How Does Resource Forecasting Work? A Practical How-To Guide

The impacts of a poorly staffed project due to poor resource forecasting are far-reaching.

Picture it: Your team goes into overdrive (and overtime) struggling to crank out the minimum, let alone quality work. Schedules are delayed while you try to negotiate a little more time. Budgets climb as you realize last-minute that you need to hire someone right now with the skills to make what you promised to deliver a reality. Profits dwindle, staff morale drops and your clients question your reliability.

Not a good look for your organization.

If you were to see this in your future, naturally, you would do everything in your power to prevent it. That’s exactly why services businesses make forecasting resources a priority–so that they can avoid the horrors of understaffed projects and underprepared teams.

But where to start? That’s the 64 thousand dollar question.

To forecast accurately, you really need software that will encompass four things:

  1. Sales opportunity management
  2. Project planning
  3. Resource management
  4. Time tracking

We’re going to discuss these aspects of resource forecasting in this article as we get into the nitty-gritty details:

What is resource forecasting in project management and why is it so important?

To define it briefly, resource forecasting in project management is the prediction of the resources your company will need in the future in order to bring projects to fruition. When services businesses make these forecasts, they typically use historical and current project data to anticipate how many people they should hire, retain or let go and what skill sets are needed to serve clients and their evolving needs.

Even if you’re not an avid chess player, the game provides a good analogy here: You plan several steps ahead, determining which players you’re going to use and how you’re going to place them on the board most effectively in order to win the game. Or rather, execute projects successfully and profitably.

Matching Supply and Demand

A resource forecast is going to help you ensure that your resource pool will be proportional to the workload. It will tell you how many people from your current resource supply you need on upcoming projects, for how many hours and what their cost rates will be. You’ll identify where the skill gaps are that would otherwise create obstacles on the ground.

Without a resource forecast, you would have a hard time understanding if and when you should rev up hiring. You’d struggle to budget appropriately when an opportunity comes in. And without that information, how are you going to deliver accurate quotes for new projects–or ensure that they’ll be lucrative? Without resource forecasting, your business will die on the vine.

What if you discover that there isn’t enough work to go around? A happy side effect of forecasting is that you’ll be better able to determine when you ought to double down on bringing in new projects and use your resources’ time in a way that makes the greatest impact. Or, you could find that you’ve overbooked your current resources and prevent the undue strain on them that will likely make the quality of their work suffer.

Resource forecasting is a vital preliminary step in planning successful projects. It will help you better manage your team’s time, budget correctly and ensure quality outcomes and healthy profits.

What are the benefits of resource forecasting?

The immediate benefit of forecasting resources is obviously that you won’t be stranded without an adequate workforce in the coming months. But there are plenty of additional advantages that can be counted on to make your organization stronger overall.

A good resource forecast can:

  • Optimize your resources’ time for the greatest efficiency, which means increasing billability (and profits)
  • Produce more revenue by taking stock of anticipated skills to identify and adapt to future market trends
  • Help your organization become flexible to adjust to demand changes
  • Prevent project planning bottlenecks
  • Prevent burnout from consistently overbooking employees

How do you calculate resources needed for a project?

If you do a quick Google search, you’ll find a variety of highly theoretical techniques. While you’re up to your neck in forecasting techniques, you lose time, efficiency and possibly the opportunity you were forecasting for by the time you’re done. Actually, it’s because this way of doing things is so painstaking and time-consuming that most people just stick a finger in the air and hope for the best.

The biggest complaint we hear from our clients is that they’ve struggled with separate forecasting methods that don’t synchronize with their project management and planning tools. The result? They have no idea if what they’re forecasting is relevant to the actual project data. They’re using a mishmosh of tools (frankly–most use spreadsheets) that don’t communicate with each other and leave project managers no better off than if they just took a wild guess.

Luckily for all of us in the business of selling services, we don’t need to use a mess of techniques and tools. A resource forecast relies on these four practices:

  • Planning out projects diligently
  • Ensuring accurate time tracking
  • Adding opportunities to project planning
  • Planning as far as you can into the future

All you really need is a single system that gives you solid project planning, resource management, opportunity management and time tracking features. You need to be able to build projects in your system when they are still at the opportunity stage and factor these opportunity projects into your overall resource planning. It’s the most direct path from “Are we staffed sufficiently for our upcoming projects?” to “We need X number of resources at this cost and at this time.”

Accurate and diligent time tracking for your live projects will ensure that any changes in the budgets and timelines automatically update your resourcing heat map going forward.

There’s no risk of missing out on opportunities because of arduous methodologies. Accurate estimates are guaranteed by virtue of the fact that you’ve integrated all relevant project data as you forecast. Go ahead, breathe a sigh of relief.

Why businesses fail at resource forecasting

One of the primary reasons services businesses have trouble forecasting resources is that their workflows separate Sales, Project, and Resource Management. Your sales team’s goal is to sell projects, but they don’t use delivery data in proposal estimates of how long projects will take. Or indeed how profitable they will be. In turn, your resource estimate will be off because it’s based on inadequate data. Unless you can create visibility into the Project Delivery side for your Sales team from the start.

Data/information silos will continue to plague your forecasting capabilities if your resource planning software is separate from your time tracking software. Without integration, you’ll struggle to know when work has been completed and when project deliverables have been met, information you need to match the workload to your resource supply. Your resourcing heat map needs to be “always on.”

Other common issues include not planning projects far enough into the future, leaving you in the dark about what team members or roles will be doing particular work well ahead of time. Understandably so perhaps. Because if these calculations are not married up with actual delivery data like timesheets and deadlines, it will be meaningless before you can say, “Spreadsheets are the ticket to Hell.”

Falling into these traps is all too easy without the integrated data that one cohesive PSA software tool will provide.

What is the best resource forecasting method?

There’s really only one method that works: Combine your resourcing forecast for live projects with forecasts for opportunities in one view. This way, you’ll see where the squeezes are, decide whether you can rearrange your players on the chess board and plan your staffing needs accordingly. The only way you can do this is with integrated software.

In VOGSY, as soon as your sales team sees an opportunity, you’ll forecast it by creating an opportunity project. Digging into past project data, you’ll be able to plan it out over the weeks, creating estimates for hours, cost rates and what rates you can sell at. A resource heat map in your planning view will highlight any clog-ups in terms of overplanned hours, and the software will automatically produce the project budget and margin. This information will enable you to work out specific hiring scenarios.

If you hire someone on and it takes a few months to learn all the ropes, you’re not getting much back in terms of revenue during that period. Knowing how much you’re going to make from a project will benefit your analysis of whether you can offset the cost of hiring. If you’ve planned projects out far enough, you can look further down the road and see if the skills of that new hire will continue to be useful. If not, you may decide to go with a contractor instead.

You could also decide that you don’t want to put a proposal in at all because you don’t have the staff or the means of acquiring the staff for it. Or, in an ideal scenario, you might propose starting the project one or two months later, when it’s more feasible. That way, you won’t lose the customer, and you can plan your order book well in advance and as optimally as possible.

To recap: Use solid resource management features, build an opportunity project and factor that into your overall resource heat map.

What if your company has transitioned to remote work?

Now that we are all largely working remotely–a situation that is not likely to change soon–the fear of losing track of your resource planning is a little more real. Even if you’re used to working with freelancers and contractors, actually being away from the office and all of its amenities introduces new nightmares about tracking down information and disrupting the natural order of things.

You may be wondering how remote work will affect your ability to forecast–if you’ll even be able to do it at all. Don’t worry! As long as you’re using adequate resource forecasting software, this should not be affected in the slightest.

The key is that the software helps you plan the future of your projects, including opportunity projects, and become diligent in your time keeping. If you have a system that combines these practices cohesively, it doesn’t matter whether you and your team are working from an office or from your couches at home. The results are the same, and they’re always reliable.

Tools that can help you forecast accurately

An effective resource forecasting tool should allow you to:

  • See past project data so that your estimates are solid–without having to sift through a football field’s length of reports. Why make more work for yourself?
  • Reuse successful deliverable budgets and work plans or even clone entire previous projects that have shown to bring in good results and margins.
  • See how many hours your resources are scheduled and to which projects and deliverables they’re assigned. This is going to be a lot easier if the information is presented in a simple, visual format. Will the tool enable you to see all hours and projects on one screen? That’s helpful. Can you easily see if people are overbooked so you can instantly spot bottlenecks? Even better.
  • Track time so that you have precise data on hours spent on projects. You can then use this data to plan future projects and predict how many resources you’ll need. And you will immediately see the impact of shifting timelines, over- or under-delivery on all your other projects going forward.
  • Store activities each resource is able to do so that you can match their talents to different tasks and projects and discover where the knowledge gaps are.

The Bottom Line

Resource forecasting is the only way to assess your future hiring needs, capacity and profitability by ensuring that the right people with the right skills will be on future projects. Truly, forecasting is part and parcel of becoming adaptable. The key is to use one cohesive tool to make your forecasts fast, accurate and problem-free, which is becoming increasingly important in the work-from-home age.

Lean on your forecasting software. It should provide all of the data you need to drive good decision-making in a practical, easy-to-use format. And if you can run your whole services business and forecast resources with one tool-jackpot.

Stop struggling to forecast resources. Keep it simple (and accurate) with VOGSY.

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