Revenue planning in construction is not a sales forecast. It is working out how much of the work you have already won will actually turn into money, and when.
That is a different question, and it is the one most construction businesses cannot answer.
Start from the order book, not from last year
A general business forecasts revenue by growing last year by a percentage. That does not work here, because your revenue next quarter is largely already decided by contracts you have signed.
The starting point is every live job with its contract value, how much has been certified, how much is left to do, and the programme it is running to. Add the jobs you have won and not started. That is your secured revenue.
Everything above that line is pipeline, and pipeline should be weighted rather than counted in full.
Secured is not the same as certain
Two things eat into secured revenue and both are predictable if you look.
Programme slip. A job that runs two months late does not lose you the revenue, it moves it into a different quarter. That is fine for the year and a problem for the month you were counting on it.
Variations that never get priced. Work done on a handshake and never agreed in writing. It is real cost with no revenue attached to it, and it is the single most common leak in a construction forecast.
Revenue and cash are different plans
Worth separating deliberately, because conflating them is how firms with full order books run out of money.
Revenue is recognised as you do the work. Cash arrives when the customer pays a certified invoice, which is later, and 3% to 5% of it is held as retention for a year or more after that. Meanwhile CIS takes 20% off your labour at source.
So a strong revenue month can be a bad cash month, and the plan has to show both.
Capacity is the ceiling nobody models
Revenue plans usually assume the work can be delivered. In construction the binding constraint is normally labour, not demand.
If you have four gangs, there is a hard limit on what you can turn over regardless of how much work you win. A plan that shows 40% growth with the same headcount is a plan to subcontract more, which changes your margin and your CIS obligations, and both of those should be in the numbers.
What a useful plan looks like
- Secured revenue by month, by job, off the programme rather than off hope
- Weighted pipeline shown separately, never mixed in
- The gap between secured revenue and your capacity, so you know whether the problem is winning work or delivering it
- A cash line underneath, with retention release dates and the CIS position
- Updated monthly, because a construction forecast is out of date within weeks
The version most firms have instead
A turnover target in somebody’s head, and a bank balance checked on a Friday.
That works while the order book is full and stops working the moment it is not, which is exactly when you needed the warning.
If you want one built
We build these for construction clients off the live order book, and update them monthly rather than annually.
Have a look at profitability planning and cash flow forecasting, or book a call.