By Sergio Furio, CEO at Creditas
Planning and projection are terms that are usually used interchangeably to refer to the process that attempts to determine what will happen in the future of an organization, especially regarding the areas of sales and marketing. At
Creditas, we like to make the difference between the two concepts clear.
Companies of all sizes experiment with all kinds of different processes to define the objectives for the upcoming month, quarter, or year. This process is usually a mix of art and science, and it tends to involve members from various areas such as sales, marketing, operations, product, technology, and finance. At startups, this process is made even more complex by the lack of a robust baseline, as well as an absence of market knowledge and behaviors.
On countless occasions, in both the corporate world and at startups, I’ve encountered graphs modeling an exponential growth curve. A marvel, the dream of any investor. When I question the basis of these hypotheses, the response is normally one of the following: (i) “I’ve taken the average growth of the past weeks and projected it over the next year” or (ii) “I used the growth rates of international equivalents”.
This is how we come to the problem: these hypotheses and projections rarely take place. I like to differentiate between projection and planning in the following manner:
● Projection: an estimate based on an analytic study that combines: a history of past internal figures, market speculation, and a company’s relative performance. This methodology usually works well with mature companies working in well-known markets.
● Planning: a definition of actions that will be taken by specific people within an organization, guided by quantifiable goals. This methodology doesn’t just provide an objective, but a path to achieve it.
At Creditas, we’ve created a monthly routine to review the results of the previous month and plan for the upcoming month. It’s normally a two-hour session at the end of the day, attended by representatives from marketing, sales, operations, product, credit, and finance. The dynamic is:
● During the first hour, we review the performance of each product’s funnel. We have three products and five principal metrics in our credit acquisition funnel. Therefore, we’re discussing fifteen numbers. Attendees should have exhaustive explanations of what’s going on and what can be improved. Our funnel covers everything from traffic to credit origination, starting with marketing and ending with operations and legal. By the end of this process, we have an idea of the trends that are occurring and what can be improved in the future.
● During the second hour, we focus on planning. Sometimes we approach this process bottom-up, from origination to traffic, or top-down, from traffic to origination. For each step of the funnel, we evaluate actions planned for the upcoming month and consider other actions that might be relevant considering the context of our operation. This “other action” is sometimes a new product feature, a new distribution channel, process reengineering, or a new data science algorithm. What’s important to us is that we leave the meeting with the steps we’re going to take clearly defined.
Our monthly review process allows us to reach a balance between (i) taking the operation’s pulse and (ii) maintaining the operations strategic vision. Furthermore, teams have weekly meetings to review and optimize their KPIs, breaking the steps of the funnel down into pieces to really understand what’s happening with our product and clients.
Here at Creditas, we do this so we can avoid “projections” based on excel and instead focus on the action of planning, ensuring those areas are coordinated. In our experience, sales projection works well with quarterly and annual plans, where actions aren’t clear. However, in the short term, planning is a powerful tool, and once your actions have been defined, iterating its
processes until the best possible solution is found is the path forward.
