Even though it’s good business practice to constantly review your numbers and business plan, a new financial year often brings with it a period of reflection and a bit of a reality check about how your business is travelling.
I have seen our clients grow their revenue by an average of 20% when they take charge of their numbers and follow these 4 simple steps.
Step 1 | Analyse your numbers
Analyse how you made your revenue in the last 12 months. This means looking at things like average client spend. Divide the revenue by the number of clients you serviced to determine the average spend per client.
Look at your hourly rate. If you are a service provider, divide the number of hours you were available for client work and divide that into your revenue number. If you have a number of products, then review the revenue on a per product basis.
Most accounting software like Xero, MYOB, etc, allows you to review and measure your numbers so utilise that software.
Step 2 | Budget for the year ahead
Project your expenses for the next 12 months by preparing a budget. Using your profit and loss for the past 12 month, create a budget by going through each expense line and projecting what you will spend in the year ahead.
If your plan is for all things to remain the same, then allow for slight increases across some of the fixed expenses like electricity, rent, etc.
If you plan to grow then look at how that growth will impact your costs. Determine whether your salary cost will increase if you bring on more staff. Ask yourself whether you will need to invest in more stock or infrastructure. Finally, the most important part of writing a budget is to determine how much you plan to PAY yourself.
In our experience, most clients pay their expenses and then pay themselves whatever is left. If that is how you have always done it, then I recommend you do something different and project your salary. You now have a revenue target. — Jacqui Attard
Step 3 | Create a sales plan
Now that you have created a budget using your analyses of your income for the last 12 months (step 1). You will be able to plan what you need to do different to reach your target.
Divide the total budget, by average spend per client or hourly rate or by product line.
This is where you can now start to be strategic about your business. Do you need to increase the number of cleints you see or increase the average spend per client. If you selling a number of products consider whether you can you encourage clients to by more products from you or if your clients come in regularly can you shorten the length of time between appointments.
Step 4 | Set new goals
Divide your revenue target by the number of days or weeks you trade and work with a daily or weekly goal.
This goal will keep you accountable, track and measure your results. Share the goal with your team, if your team are engaged they will help you achieve it. Remember, it’s no secret that work can be carried out much more effectively when there is a fixed level put in place as a marker, as opposed to just hoping for good results.
Realise Business CEO Jacqui Attard believes that “A business without goals is like watching a tennis match without a score, how do you know if you are winning or losing. These 4 simple steps will help to you review the previous year and to plan for the year ahead.”
Remember, Realise Business’ professional advisors can take the stress off your hands. With a team of experienced experts who possess a track record of helping small businesses succeed, Realise Business can help carve an in-depth financial plan, providing you with a clear vision for the future. Book now.