and/or the sales pipeline to gauge expected revenue is necessary. Then, align your organization’s expenses. The challenge is whether or not the business is structured to capitalize on market demand–a high market demand means you may be losing opportunity if you don’t have the necessary resources aligned internally. Combine employee planned hours, billing rates, and planned revenue data with potential revenue. The result is a revenue model driven directly from planned and unplanned data.

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Survive 2017 Budgeting (Our least favorite season!)

TopDOwnIt is officially fall. Halloween is on it’s way, leaves are changing colors, and you are mentally preparing for the Holiday season. There is one season we are all a little LESS excited for: Budgeting season.

Budgeting season is beginning for professional services organizations. Sales are made, profit is generated and you have to think & plan months in advance based on your history. Making sure your organization’s headcount is in balance with your backlog and projected pipeline is a constant challenge. To over or under staff your organization affects profitability with poor utilizations or project delays. You need the RIGHT TOOL: the one that helps you see far enough into the future to understand staffing needs, the tool that makes you feel ready for the new year.

  • How do you make sure you’re not spending too little on project staffing or too much?
  • Are you wasting time, resources, your hard earned cash by frantically assigning projects?

You have a few options: a top-down approach is driven on market demand. An understanding of the market through historical trending data and/or the sales pipeline to gauge expected revenue is necessary. Then, align your organization’s expenses. The challenge is whether or not the business is structured to capitalize on market demand–a high market demand means you may be losing opportunity if you don’t have the necessary resources aligned internally.

A bottom-up approach is driven on resource supply. It answers questions like “how many hours of work can I bill?,” “how many widgets can I get produced?” and “how much crop will my fields yield?” Estimate potential sales revenue of a product in order to establish the total sales figure.

Your organization’s need is unique based on its industry & market conditions. Comparing both models with ease will give you a competitive advantage. That extra component, the gap analysis, is just what you need to maximize utilization & profitability. Gap analysis allows for a holistic view of the business. Viewing the difference between a top-down and bottom-up can give you actionable intelligence. For example, more market demand means you can safely hire more people, or a constraint on resource supply could determine the possibility of raising prices to increase margins.

We are going to go more in depth in the coming weeks on each component, but for now, please follow our social media pages so you are ready for more info.