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HomeBlogBusiness BlogPlanning Your Business Budget and Setting Goals for Next Year

Planning Your Business Budget and Setting Goals for Next Year

 

When I first started a business I never had a budget and my only goal was to have money left over at the end of the month. I was almost surprised by success. I had two small kids to raise and if I could make enough money to stay at home and take care of them I was happy. It wasn’t long before I needed some help. That meant there was another person depending on the revenue from my business. This was getting serious. Employees three, four and five quickly followed and they all needed goals and objectives. Sure I had done all of this practice planning in business school but now it was different, this was the real thing and it involved not only my blood, sweat and tears but that of other people too.

Setting Sales Goals

The first goals I did were based on the revenue I had been able to bring in by myself and then a little wishful thinking. As a few years went by I got better at predicting revenue and the expense side was pretty easy to budget for. While sales reps tried to be helpful by supplying me with their own goals for the next year, they almost always set the bar too low guaranteeing that they would make their goals every month. Our company bonuses are based on exceeding goals. While setting the bar too high would be discouraging to most anyone, a more reasonable 50/50 split has worked best. By the end of the year if the rep has been doing a good job and if the goals were reasonably set the rep should have exceeded her goals half of the time. We’ve also on occasion set a higher bar with B.A.G.s (Big Ass Goals) that pay an added bonus.

Planning for Business Growth

Have you decided how much revenue you want for next year? Here’s the crazy part of my planning, I’d always do the revenue goals for the sales rep and then hope that they exceeded their goals to reach the revenue I had my sights set on, despite the fact that their goals added together didn’t come close to reaching my revenue target. In my industry there is a revenue threshold for optimum net income and my business was never quite there. I always wished it was and we just couldn’t make it despite a lot of good effort.

Finally one day it dawned on me that I had to put opportunities for revenue growth in place instead of just hoping that it was going to happen. If I wanted to get to 1 million in sales but was only at $500,000 I needed to create more ways to bring in revenue instead of hoping that what I had currently was going to experience unheard of growth for the next few years to reach the 1 million dollar mark.  

Plan For More Revenue

Our team got together and came up with a winning trio of products that would help us get closer to our overall revenue goal. We made sure we had the people resources in place and that the net revenue would make these products welcome additions. I have no idea why it took me so long to figure out how to grow the business. I guess it was the short-sightedness that comes with just following an annual budget.

Annual budgets and goals are essential for keeping track of the health of your business but at least as important is planning for growth. Where do you want your business to be in a year, two years, five years from now? How are you going to get there? I had always answered the first question but it took me years to come to the realization that I had to answer the second question too. Now I know where I want to go and how I’m going to get there and as a result have a thriving business that has survived the turmoil of the last few years.

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