Creating membership forecasting is important for any non-profit, it will make many revenue-impacting decisions a lot easier to make. Without forecasting you'll struggle to make the right decision regarding goal setting, prospecting, budgeting and hiring.
Membership forecasting can be tough to get right, so we've written this guide to make it a simple process for you! We'll start off by talking about why you should membership forecast, but if you'd like to skip to the membership forecasting methods, just click on the link below:
Having a forecasting model in place will enable your organisation to have a detailed picture of the expected revenues and expenses, enabling the improvement of membership-related strategies. Equally as important, you'll be able to reduce the chances of unexpected membership trends being overlooked.
What's key is that whether good or bad, you'll find out before the end of the month or quarter, enabling you to continue the push of what you're doing or make adaptations to avoid sticking points. Let's say your forecast predicts a large increase in opportunities, you'll be able to shift workloads accordingly or begin your recruitment process before your team's workloads become unmanageable.
You don't need to worry about your membership forecast being 100% correct, because it most likely won't be! Unless you have a crystal ball conveniently sat in your office, this process will be some what of an estimation - and that's fine! They don't need to be perfect to still hold value, but results that are highly inaccurate will be problematic (thankfully we've written this blog to help you avoid this)!
These are some factors to take into account when generating your forecasts. There are both internal and external influences to take into account and we've summed up the relevant ones here.
If some of your sales team leaves for whatever reason, you can expect a dip in your expected revenue. In an ideal world you'll have another salesperson ready to take over their sales pipeline to avoid any dip, but it's not always an ideal world! Conversely, if you make some big hires, you can expect a rise in your memberships as a result.
Although you may be working for the same cause, having competition nearby will still impact your membership rates. Your competition may lower their membership rates, causing a dip in your memberships for that period, or alternatively an organisation similar to yours may go out of business causing a spike in your memberships.
Sadly when the economy is poor and people are being careful with their money, non-profit organisations often take a hit. People's money is directed towards necessities and savings for financial security - so expect dips in memberships during times of economic downturn!
New legislation might have a positive or negative impact on your organisation, which makes it an important external factor to keep up to date on!
If you roll out a highly anticipated change to your membership system, for example if an individual becomes a member and they gain more insights into what their money is doing and specifically how they're helping, this can be utilised by your sales team to drive memberships up.
Certain times of the year might have an impact on how willing people are to spend their money. As a stereotype, people are considered more giving around the Christmas period, so you might see your memberships creep up around this time. It'll be different from organisation to organisation, but being aware of this will help you build your forecast.
Here we'll run through the different membership forecasting methods you can implement in your organisation. Some of these require a bit more work and result in a more accurate forecast, whereas some are quick and easy to do but result in a less accurate forecast. It's important you understand that these methods can be inaccurate and should be taken with a pinch of salt, but regardless of their accuracy they're still a great tool to give you a general idea of where you'll be financially in a given period.
There are more forecasting methods that can be implemented than the ones we've mentioned, however these often require advanced analytics solutions which are tough to access on a small budget.
HubSpot have a free sales conversion and close rate calculator which might also help with your forecasting, you can download it for free here.
Intuitive forecasting is great for organisations that have just started operating and how no previous financial data to pull from. In this instance, you might simply want to ask your sales team to all estimate the likelihood of a deal closing, including a time frame and the the worth of the deal.
Whilst this forecasting method takes in the opinions of the people working closest with your prospects, it also relies on your salespeople to be realistic when they're likely to be optimistic in their estimations.
This method is also a good choice for newly started organisations but still has its place for more developed non-profits. It essentially does what it ways on the tin, you just look at your competitors and use their figures to forecast - just make sure you factor in those internal and external factors we mentioned earlier!
You can find out the financial information on a range of non-profit organisations from Guidestar. Here you can find non-profit organisations similar to yours where you'll be able to compare their membership rates to that of yours and forecast for the future.
This method involves picking a reporting period, usually a month, quarter or year, then you multiply each deal's potential value by the probability it will close within the reporting period. You do this for each deal in your pipeline, and the sum of these figures will be your overall forecast.
This is a very simple method and is great if you need to get a quick idea of your forecast for a period. However the results of this method can be somewhat inaccurate as it doesn't account for the age of an opportunity - so a fresh, hot lead in the pipeline will be treated the same as a deal that's months old as long as their close dates are the same. This method relies on a sales team that keep their pipelines regularly updated and cleaned.
This method looks at the length of a sales cycle and compares it to that of your average sales cycle. This method doesn't take into account your sales team's interpretations, so that chances are it'll be a bit more accurate.
So let's say your average sales cycle lasts 3 months, and you've got a prospective member that's been in the pipeline for 1 month, this forecasting method would state the deal is 33% likely to be won. But what if this prospective member was referred from a friend and your average sales cycle for referrals is 2 months? Then this deal would in fact be 50% likely to close.
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HubSpot lets you create multiple pipelines, where you can have customisable deal stages throughout. This means HubSpot can be moulded to fit your non-profit organisation and can make your membership forecasting much easier. Click the button below to chat with us about your non-profit organisation and how HubSpot can help!