The art & science of forecasting (Part III: Timelines)
Forecasting timelines is just as important as forecasting revenue...and in many ways even directly influences it!
The tl;dr
How much revenue you generate from new stores depends just as much on your timeline to opening as it does on the quality of the location (at least for the current fiscal year)
Opening stores is a highly cross functional process that takes months of cross functional planning and collaboration, and heavy resource allocation
Missing your timeline by 1 week can equal $20,000+ of lost revenue; beating your timeline can also mean an incremental $20,000+ of revenue on the year
Everyone in the company — and even external vendors — need visibility into various aspects of the timeline, but most software out there doesn’t provide the best views into the right things
Use these templates and tools to share varying types of visibility to the right teams, for the right purposes
Forecasting timelines enables visibility into critical dates
I’ve written about forecasting in the past:
Both focused on directly forecasting sales, so in this week’s newsletter we’re going to deep dive into forecasting something equally important: timelines.
Opening stores is just as much about strategy and metrics as it is about managing a process. And great process requires visibility into critical dates:
When a lease will be signed
When the landlord gives you the space
When you finish construction
When you open
All of these dates are important for different reasons, but those reasons all have a common tie: they have significant financial impacts. They’re so important that some even have legally defined terms in most leases:
When a lease will be signed: Lease Execution Date
When the landlord gives you the space: Date of Possession
When you finish construction: Turnover (not typically a legal term, but used internally quite a bit)
When you open: Opening Date and/or Rent Commencement Date
And, perhaps most importantly, each of those milestone moments triggers something that will impact your P&L:
Lease Execution Date: This date marks when you officially take on the contractual lease liability. It also marks the conclusion of the “lease project” with your real estate attorneys, meaning that you should expect an invoice from them shortly (unless they bill same time every month). For startups, these dates are also critical to document and provide when you’re going through investor/acquirer diligence.
Date of Possession (DOP): This date marks when the landlord literally and metaphorically hands your team the keys. This date is also usually formalized in a letter/email — if you don’t get one from the landlord, then you should instigate one and/or at least get it in writing in an email. All dates (including a lease’s expiration) are tied together, so you should be sure to have all of them documented somewhere. This is also the date that the accounting team uses to start the rent expense — even though you’re not actually paying rent yet (the Rent Commencement Date). Because you’re now in possession of an asset with rent liabilities, GAAP accounting requires you to start incurring (non-cash) rent expenses on your DOP.
Turnover (T/O): This date marks when the construction team has completed their work and hands the keys to the operations and field teams. This is typically a 1-2 week period when those teams set up merchandise, systems, etc. While it’s not a legal or accounting milestone, this date is critical for operational and field teams to plan around with their vendors.
Opening Date / Rent Commencement Date (RCD): Most leases will dictate that your Rent Commencement Date is the sooner of Opening Date or [120 days] after Date of Possession. Assuming you open on time (within [120 days]), your Opening Date and Rent Commencement Dates will be identical. This is the date from which you start incurring cash rent obligations, and usually the date to which any free rent is applied.
Let’s zoom out for a moment
Generally speaking, all of these dates span across multiple teams — the same teams that I like to structure my organizational design around.
Because these dates are so interconnected, I like to structure the team around those same milestone handoffs. It’s also why I like to include Retail Finance and Store Operations in the broader workflow — visibility across, and handoffs between, teams must be seamless to stay on track.
The timeline becomes the critical tool to drive handoffs and accountability
Combining the timelines (I’ve also added a few additional critical milestones) with org design, it’s obvious how and why these are important to view together:
The ability to hit a target opening date requires relentless management of the broader timeline, and collaboration across numerous teams to ensure seamless handoffs. A delay in one phase will usually domino across the entire process.
I always list Finance and Lease Administration as parts of these processes since they both provide inputs (budget targets and critical dates, respectively) and absorb outputs (forecasted milestone dates).
Opening 5 stores in a year requires chasing 15 options
A good rule of thumb is to chase 2-3x the amount of opportunities that you’re actually hoping to open. Deals fall apart for numerous reasons, and sometimes at the very last minute. Here’s how I view the typical lead funnel:
Site ID’d = 10% probability deal will get signed
In LOI = 50% probability deal will get signed
In Lease = 95% probability deal will get signed
You can manipulate those probabilities by changing the criteria that allows an opportunity to move forward (eg shorten the list of terms in the LOI), but those probabilities reflect my experience — and therefore a comparable experience you might have if you use the templates and processes provided in the Retail Expansion Community’s Resource Hub.
And when you’re chasing more than 10 options, trackers start to get messy, and critical dates become hard to manage. Most importantly, ensuring everyone is working from the same (a) list of approved / upcoming store openings and (b) critical dates for all opportunities becomes really f***ing hard. Literally every organization I’ve worked with has had this problem: multiple lists, dates, and even confusion in the store names runs rampant.
The worst part is: I’ve truly never encountered a technology that can solve for this well. SmartSheets, Asana, and other project management tools help with aspects of it, but most of those systems don’t enable you to build the numerous views that are needed across the organization, nor do they enable you to quantify time (eg track sales weeks) the way it should be in order to keep people on track.
Real estate deals and retail stores are all different
They’re different not just in the literal sense, but also in the sense that timelines, municipal requirements, and everything in between vary from location to location. Timelines can’t be overly prescriptive — but you have to try.
So with all of that said, here are some timeline views that I regularly use — each slightly different depending on the purpose (which varies by receiving team). But note that these views are also interconnected: there is one source of truth, and changing one date will update across all outputs:
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