70% of businesses either public or private entities that survive over 5 years, have a plan.
Creating an annual plan, helps you to be more efficient, manage your debt, plan for slow times, looking into the future and set measurable goals.
But it is intimidating.
Follow this process:
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• Reflect on the past year
Without reflection, it’s easy to miss the big wins and losses from the last year.
I like to pull out my calendar and financial statement and take a look.
This walkthrough “memory lane” can help you apply what you’ve learned, good or bad.
• Estimate revenues for the next year
I like to do this early in the process. Your revenue will be based on a number of factors.
1. What is the trend?
2. What is the economy?
3. What contracts do you have?
4. What is changing in your business?
• Set your goals
Goals help align your team and create excitement. They need to be hard, but attainable.
These need to be:
▸ New initiatives
▸ Growth targets
▸ Talent targets
• Create a budget
What, you don’t love a budget like I do?
Like or not, a budget acts as a compass.
1. Figure your fixed cost
2. Estimate your variable costs
3. Plug one-time/capital expenditures
4. Create a contingency fund (5-10% of expenses)
Don’t rush this process.
• Project Cash Flow
By figuring “low” spots, you know your lean spots, improve decision quality in the moment and can plan your capital expenditures.
Is the June hard? Wait until after June has passed to make that purchase.
• Make adjustments to projections, goals, and budget
Now that you’ve set the foundation, it’s time to reflect on each element.
View them in light of all the new information you’ve gathered and examine assumptions.
As you do this review, think about:
▸ Profitability goals
▸ Increasing areas with uncertainty
▸ New initiatives that require spending
When you finish, dig into your cash flow model and figure out how redeploy the cash flows.
•Communicate your direction too often leaders keep these decisions to themselves
SHARE! Your team will:
▸ Buy into the vision
▸ Get excited with you
▸ Join you in the goals
Be thoughtful, but not withholding.
People can sense when they don’t get the whole story. you’ll redeploy the new cash flows.
Desire Ntaganzwa
Professional Accountant
