There’s an old saying “Most businesses don’t plan to fail, they just fail to plan”. If you want to achieve a desired outcome you need to consider what actions are required to get there.
The key elements of Profitability are Sales, Costs and Overheads. So have a plan for these:
▶ Plan how you are going to achieve your desired Sales levels
- What are you going to sell?
- How much of it are you going to sell?
- Who are your target customers?
- What marketing are you going to implement?
- How will you measure effectiveness of your marketing?
- How will you manage sales enquiries?
- How will you measure effectiveness of your sales process?
- How much marketing and sales activity do you need to perform to achieve the sales you desire?
▶ Plan your Costs and how to Minimize Them
- Understand the ‘true cost’ of your product/service, including everything involved in getting it ready for sale. This enables you to set the right price to ensure a decent margin.
- Shop around to get best pricing on what goes into creating your product/ service.
- Constantly monitor costs to ensure they aren’t creeping up and so that you know when to either seek better pricing from suppliers or increase your price to maintain your margin.
▶ Plan your Overheads and how to Minimize Them
- Understand what overheads you need to run your business each month. These are different to the costs of the product/service e.g. rent, admin salaries, office supplies etc.
- Shop around for the best price or most efficient way of achieving things. For example do you really need a fixed office space? Could you run from a combination of a home office and casual office space when required?
- Constantly monitor overheads to ensure they aren’t creeping up and eating all your profit.
A budget is one of the most powerful tools you can use to ensure you end up with a profit.
The benefits of a Budget are:
- It acts as a ‘Roadmap’ by setting out an exact future plan of sales, costs and overheads.
- It reveals waste by comparing to actuals each month.
- It aligns priorities within the business e.g. everyone can be allocated their own area of responsibility and a budget to do it.
- Reduces stress because everything can be seen in black and white clearly.
- Builds new habits because variances can be investigated and fixed.
- Controls spending because people within the business understand there are limits.
