The process of business planning at least once a year is not a luxury but a necessity for even the smallest business and one that should not be ignored.
It gives the opportunity for insight into how your business is performing and areas for improvement. Many small business owners rely on annual accounts but this is often too late as the information is retrospective, and in many cases as much as nine months behind, as they’ve been completed to fulfil your statutory requirement.
Not only that but it will identify other key areas necessary for the successful growth of your business. Do you have the right resources? Do you have the right staff/skills? Are your premises large enough? Do you have sufficient working capital?
Preparing a Budget – Sales
The first place to start is with the sales figures, and previous performance helps with preparing a budget.
If you’re confident that there is a certain level of business and you’re previously experienced growth of say 5% per annum that this can form the basis, but where possible drill down into the detail:-
- Month by month basis
- Customer breakdown
- Type of sale
If possible, use data from more than one year as this will often show trends that can be incorporated into your forecast.
It will also give you the opportunity to review the products/services you offer, is it possible to sell more? Can you provide more to a particular customer or type? Can you offer something different? What are your main competitors doing? Can you increase prices? Do you regularly review prices? Is there any seasonality to your business?
By reviewing all of the information and setting targets it helps to formulate the plan to help you achieve the goals you have set.
The key is also to measure your performance as you go; so set the budget, put the plans and actions in place to achieve the growth, then each month measure your performance.
This helps highlight areas where action needs to be taken and you’re identified it each month and therefore you have the opportunity to put it right before getting to the end of the year and being disappointed that you didn’t make better use of the information you have in order to achieve your goals.