In This Episode
We are coming to the end of what’s typically called the planning season in business where owners and managers are finalizing their plans for the upcoming year…for those who do plan their business. Most business owners know they’re supposed to put together a “business plan” or “budget” for their business but most don’t know how to do it.
First off, let’s get the terminology straight. We call it a Profit Plan (vs. budget) because the goal of any year in running your business is to make a profit. But most owners were never taught how to pull together this plan. The end result should look like your Profit & Loss Statement (or P&L) and will forecast your revenue, expenses, and resulting profits for the upcoming year.
The best starting point is to pull together some of your historical data including your most recent P&L, a list of your top customers, a list of your current employees, and a month-to-month summary of your sales over the past couple of years. These are key pieces to help you start forecasting your sales and expenses for the next 12 months. Start at a very high level and set a goal for sales dollars for next year as well as desired profit. Then you can use these documents to add some details to those goals.
On the sales front you can project out sales by current customers vs. new customers. You can also look at projected sales from current quotes you have outstanding as well as potential customers you have in the pipeline. This should make up a good portion of your forecasted sales for the next year. Whatever the difference between your desired total sales and the details you’ve been able to cobble together in this paragraph will show the desired new sales. For instance, if your overall sales goal for the year is $1 million and you can see $750,000 in sales from your current customers, outstanding quotes, and pipeline, then you will have to find $250,000 in sales. You can then pull together a Marketing Plan to show how you will get those new sales.
Usually forecasting expenses is a little easier and should start with going line-by-line through your latest P&L and forecast each item for next year. We encourage our clients to get their team involved in this process so you can get their best thinking as well as buy-in to this plan which increases the chances of achieving this plan. During tonight’s show we gave some examples for clients’ of ours and how we guide them through this process.
People, Companies and Resources We Mentioned in the Show
Austin Powers International Man of Mystery (http://www.imdb.com/title/tt0118655/)
The post How Do I Pull Together a Profit Plan To Make Money Next Year? appeared first on Dirty Secrets of Small Business.
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