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Business Plan Recipe
There's nothing like the invigoration of a whole new year stretching out before us. There's a blank slate on which we can design and redesign our businesses. Can you fill in the blanks in this recipe that will cook up a successful year for you -- without looking anything up?
My company's net profit goal for the coming year will be ______%
of our
anticipated volume or $________.
My company will complete $ _______ in volume this coming year.
We will bid jobs by using an overall markup of ________%.
Thus, we are targeted to hit _____% in direct job costs and to achieve
a ______%
gross profit.
Our overhead (including my salary) will be $______ or ______% of
volume.
If you did it, congratulations! If not, you need to be able to guide your company based on targets that lead to success. This recipe contains all the major financial information you need to have in your head as you go about your roles. This information results from a careful planning process -- more later.
If you as owner pass the above test, here is the next challenge. Can each of your key management employees fill out this recipe for the coming year? Check it out. If they can't, it's usually because you have not communicated this key information. By having this recipe front-of-mind, your salesperson knows exactly how to mark up jobs and how the job costs must result.
Your production manager knows the target job cost percentage they must hit. You and your key people can review each month's statements to see how you are doing and to create action plans to correct when you are getting off course.
Are you adventurous and risk-taking? Then go to the next level. Why shouldn't every employee you have be working every day with these targets in their minds? How would Cal Ripken and Mark McGuire have done if they only knew Babe Ruth hit the home run record but didn't know how many home runs that was -- no target? Or if they didn't know their own score on homeruns -- no target? Or if they didn't know how the other contender was doing -- no target?
Your recipe for success is simple but so powerful in its effects. You arrive at it through planning. Let me tell you a magical secret I've learned as a consultant. If, without planning, you now earn a positive percentage at the net profit line, you will add 5% to that net by creating targets and monitoring your progress against them. If, without planning, you have had year after year of mediocre (or worse) financial reports, this planning will lead you to consistent profitability. How's that for a major payoff on perhaps 10 hours of work for you and each of your team? Here are some thoughts on planning. Gather your team together for 4 or 5 meetings and follow this path:
1. Start by focusing on your achievements last year. You may have upgraded your technology, shaved 2% off job costs, added health benefits, finally found a really good office manager, developed a long term relationship with a commercial client.
2. Then focus on your disappointments last year. You lost a star salesperson who must be replaced in this tight job market; your workers compensation insurance went up steeply because of two accidents; you've had a long and tedious switchover to a new accounting software; you sometimes had to scramble for leads and reduce markups to get the job.
3. Set goals. What do you want to achieve this year? What are your financial goals, your marketing goals, personnel goals, estimating goals, etc. Go through each part of your company and decide what must be changed and how. Pick two or three major goals and lots of departmental goals . Be realistic about what you can accomplish. But remember, with everyone working on the company a portion of each week, your team can accomplish huge amounts over a year's time.
4. Support each goal with a practical action plan. Include a time line and a "champion" who will be in charge and take responsibility and accountability for this goal.
5. Develop a full financial budget for the year and be sure it is monitored monthly. Your accounting software can do a monthly comparison to budget so the team gets feedback and can make changes.
6. Develop a marketing budget line item in the main budget and then a separate marketing plan and schedule for the year.
By this time, your team is pumped up, focused, challenged and ready
to roll. You'll love it. You'll do less, achieve more, make more
money and run a better company. These are not empty promises. Get
your recipe and your plan in order and get cookin!
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Official Charity of 2008
Remodelers Advantage Inc.
535 Main Street, Suite 211
Laurel, MD 20707
ofc: 301-490-5620
fax: 301-498-6869
Info@RemodelersAdvantage.com