Plan Ahead for the Year Ahead

It’s January, the start of a new year, and now is a good a time as any to look back and reflect on the course your business took the previous twelve months. But it’s also a good time to put a plan in place for 2012. So, before you get lost in the details of a new social media blitz or great marketing campaign, take time to answer some very simple questions about your current plans and where you want to go with your business.

» How many customers or sales do you need to make today to turn a profit?
» How many do you need to break even?
» Do you have a system in place to generate consistent cash flow?
» How many prospects do you need in your sales pipeline to produce enough customers to make your profit margin?
» What is your profit margin?

If you can get a handle on these questions, you can get a handle on your business. And that will put you ahead of almost all business owners, and, most notably, ahead of your competition. Simply put, you can’t manage what you don’t measure, and the most profitable and highest growth companies know their numbers on every level.

A harsh reality is that most business owners have no clue what their true numbers really are. They may have a gut feeling as to what they are, but they don’t really know. Why? Mainly because they’re afraid of what the numbers may reveal to them. However, to really prosper in business, you’re going to have to accept the notion that business is numbers, and by mastering your numbers, you can master your business. Here’s a little of what you need to know:

Your Numbers At The Moment
Figure out what your sales, cash flow and profit margins look like. Then begin focusing on what you can control.

What’s your best selling or projected best selling product and can you raise its price at least 10%? Do this and you’ll instantly start to boost profit margins. Afraid you can’t boost the price of your best selling product? The reality of that is, most of your customers won’t even notice the difference. And those who do will start falling off but that’s okay. They’re your lower on the totem pole, “C” and “D” type customers, whereas your “A” and “B” type customers are the good ones who’ll stick around. The C and D’ers are price conscious and will likely never be happy anyway. So let them go. Chances are, they will flock to your competition, where they will haggle about price and complain about service. Let them become someone else’s problem. That will allow you to start boost up the customer service experience with your current customer base, as well as convert new, quality prospects who come through your door.

Speaking of which, you do know how many prospects are out there for you, don’t you?

And how many would actually buy something? When you know this, you can start to manage the number known as your “sales conversion rate” with extra service and sales scripts to help guide your prospects through the sales process.

Plus, if you know you always convert 15% of prospects into a sale and you know you need 12 sales to make a profit, you can easily determine you’ll need 80 people through your doors on average to be profitable. Now your question becomes something you can act on, namely “How can I get 80 people through my doors?”

The Numbers Where You Want to Be
How much extra are you looking to make. For example, are you looking for an extra $10,000 in gross profit on a 25% profit margin? You’ll need to generate revenue of at least $40,000.

Are you a professional who charges $100 an hour and now wants to double your income? You might need to determine whether it is better for you to charge $200 over 2,000 working hours a year (highly unlikely given you can’t charge every working hour)—or charge $400 multiplied by 1,000 working hours a year (meaning you can take some time off once in a while). Now the questions become: Do you have the products, services or skill set to charge that amount? Can you reorient your marketing to target audiences both willing and able to pay that amount?

The Numbers in Your Plan of How to Get “There”
Sometimes the numbers will reveal your current skills and market conditions—or your current mix of products and services—just won’t support your targets.

Maybe you want to charge a higher rate per hour, but realize that you can’t until you add another level of product or service, or more expertise to your skill set. Or, maybe you’re the newest entrant in a category with a dozen seasoned competitors, and you’re all chasing after the same small pool of price-conscious customers. That’s not bad news—it’s a reality. But it will assist you in determining what you need to do to improve and enhance your professional skill set or to revamp your product and services mix. The numbers might show you that you can afford to hire a great salesperson and a bookkeeper while you network or leverage your greatest skills to build your business in new and innovative ways. Could you do that if you were physically in your business 12 hours a day? Probably not. But those opportunities won’t ever present themselves without a good handle on the numbers of your business.

So, do your homework before it’s assigned, so to speak, which means look at your numbers—cash flow, sales, leads, and you’ll be so far ahead of the curve you’re competition won’t even be able to see you way out there in the distance. Plus you’ll be better prepared for any challenges that inevitably arise. You’ll also be equipped to make better decisions with information that can help guide your gut—if that’s the way you prefer to do your decision making.