SustainAbility:

Revenue Forecasting

Date: October 2016

London New York San Francisco SustainAbility 2016

SustainAbility Revenue Forecasting

SustainAbilitys Financial Planning

Prior to the start of each financial year, the management team decides on budgets for both
revenue and expenditure, which are based on the prior year and also take into account market
trends, potential growth opportunities, and other significant factors (e.g., we have Nestl as a
significant client this year; will we have them next year? etc.)

In parallel to the budget there is a cash flow forecast, which will reflect the amount of working
capital (cash) available throughout the year.

To keep this information current and accurate, and allow the management team to make
decisions based on up-to-date information, these figures are continually re-forecasted and
adjusted throughout the year. Part of this is the process that we have called Revenue
Forecasting.

In order to provide the most complete and accurate information to the management team for
decision-making purposes, starting in October 2016, we will review the revenue forecast 2x per
month.
SustainAbility Revenue Forecasting

How SA Calculates Revenue

v Revenue for SustainAbility is calculated, not on the actual invoices raised in the month, but
on the time recorded in Harvest, compared to the fee budget available. Once the entire fee
budget has been recorded as time spent, no further income can be recognised in the
accounts.

v For example, we recognized 12,740 in revenue from the Nestl Materiality Project in
August:

v Once the entire fee budget for a project has been spent (in Harvest), no further income
can be recognized for that project and any additional work/time recorded in Harvest is a
potential loss for the company, if no further budget can be agreed with the client.
SustainAbility Revenue & Planning

What is Revenue Forecasting?

v Revenue forecasting is a financial management tool which uses past, present and future
information to provide the company with a snapshot of its current performance and an
estimate of future performance.

v Revenue forecasting is used for strategic decision making for the future.

v Unless revenue forecasts are fairly accurate, they are not helpful for planning, and poor
business decisions may be taken based on inaccurate revenue forecast information

v Forecasts should be conservative but realistic, based on the best information a project
manager has available at that point in time.

Budget information
from Harvest

Project information Previous revenue Revenue forecast from

from QuickBase information from the PMs knowledge of
Harvest (this has the projects future, the
already been Capacity Chart, and
recognized) project budget plan

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SustainAbility Revenue Forecasting

Flow of Information
We use several different systems that all come together to ensure the Forecasts are as accurate
as possible.

To limit the amount of follow up emails and calls and Slack messages you will get, please keep
in mind the following:

THE CAPACITY FORECAST has now been extended to allow us to plan up to 16 weeks ahead.
We use this to forecast time to be spent in the current and future months on each project and
by each employee. The information here should match the Revenue Forecasts. We also use
the capacity forecast to resource projects. It should be updated at least WEEKLY.

NUTSHELL tracks our open leads. Leads should only be listed at 20%, 50% or 80% confidence
levels. The Est Value field should be your proposed fee budget, excluding CST and Admin
fees. Leads should be updated with revised budgets, confidence levels, or as won, lost or
cancelled, as soon as the information is known.

QUICKBASE is used to manage active projects. As soon as a lead is marked as Won in

Nutshell, a new project should be opened in QuickBase that includes all billing and project
information. Do not open a new QuickBase project until the lead is marked as Won in
Nutshell; if there is both an open lead and an open QB Project for the same piece of work, we
risk double-counting the potential income. Again, the Fee Budget should exclude Admin and
Carbon charges; those are calculated separately on the Project page in QuickBase. Our
current Admin fee is 5% and the current CST charge is .22%. Start and Due Dates should be
kept up to date and accurate. Alert the Finance team if there will be a change in the invoicing
schedule or any change to the Fee Budget.

HARVEST tracks our time, revenue and project budgets and should be updated in real time,
and in worst case scenarios at the end of the day. There is a Chrome extension which will allow
you to start and end a timer that automatically syncs to Harvest; there is also an iPhone app
which you can use to enter your time, even when you are offline, on a plane or underground.
SustainAbility Revenue Forecasting

Things to keep in mind: Project

Planning
v When thinking about the revenue forecast for a project, consider the period of time that the
project covers and when the project team will be spending more or less time on it for each
phase of the project (e.g., an onsite visit or workshop, a time-consuming deliverable, client
deadlines, or when a client will be on vacation or focused on other priorities).

v Tool to use: your Project Budget Workbook for planning hours on specific tasks, and
reviewing the resulting monthly budget dashboard.

Tasks Hours Team Members Billable Rates Date (weekly) Project Week

Information that should go into

the Revenue Forecast
SustainAbility Revenue Forecasting

Things to keep in mind: Capacity

v When looking ahead for revenue forecasting, review your teams available capacity to do
work on a project during the coming weeks or months (this can include checking on holidays
and annual leave, as well as internal priorities such as hiring, creating service offerings, or ES
or Trends responsibilities).

v Check how many hours your team members have planned to work on your project; does this
align with what you think you need to do the work? If not, discuss right away!

v Tool to use: the Capacity Forecast

Charlotte and Margo

Matt are probably isnt
planning to do available to
~17k on work on any
Nestl more projects
Materiality in right now;
October; this dont count
should her into your
roughly new projects
match the revenue
revenue forecast for
forecast. October!

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SustainAbility Revenue Forecasting

Things to keep in mind: Nutshell

v We also forecast revenue based on Leads (potential projects) that have not yet been won.
This information comes from Nutshell and the revenue that we plan on is calculated as
follows:

v Est Value * Confidence Percentage = revenue that we plan around and which we ask
the PM to predict

v Nutshell should always be kept up to date as your conversation with the prospective client
continues, including confidence percentage, budget, and close date.

v Confidence percentages should only be set at 20%, 50% or 80%

v Remember that there is often a delay even after a Lead is won for contracting, budget
negotiations, etc. and that should be taken into account when forecasting revenue for a
Lead. Again, the revenue is only counted when the work is actually done and the time is
tracked in Harvest.

v Tool to use: Nutshell

For this lead, we will forecast $8,000 ($10,000 Est Value * 80% Confidence) and then ask when, if won, this
work would be done.
SustainAbility Revenue Forecasting

Things to keep in mind: Harvest

v Harvest is a critical component of tracking SustainAbilitys revenue; it is the ONLY way we
collect this information; Therefore, time sheets should be completed daily and information
should not be entered in advance, unless its for pre-planned Annual Leave.

v Time sheets should never be adjusted retroactively, as revenue information from Harvest has
likely already been reported to the management team, the Board, and our accounting
system.

v If you made a mistake, talk to Joanna before you try to make any adjustments to prior
days time sheets.

v Time sheets should be accurate and timely to allow Finance and PMs to see an accurate
picture of revenue and/or project budgets at any time.

Random mid-week
snapshot: pretty
good! But, we can
do better.
SustainAbility Revenue & Planning

Ways to Make a Profit

PRICE PROPOSALS Can you use work or information gathered for another project to
BASED ON VALUE, NOT reduce the amount of time youd need to spend on a new
JUST TIME project? Great!

Dont under-value a proposal just because we will use fewer

hours. We can make a profit here!
WATCH FOR BUDGET Keep track of the hours your project team is using in Harvest
OVERRUNS frequently and regularly. Identify where you might go over
budget, and why. Work with your project team to avoid
unexpected overruns. Any overruns anticipated must be
communicated to finance.

Communicate with SA globally on where you found the issues

that lead to the overrun, so we can all learn!
COMMUNICATE WITH As you work on a project and manage your time and budget, you
THE CLIENT ON THE may realize that the project is on track for an overrun.
BUDGET
Speak to a Director or CBD team member for advice on how to
manage this; either by asking for more money from the client or
by adjusting other areas of the project, and inform finance.
DONT BE AFRAID OF If it looks like you will wrap up a project with money and hours
UNDERRUNS still available, great! This is profit, and we like it. Profit = impact.

Speak to a Finance team member if you anticipate an

underrun on your project.