With the new year just underway, everyone is talking about New Years Resolutions, and every business owner has the same one: Earn More Profit than last year. Business owners often look at a new year as a new beginning; with a new year comes new goals and a unique opportunity to earn more profit than the previous year. Ideally, a business owner will have started this process in the 4th quarter; however, if they haven’t, it is not too late yet to prepare for the rest of the year. You must start by developing goals based on your objectives for the year. For starters, what objectives, often called KPIs (Key Performance Indicators), should you even measure? This will vary from business to business and industry to industry, but some of the most basic KPIs include:
- Number of active clients
- Employee turnover %
- Quality of product
- Customer satisfaction
- Customer retention
Once your KPIs have been identified, setting realistic time frames and frequency to monitor results is critical. While it’s great to have yearly goals, don’t forget to set some smaller period goals, such as monthly or quarterly as well. Remember, the longer the time allowed to achieve the goal, the less urgency is likely displayed toward meeting it by staff. Set up regular meetings, discussions, and report outs with your teams so that goals and results may be analyzed and updated with key team members regularly.
So, how do you get started? You can begin by following this six-step plan to prepare, plan, and present a meaningful roadmap for earning more profit in the new year.
- Perform an in-depth analysis on what you accomplished this year with your stated KPIs and metrics. Compile and distribute year to date reports to understand where you succeeded and fell short. Don’t just post a scoreboard of wins and losses. It’s imperative to know the reasons why you achieved what you did. For example, ask yourself and the team:
- Did you predict the market trends accurately for the year? Did you course correct as conditions changed throughout the year?
- Were the targets set too high or too low? Were they adjusted up or down during the year as trends were analyzed?
- Did you have the right people in the right places to be successful?
- Have in-depth conversations with your teams about what went right during the previous year and what you could have done better. This will help keep you from repeating the same mistakes in 2020 or abandoning successful practices from 2019 which is a sure recipe for disaster and missing out on making more profit. Business owners must understand where they have been to know where they are going.
- Set company-wide goals and targets for the upcoming year. Collaborate with the leadership team to create high-level company goals for the forthcoming year.
- Each department in the company creates their goals from the company goals. Each department should understand what the company is committed to achieving in the new year so that they can create their goals and tactics to support the overall company goals.
- Ensure all your goals are S.M.A.R.T. S.M.A.R.T is an acronym for five essential elements of goal setting: specific, measurable, achievable, relevant, and time-based. Stay away from vague goals that have no way to determine if the objective was truly met. Once you do this, your S.M.A.R.T. goal of earning more profit in 2020 will be easier to attain.
- Present your goals to the entire company in a clear, concise, and inspirational way. Your full company must buy-in to the plan and work toward the results every day. Spend a lot of time in this “buy-in” phase. You can hold department meetings, schedule one on one conversations with key employees, even present the entire plan again. A team is only as good as their belief in the mission.
Remember, the goal of any KPI or goal is to create sales and more profit for the business. As part of the goal-setting process, understand how much additional revenue each initiative will bring in comparison to the overall sales and profit goal. This exercise will help determine if the tactics you plan support the global goals. For example, if you have KPIs that call for 12 additional projects to be sold in 2020 vs. 2019, tie that back to how many sales dollars each job will create and do a full analysis to understand how much profit each job will bring. If the 12 projects don’t create the sales and profit goals, you must change either the goal or the tactic (i.e., # of projects) so that the two align.
One of the more essential parts of earning more profit is finding the “sweet spot” for goals that are challenging enough to stretch the business but not so challenging that they are entirely unattainable. Remember, one of the criteria of a S.M.A.R.T. goal is that it’s achievable. It may take a bit of trial and error to get to goals that challenge the staff, but it’s worth the effort. Make sure to include key team members (not just management) in this process. Getting the team’s buy-in during this process is a crucial component to success.
By the way, it’s okay if every goal isn’t met at the end of the year. Some people use the term “stretch” goal for targets that are achievable but just outside the comfort zone of what people think they can achieve. By creating these stretch goals, you have a much broader avenue to manage for success. The best-case scenario will come when the team is suggesting even higher goals than you thought were possible. You may need to talk them off the ledge a little bit and move them back to an attainable goal, but the enthusiasm and buy-in from the team that created the higher goals is a critical element of success and earning more profit.
As with any plan, much of the success is found in the execution. The critical thing to remember as we begin the new year is that you must set goals and benchmarks for your business to earn more profit in 2020 than in the previous year. Once your plan is in place, work it very day. Throughout the year, goals and objectives will likely change but, don’t worry; that’s all part of the plan.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: