Does a lack of strategic planning cause you to set low expectations for your business as a way of combating the feeling of not having control over profitability?
Said another way, has business driven you into desiring only small goals – or maybe not wanting to set goals at all? There is some simple and practical strategic planning that can help you aspire to more and gain more control over your company’s outcomes. The challenge is often that these strategies aren’t talked about outside of management consultations.
Many business managers may be under-implementing or unaware of vital processes that support greater fiscal control. This blog focuses upon the four key steps towards greater financial management of your company’s revenue and profitability.
Strategic Planning Step 1 – Understand that failing is harder than the effort required to achieve success.
Most failure in small to midsize business is due to a lack of action from fear of being judged negatively by others. We need to better understand and accept that the pain of failure is far worse and longer-lasting than some grinding activities required for success. When we accomplish this, we begin to see that the required strategic planning for achieving success can not only less painful than failure, it can actually become enjoyable, motivating and greatly rewarding.
Strategic Planning Step 2 – Get simple, accurate and clear metrics for how you are currently performing vs. what is required for success.
One key issue that faces small to medium business managers is that more money is needed in the sales pipeline. There is a finite balance between a critical focus on conversion rates and the overwhelm of more leads than you can handle.
Of course, it is always smart to work on improving your conversion rates in order to maximise the quality of your customer sales process, but not as a way of combatting a lack of leads. This sense of lack also affects pricing and profitability due to feeling the need to convert as many sales a possible. Quality over quantity is often a more productive mentality to assume.
Establishing clear metrics means knowing how many leads are required for a given period to ensure an adequate sales pipeline. A second number within the sales pipeline is generally also required, such as the number of proposals submitted per the same period. The third important number is often the total sales (revenue) amount for the period. And fourth is the Gross Profit (GP). With these three or four numbers in hand, you can begin to get objective feedback on whether or not you are doing all that is required to achieve your desired numbers.
From these basic metrics you can expand to begin working toward a balanced scorecard that takes more company activities into consideration. However, if you are currently not diligently reviewing some simple weekly metrics and making tough decisions to correct any under-performing numbers, stay practical. This dynamic of practical versus diligent reminds me of the unfit person wasting time researching the benefits of different exercises. They should simply begin by stepping away from the computer and running around the block! It is easy to make huge improvements early on before you need to start contemplating more sophisticated strategies. In the business world this can translate to not concerning yourself with the perfect CRM, networking group, or product presentation. Just get going and measure some simple numbers accurately to get some feedback on how you are progressing.
Strategic Planning Step 3 – Ensure everyone is accountable to someone or something.
Accountability gets easier when objective numbers are being measured. To really elevate accountability, find ways to make everyone feel accountable to the point where it is far less painful to do what is required than paying the consequences for not achieving targets. This can be as basic as regularly reporting progress to the rest of the team.
Quota bonuses can create excellent motivation. Even if set small and low, the regular bonus can be factored into your base salary budgets and at a level that is frequently achievable yet not guaranteed. Staff will become accustomed to this little windfall, making them even more motivated to improve should they not attain their monthly quota.
Even a supposed bonus that is simply a portion of their budgeted salary can instill high levels of motivation.
Strategic Planning Step 4 – Schedule quarterly reviews to reassess and restructure your processes
There is a reason business breaks a year into 90-day quarters. It will serve you well to align with the dynamics of business and people in general. We need to recalibrate every 90 days to remain clear on where we are going and why.
The typical strategic planning session requires 4-8 hours every quarter to go through the company processes. When performed correctly, company planning days reaffirm clarity, urgency, and accountability within your team, keeping them on track and motivated for the next quarter.
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In conclusion, maintaining control of your company’s ability to generate a desired level of revenue and profitability is not for the lucky, it is for those who approach the process correctly, functionally and with the right mindset.
Give it a try. For the little effort it can take, the gains can be exponential. There is a reason more than 80 percent of businesses fail within the first three years. We hope this article has helped clarify that business and financial success have little to do with luck. Through Better Financial Control, you now have access to information that can make building your business a practical, predictable success. Please feel free to contact us anytime for many more practical business solutions.