The Joys of Quarter End – Reality vs. Plan

For many of us, this month (June) marks the end of the second quarter and provides a good look at how your company is doing mid-year against the revenue plan you established last fall or at the end of last year.  You check all the parameters such as revenue to date, average bill rate, utilization, and cost to plan.  I am sure this isn’t the only time you check as it’s best to trend this type of information over the past 6 months (and ideally year over year) to see how certain times of the year impact your ebb and flow of revenue.

I find in many cases the revenue plan for companies is a linear or somewhat curved uptrend for the year with each month showing an increase of revenue from the previous month.  The funny thing is that in actual delivery, there always seems to be a somewhat bell curve to the revenue.  Q1 services generally are ramp up from year end deal closings.  Business looks good but the pipeline is growing more and more.  Q2 is an over-performance of services delivery due to those year-end closings coming in and customers with new budgets ready to move forward with engagements.  This is where I find our company and other companies exceed their plan and things look great!  Then Q3 hits us with the infamous vacation outages and key resources not being available to close deals or move projects along.  Inevitably the delivery slows down or your resources go on vacation.  Overall, however, you come out in sync or close to the Q3 plan due to Q1 and Q2 being good quarters.  Q4 is a bit unpredictable.  I find customers want to either wrap things up so there is a high volume of services before the November and December holidays while other customers will decide they want to wait until next fiscal year as other priorities are coming into the picture in their organization; especially budget planning and financial audits. 

Each year I put together a budget plan with a target of revenue each month and it’s not reflecting a bell curve.  It’s more like a target ramp to start slow and increase by year end.  I find it difficult to plan around vacations or have expectation that the second half of December in many cases is a write-off due to holidays and vacation.  This means you have to plan for margin hits on certain months or quarter to accommodate the cost of staff with lower utilization due to vacations and holidays.  One solution that works for some companies is the use subcontractors in the expected heavy services months so they can be disengaged during the lower services staffing need months.  Unfortunately in my line of work, it is hard to come by subcontractors that can ramp up to our business model and knowledge level that we can engage and disengage as necessary, so we don’t leverage subcontractors very often.

My planned solution is to factor in the bell curve in next year’s budget model.  TOP Step has been in business for 4 years now and we’ve got plenty of trending data to support adjusting our budget plan a bit to reflect the bell.  One thing that will continue to nag at me, though, is the false sense of security I may get because we hit numbers in Q1 easily when it’s a ramp-up – will that change my attitude in pipeline growth for Q2?  Is it really better to plan for that target ramp revenue plan vs. the reality bell curve?   All items to think about as we work toward closing Q2.  The metrics trending that we rely upon for business decisions will show us our results.  Little did I realize that we have our own reality show in the works…I’m just sayin.