Target Profitability and Take Your Bite-sized Business Plan to the Next Step
Topic: Managing Your Business,Tips & Tricks | Comments Off on Target Profitability and Take Your Bite-sized Business Plan to the Next Step
In writing about Key Success Factors (KSFs) as a tool for managing a small business, I recently suggested that you create a “bite-sized” business plan. The process is simple; just take twenty minutes and one piece of paper. Jot down:
- Your top three goals for the next 30 days.
- What activities are required to achieve those goals?
- What measurement(s) will chart your progress?
Once you have these fundamentals identified and written down, ask yourself this question: “If I do these activities properly and hit these goals, how much profit will I make?”
If you’re like the owners of most small business, you won’t know the answer! Why? Because most plans don’t include a line item for profit! It’s true; look at the “bite-sized” plan you’ve written. You almost certainly have a top line, or a revenue number. You’re bound to have something written down for targeting your expenses. Did you subtract the expense from the income and commit to a profit target?
- If you did, congratulations, you’re in the small minority.
- If you didn’t, then don’t fret – instead ask the question, “What’s the right amount of profit?”
Don’t fall into the trap of simply accepting the difference between the income and expense projections. Instead, establish a specific amount of profit you want to achieve. By targeting profit as a line item, you’ve taken a big step towards turning it into a reality.