Most business owners go through some sort of annual budgeting process. As the 4th quarter comes to a close, they look ahead to the next year and set some sort of financial goals for their business. Some examples:
“Grow sales”
“Close more new customers”
“Improve our profits”
Unfortunately, without specific numbers and a disciplined process in place, these are more like using hope as a strategy, than having an actionable plan.
Setting financial goals for your company should start with measuring where you are right now (or in this case, where you were last year). Weekly, monthly and quarterly numbers are necessary.
I always suggest to my coaching clients that they think ahead to what they will want to know, and then work backwards to decide what measurements they will need.
If you want to grow your sales, then you need the numbers for cases moved, dollars of revenue, customer sales and what the product mix is. Track it monthly.
I always used a Trailing 12-month tracker, (TTM) so I could see what was really going on in my business (not just the weekly or monthly revenue numbers). If you want to know about how to create this tracker, email me.
For sales, I like to involve the people doing the actual sales to give their input about what increases are possible. But, as CEO, I always shared my vision with them to create an anchor number to start with.
If you want to “Close more customers”, first decide who your ideal customer is, and what market segment they are in, then look for those names which are missing from your customer mix. My company’s list of prospects was long and we knew it would take time to close new clients. But because we put a strategic prospecting plan in place and assigned the prospects to specific sales team members who followed our process, we were able to close several new clients each year.
And if you want to “Improve your profits” there are two ways to do that: Grow your top line, or reduce your expenses. Or a combination of both. Making your business more profitable does not happen by just raising all your prices. I always recommend a more strategic process for improving profitability.
In businesses that mark up their products by a percentage or work on a commission – it’s possible to evaluate if your commission is high enough for the services you are providing. If you can’t raise your commission percentage, you can consider charging separately for special services (such as marketing, pass-through expenses or consulting).
On the expense side, when was the last time you evaluated the expenses that you are incurring as a company? For example, over the years, with the advent of email, scanning, electronic invoicing and ACH payments, we were able to reduce the number of copy machines in our building from 5 to 2. Not only did we save money on the cost of the machines, but we eliminated a lot of paper costs, labor to do filing, postage and more.
Hopefully, you have company goals in place for 2025. But if not, it’s not too late to create them. There is no reason that you can’t work on specific, measurable goals in January and create your plan for the rest of the year.
One of my favorite questions to ask my CEO clients is this: Who “owns” each line in your budget or income statement? If you can’t answer that or have not thought of that approach – it may be time to think of it that way.
I guarantee it will give you better results….more sales, more new customers, more profits.
Onward and upward and let’s make it a great year!
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