Big Budget Miss: What Next?

As we approach the end of the first quarter of 2024, most companies, large and small, are working to reconcile the differences between what was projected / budgeted and what was actually realized. For some, this process seems silly; they have crushed their forecasts and significantly outperformed expectations. For others, they have missed wildly in the opposite direction; they spent too much and earned too little. Realistically, most companies have fallen somewhere in between these two extremities.

The famous Chinese proverb that states “The best time to plant a tree was 20 years ago. The second best time is now.” The same is true for adjusting your expectations and forecasting future performance. The best time to adjust expectations and actions was before the misses occurred, the next best time is now.

How to adjust moving forward depends on in what ways you missed the mark. Let’s explore a couple reactions and courses to take moving forward.

“We sold way more than I thought I would!”

Awesome! Great! First off, celebrate! Too often, entrepreneurs find themselves expecting more and more and forget to celebrate the successes. It can be exhausting building and running a business and if you forget to enjoy it, you’ll burn yourself out. Next, you’ll need to explore why you had such great success and how this impacts the future. Here are some (non-comprehensive) common reasons:

(1) our conversion rate was higher than expected

Example question to ask: Did we source better prospects or is this an anomaly? If this is a repeatable outcome, let’s change expectations to meet this new normal.

(2) our sales cycle was much faster than expected

Example question to ask: Is this due to the time of year or are we better at closing quickly than expected? If this is due to the seasonality of business, keep in mind for next year but hesitate to make changes too quickly for the rest of the year.

(3) our revenue per sales was higher than expected

Example question to ask: Is our current pipeline full of prospects similar to what we sold historically or recently? If your prospect base is changing, it’s good to readjust expectations. Often, though, larger sales may be blips and outliers to the common customer profile.

“We sold way less than I thought I would!”

Okay, not the start to 2024 that we wanted to see. However, often this is due to delayed sales and not missed sales. Let’s figure out whether or not it’s time to start panicking and making sweeping changes.

(1) our conversion rate was lower than expected

Example question to ask: Why are we failing to close deals? If it’s a pricing issue, let’s explore what price changes or promotional offerings would lead to. If it’s a product market fit, maybe we are targeting the wrong prospects. We need to get better at disqualifying customers earlier.

(2) our sales cycle was much slower than expected

Example question to ask: Is our pipeline full enough to catch up to our revenue expectations? If it’s simply a timing issue, it becomes important to forecast cash flow but not change the sales process. A delay in sales is okay, as long as that delay is measured in weeks or months and not quarters or years.

(3) our revenue per sales was lower than expected

Example question to ask: Are customers coming in with a lower offering and providing opportunities for expansion sales or are we only selling to smaller clients with lower budgets? If there are opportunities for expansion, it is important to prioritize relationship management and customer support to make sure we don’t lose momentum on potential follow on sales.

There are many other areas to explore and assess as we review Q1 2024 results. It is important to make sure we understand why outcomes are occurring and picking the right follow on course of action.

“We need to hire to support our uptick in sales”

Often times, companies hire too quickly to support an uptick that was an anomaly and not a new normal. It is paramount to understand the why in the over performance and make sure that it truly requires an increase in headcount before leading your company to unsustainable spending. It is much easier to hire fast later than it is to perform layoffs.

“We need to change our sales process because what we are doing doesn’t work”

This might be true, and if it is, a quick pivot and change is crucial. However, before you do, make sure that you aren’t just in a slower sales cycle than expected and that you don’t just need to be patient. In can be hard to understand right away whether or not it’s a delayed purchase or dead purchase, but constant pivoting will guarantee a slow demise.

Not sure what to make of your year to date results? Concerned that quarter 1 is going to end and you’ll need to craft a careful message to your investors? Chat with our experts at Guidepost Advisory and we can help instill confidence in your investors by diving into your results.