By Jeff Stagnoli, Nexstar Network Business Coach
Sometimes we leave things until the last minute. I know I do – it’s human nature! Once a year, a few days before Christmas, I realize I haven’t gotten (or even thought about) any gifts yet, and it never goes well. I end up panic-buying gifts I’m not sure people will like, when I know I could have taken a little extra time to make sure each gift was special. Every year, I think, I really wish I would have planned this better.
The holidays come around every year, yet they always seem to catch me by surprise. And as a business coach for the owners of plumbing, heating, cooling, and electrical shops, I know that planning season is just like the holidays for a lot of them – it happens every year, but every year, owners are caught by surprise when it’s time to have their business plans ready to go for the new year.
Now, I know it’s just the tail-end of the summer, most people’s busiest season. You might be wondering why we’re talking about this at all. But this is the time to start talking about reviewing and refining your business plan for the new year. Now. Here’s why:
An early start = reliable data.
Most company budgets are put together in September, October, or November. In order to put together a reliable budget, you’re going to need good numbers and data. When you start now, you’re going to have a little bit of time, going into a shoulder season, when you can make sure you have accurate numbers that you can use to build your action plan.
And just how do you get good numbers and data? Simple! Most businesses use the last three years of tracking to predict the upcoming year. As you gather your numbers, you’ll want to look at your monthly trends for calls/leads run; your conversion rate/closing ratio, and your average sale.
Some basic business planning math:
Take the monthly calls/leads you ran (the homeowners your technicians/sales staff visited)
x
your conversion rate/closing ratio
x
your average sale
=
Your total monthly revenue
This formula works for any business! I’ll prove it to you. Let’s say you and I own a souvenir t-shirt shop on the boardwalk of a resort town. If we wanted to make a business plan for next year, we’d need to be able to plan for the amount of revenue we’ll be pulling in. But how could we predict that?
Well, let’s say we had an electronic headcounter that beeps whenever someone walks in the store. OK: we know how many people visit our store in a year. But how many people buy something? We’d have to look at our number of sales for that. Let’s say 40% of the people who walk in our store buy something. So how much is our average sale? If we looked at our receipts, we’d find out that, on average, each person buying something in our store spent $22. So how do we find our total revenue for last year?
Foot traffic x conversion rate x average sale = our total revenue!
If we know these numbers, and we know them for the past three years, what’s to say that next July we won’t have the same foot traffic? The past nearly always repeats itself. If you use the last three years of data, the numbers will get you so close to exactly how the next year is going to be. You’ll be amazed at how well this works.
But what if we wanted to grow our t-shirt business? This is where we can tinker and try out new ideas. For our t-shirt store, we could put signs out along the boardwalk to get more people to come inside. What if we could get 10% more people to enter the store? What do we predict this will do to sales? What if we rented a second place on the boardwalk a few blocks up? We could likely already predict how many t-shirts we’re going to sell at a second location, based on our data.
You can do this math with any business. Including yours. Look at the past to predict the future. The data isn’t hard to get.
The only way you’re going to be able to have your business plan ready to go in the new year is if you start gathering your data and numbers now. Don’t be the person who just puts two days aside in late November to sit in a conference room with your leadership team, looking at them, saying, “OK, it’s time to plan! Where do we start?” Get prepared – get your numbers in order now. You’ll find business planning for next year is easier than you think, especially if you start early.
Jeff Stagnoli has been in the industry since 1991. As a business coach for Nexstar Network, he loves helping members create individualized paths to success, and especially enjoys connecting with owners on a one-to-one level. He looks forward to helping members build the businesses of their dreams. Jeff can be reached at jeffs@nexstarnetwork.com.
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