Ask yourself as a small business owner did you meet your Revenue target this year? OR Alternatively, should the question be, did you set a sales target or did you hope for the best?
Sadly, as a Chartered Accountant specializing in helping small business, I observe not enough setting targets for their small business sales and growth. Many slither along like a yellow bellied black snake not knowing if they are winning, going backwards or worst case getting a fatal bite of death as they had no idea what they need to achieve to make the business grow. Sadly a small business can become a liquidators picnic if sales aren’t monitored and cash is not collected.
A new financial year for 2018 is nearly here so let’s take a minute to ask some honest questions about your business growth plans!
Do you undertake sales growth forecasting and planning ?
First of all, let’s talk about how you as a small business owner undertakes revenue planning?
No cheating here , no ask a friend , which one do you do?
– Potluck and let’s hope we get it right?
– Just add 10% from last year!
– No idea I just wait until my tax accountant tells me ??
– Who cares money does not interest me, as long there is money in the bank!
– Plan and set targets every month based on history- correct answer
Your sales forecast is the key to business growth!In setting a sales target, you need to think about what you are trying to achieve taking into consideration:
– Your Overheads
– What you are trying to obtain from the effort and assets in the business to achieve on the bottom line,
– Are you just trying to keep turnover to keep your staff employed.
Take a large piece of paper and start the process. We have established that it is important to do a sales forecast and I am sure you get that. Many however get it completely wrong. Many clients say to me I do a prediction, but year after year we get it wrong? By wrong we mean above a 15 – 20% variation below what they hoped to achieve.I have some whose budget variation of upto 50% wrong.
How do you forecast ?
There are a number of sales forecasting techniques and each can lead you up a yellow brick road or down a creek bed with one paddle. Which one have you tried?
– Just take last years result
– Use a set amount and divide that by equally by 12 months
– Add 10%, and that is what we can do
– Methodically work out a forecast, based on consultation with staff and my accountant etc . It may be more or less from last year but its true.
Forecasting is more than just plucking figures onto a spreadsheet. It takes thought and a process to get it right! Many small businesses forecasters can be overly optimistic and then under deliver. They under deliver because:
– They do not understand their customers,
– They do not have a marketing plan to grow, they just hope the sales keep coming in,
– They don’t think about seasonality and industry trend,
– They hope all is rosy and don’t face reality,
– Have no idea!
So what can you do to get it right and grow your business when predicting sales?
Here are my three hints to help with sales forecasting
1. Understand your customers buying cycle
Review your top customers and look at the trends. When did they buy and how much? If you have a great relationship with them, sound them out for coming 12 months.
2. Use CRM and other sales tools
Use tools available to analyze your sales. Look at your accounting data and look at the trends. What were your biggest sales of products last year? Do you have the right marketing material to get results. Subscribe to programs like Salesforce and start connecting with your clients. There are a lot of smart apps out there so really there is no excuse that you shouldn’t have a go.
3. Are your sales processes in place to make sure you are making the wins
If you are not winning the sales, do you have a process to ensure you are in the race to win the sales? Are your employees focused?
What now and whom do you make accountable?
The final part of the process is once you are happy with your forecast for the coming 12 months what do you do with it.
– Stick it in your accounting system
– Review monthly Sales vs Actual
– Take action regularly if sales are being achieved per forecast
– Celebrate your wins with your partners and staff.
They say in baseball, follow through . You need to do the same with your budget . Follow the game , comfy with your key players in the business . Keep staff and your sales team informed with progress.
Business growth does not happen by accident and to get to your destination it’s necessary to plan and that is why you need to start at the top end. Get it right, and business growth will be an enjoyable past time.
Best wishes for your year ahead and more importantly your Sales Growth planning.
To expect the unexpected shows a thoroughly modern intellect. “