According to Dictionary.com, the definition of forecast is as follows:
Okay, you're probably wondering why we are starting off this blog post with a definition. Well, the interesting thing about the word "Forecast" is that it can be used as both a verb and a noun. This is an important distinction, as we believe that firms that use forecast as a verb are more successful than those that are using it as a noun.
You see, our rationale is that firms need to be continuously working on their forecast, it can't be a one and done exercise. By treating a forecast as a verb, you're constantly taking action towards achieving your goals. At Planifi, we always use forecast as a verb. Plan. Manage. Forecast.
So, how can architecture and engineering firms forecast successfully? Well, in most cases, firms rely on their most senior members for forecasting and projections. Senior leadership has the most industry knowledge, understanding of their firm, and of their projects.
Now often times, leadership will use their “gut instinct” as a substitute for data, and they may achieve success for a while. However, "gut instinct" without current, accurate data is a problem waiting to happen.
As an example, after living in the Chicago area for 20 years you can probably get around easily without paper or digital maps. By instinct, you know the best way to go. However, your instinct or memory won’t tell you where there is a traffic jam or where this new construction. Nowadays, to successfully navigate the streets of Chicago, you need current, actionable data from applications like Waze or Google Maps.
Now, take that same thought process and apply it to your firm. With modern technology available from companies like Planifi and others, wouldn't you rather make decisions based on current, acccurate information?
Here are some tips to help you and your firm forecast your success:
Tip #1: Metrics & Standards
There are a number of ways architecture and engineering firms calculate projected revenue. In this case, it’s most important that your firm aligns to a set of metrics, standards, and process for keeping information up to date. Typically, firms will use a combination of high/low probability opportunities, unbilled work/work-in-progress (WIP), and percent complete.
Tip #2: Staffing vs Projected Revenue
How does staffing mix compare against projected revenue; do we need to hire? Architecture and engineering firms need their staffing mix to match the projects they regularly deliver. If your firm expects to win a disproportionate number of opportunities in Higher Ed, for example, maybe you need to hire a few PMs with higher-ed experience. With forward-looking and up-to-date data, we can make smarter hiring decisions and set new employees up for success.
Tip #3: Take Action
Remember, forecast should be used as a verb, and you should always be taking action. Keep the data up-to-date and use forecast projections to make adjustments so you aren’t blind-sided by a problem that you could have prevented.
To wrap things up, if your approach is to use "gut instinct" in your forecast as a noun, you're eventually in for a big surprise. Going back to our driving analogy, it would be like trying to drive down the interstate by watching your rear-view mirror. It might work for a bit, but sooner or later your project is going to go up in flames.
To avoid these kinds of results, you have to look to the future, not to the past.