If you’re like many business owners, you may wish to create goals and growth targets from time to time. In 2021 we’re exiting a pandemic so many businesses are making big changes out of necessity. Every year more than 70% of Irish business owners are expected to make strategic business plans. A considerably lower percentage stick to them. With this post we aim to give you the structure to stay on track.
CREATE BUSINESS GOALS YOU’RE SURE TO ACHIEVE
When we set business goals, it’s done with big expectations and strong intent. However, after a few months the early motivation has disappeared or things have just got so busy, many will find it hard to stay on track. What can be missing is a good plan of action to keep us on the journey to achieving our business goals. Here is a plan to keep you on track:
1. Identify what you want. We sometimes don’t reach our goals because they are not what we want but what others say we should want. For example, you might feel constrained by risk-averse advice but your gut is telling you to move your business in a new direction. As we plan for 2021 we can draw on lessons learned from Ireland’s last crisis.
“What the recession did to many small businesses was make them switch from expansion mode to one where every euro was held hostage. If you are in a mode where you don’t have access to capital, opportunities are lost and you are more risk averse,” says David O’Kelly, partner in KPMG’s corporate finance practice.
2. Assess your financial situation. Once you have set your priorities and know what you want to achieve this year, review your complete financial situation. Include your recent set of accounts, bank statements, cash flow forecast and other information you deem important. The objective is to obtain a complete understanding of your business income and expenses so you can create realistic financial goals.
3. Set SMART Goals. When creating your goals keep this acronym in mind:
Example:
Goal: Prepare for Brexit by moving into new markets. The business will move in to 8 new markets within 3 years. In 2021 it will move into the USA & Canada. We will commence planning now. In 3 months we will launch a marketing campaign and assign a business development manager we aim to get €200k in sales from this market in 2021.
Each goal states a specific and written monetary amounts and the time frame in which you plan to achieve the goal. The example above takes the process one step further specifying a milestone to achieve in the year in addition to the long-term goal.
4. Make a plan. Once you’ve specified your goal create a plan to make it a reality. Instead of trying to create the perfect plan, focus on defining the activities you will do to reach your goal. If your plan requires finance to execute it www.BusinessLoans.ie can help by organising multiple quotes to get you the best deal.
WHAT DO YOU TRACK TO ACHIEVE YOUR GOALS?
A budget. A budget will provide a visual representation of your spending activities, income and expenses.
STEP 1: ADD UP YOUR INCOME SOURCES
The first element of a good business budget is figuring out how much money you bring in on a monthly basis.
Start with your sales figures first and then go further by adding other income sources you use to run your business.
STEP 2: DETERMINE FIXED COSTS
Fixed costs are expenses that are charged the same price each month. As you can imagine, incorporating these is by far the easiest part of creating your business budget.
Review your past bank statements or accounting software reports. You’ll easily be able to spot your fixed bills and the total amount they cost you each month.
STEP 3: INCLUDE VARIABLE EXPENSES
Items that don’t have a fixed price tag each month are called variable costs.
Many of these purchases can actually be scaled up or down depending on the state of your business, using your monthly profit. Your profit each month will be determined by the earnings you’re left with after paying all your costs.
So, if your business does better than you forecasted, you can use the extra funds to increase variable spending enabling you to grow faster.
STEP 4: PREDICT ONE-TIME SPENDS
A great perk of creating a budget is now you will be able to factor in one-time purchases better than ever before. While some of these items may come up unexpectedly, like the purchase of a laptop to replace the one that crashed, others can be budgeted for months in advance, like that business retreat you’ve been eyeing, to protect your business from financial burden.
STEP 5: PULL IT ALL TOGETHER
The first four steps of this post detail the elements of a good business budget, so the last step is simply pulling it all together. Take action by using this handy checklist with specific examples so you can create your budget without any hassle:
INCOME SOURCES:
Hourly Earnings
Product Sales
Investment Income
Loans
Savings
Other
FIXED COSTS:
Rent/Mortgage
Utilities
Salaries
Internet
Government and bank fees
Mobile phone
Website hosting
Accounting Services
Legal Services
Insurance
VARIABLE EXPENSES:
Raw Materials
Contractor Wages
Commissions
Advertising
Other Marketing Costs
Transportation
Travel & events
Printing Services
ONE-TIME SPENDS:
Computer
Furniture
Software
Office Supplies
Gifts
Expenses. Closely tracking your expenses helps you commit to your budget and ensures you have extra money towards furthering your business growth. In this regard I can’t recommend highly enough reading the business classic The 80/20 Principle by Richard Koch. It will help you identify where your 20% of business efforts are resulting in 80% of your business income and brutally cutting down on wasted resources.
5. Defined steps of achievement. Create a specific plan with defined steps to achieve your goals.
Example:
Goal: Prepare for Brexit by moving into new markets. The business will apply the €3000 savings identified monthly towards the sales & marketing budget of the USA & Canada new market entry. We will also get finance pre-approval for a stocking loan through www.BusinessLoans.ie that we have identified in our forecast will need to be drawn down in 2 tranches in March and July.
Experience a setback?
It’s normal to face challenges and this year Irish business owners have experienced immense challenges. It’s tempting to retreat or give up on your plan. Instead of quitting, adjust the time frame in which you expect to reach your business goal. Alternatively explore some shorter term finance solutions. Talk to us. We can help you find a loan quote solution to stay on track. Or if you need financial advice for the big decisions consult your accountant or reach out to your Local Enterprise Office. Call us 7 days on 01 55 636 55. We have many professionals in our network who may be of use.
References:
https://www.freshbooks.com/blog/the-5-step-plan-to-creating-a-balanced-business-budget
https://www.irishtimes.com/special-reports/finance-for-smes/time-to-look-beyond-the-banks-1.297542
