Backlog is essential to a healthy company, but it needs to be predictable and dependable. Too little and you'll spend all your time focused on selling the next job; too much and you risk making clients on the wait list unhappy. The trick is determining the amount of backlog that is “just right” for your company.
The sample spreadsheet below can help you keep track of backlog.
In the first two columns (A and B), enter job names and contract amounts, each job in its own row. For current jobs, as well as those you've signed but not yet begun, the math is simple — just enter the original contract amount plus the value of any signed change orders. For “Jobs in Bid,” make your best guess. If you've just had your first meeting with the client, enter the budget number you discussed. If you have a preliminary estimate, enter that number. Remember to err on the low side to protect against a false sense of security.
In the third column (C), enter the total amount invoiced for those jobs on which you're currently working. For “Jobs in Contract,” don't enter any amounts into column C. For “Jobs in Bid,” enter a percentage that corresponds to how confident you are that you will get the work. At first you'll have to use your “gut” instinct, but after a few months, you'll improve your ability to predict your conversion rate. (You can also leave this section blank, but one side benefit is that over time you will learn to focus attention on those potential clients with a greater probability of becoming signed contracts.)
Finally, back at the top, enter your Annual Sales Goal. Cell D5 calculates Months in Backlog as follows:
Pay attention to all the subtotals, too —they contain lots of data useful for short-term forecasting and provide a basis for year-over-year comparisons. — Judith Miller is a Bay Area construction business consultant and trainer specializing in accounting, finance, and computerization.