10 Business Planning Strategies for Success in 2024
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When you’re getting ready to start your new fiscal year, mapping out all of the things you have to do can feel daunting.
As the CEO of a business planning software company, I know that it can be tempting to start a year with an “I’m going to do as well as I can” mindset, and leave it at that.
In reality, what you should be doing is taking a bit of time to set out a plan. Think of it as a strategic roadmap that’s going to ground you in what you need to do as a business owner this year to accomplish your goals.
Here are 10 business planning strategies I recommend for business owners as they turn the page on a new calendar (or fiscal) year.
1. Start with your sales goals for this year
You are the expert of your business. You should spend some time thinking about a sales target for this year for your business.
How much revenue did you bring in last year? Were you happy with that number? Do you think you can grow it by 5 percent? Or maybe 10 percent? Think about a sales goal that is achievable but still a reach.
You want to set smart goals, pushing yourself to grow but also being reasonable. The perfect goal will be just slightly out of reach. It will push you and your team the whole year to work to achieve it.
2. Analyze your last 12 months of financials
In order to plan for the best results, you need to review how your business did the previous year. I’m not just talking about your overall profit and loss, but also which business lines brought in the most revenue, and which generated the highest margins.
Then, look at your expenses. Do they all make sense? Is anything surprising? Did you spend more on something that you anticipated? Does that spend translate directly to sales? If not, can you link the expense indirectly to your sales?
3. Review 12 months of marketing spend and what you got from it
Look at what you spent on marketing on a month-by-month basis. Depending on your business, the marketing spend may directly affect sales in the same month, or there may be a lag between the spend and the sales results. Take time to analyze your marketing expenses. If you haven’t already linked them directly to sales results, now is the time to do so.
Sometimes it’s easy to be on autopilot with a business and do what you always do. Getting in a rut with your marketing and advertising is easy to do. Now is the time to shake things up and really challenge every dollar you spent marketing your business. Can you justify the spend and link it directly to results? If not, it’s time to rethink, and spend your money elsewhere.
4. Focus on key metrics
Make sure you understand the key drivers behind your business. It’s not just about sales and expenses, but knowing how they are linked and how to drive profits and keep cash in the bank. Here are some key metrics to make sure your track:
- Return on Investment (ROI). You need to track the money you spend on marketing, and how many sales that spend drives for each marketing initiative.
- Gross margin. You need to know how much you spend every time you sell one dollar. What does it cost you to sell each service or item? Oftentimes business owners fixate on selling what drives the most revenue instead of what drives the most profit. Keeping your eye on gross margins will help you focus on profitability and not just overall dollars.
- Accounts Receivable (AR). If you send out invoices, and collect money from your customers after you have delivered products or services, then AR is very important to track. You will record sales as revenue as soon as the service or item is sold, but you don’t collect the money until after you invoice and get the customer to pay. The lag between invoicing and collecting cash can often drive a business to failure. Keep track of your AR days and make sure you set up strategies to collect money as soon as possible. Give a discount if a customer pays up front, and think about penalties if a customer is late with payment. Keeping close tabs on AR can have a positive effect on cash flow and keep your business cash flow healthy.
- Track metrics specific to your industry. For instance, if you are a restaurant, you probably want to track labor cost percentage and food cost percentage among other key metrics. A SAAS (Software as a Service) business will always want to track churn rate and lifetime value. If you are not tracking key industry metrics, or are unsure of what you should track, simply google “key metrics for a (insert your industry) business.
5. Take time to benchmark your business
It’s important to know where you stand in comparison to other businesses like yours. Benchmarking your key metrics against industry standards can help you find big wins for your business, or simply validate that you are making the right decisions.
For instance, if your gross margin differs by more than 10% from industry benchmarks, it may indicate that you are paying too much for your cost of goods or that your prices are too low. Have you recently negotiated with suppliers to make sure you are getting the best prices for your COGS? Or perhaps it’s been too long since you raised prices?
Benchmarking helps you understand a baseline, and then gives you specific areas to target and make changes to have a more strategic business plan.
6. Dig into the competition to understand your landscape
You probably have a good sense of what your competition is doing. But taking time to research and dig into their businesses will help you understand where you have advantages and where you may need to address changes to keep your business competitive.
Take time perusing the competition’s websites. Sign up for their email newsletters. Check them out on Instagram and Facebook. Secretly shop their products or services if you can.
While competitors can cause anxiety and oftentimes seem easier to stomach if you ignore them, don’t. In order to create a strategic business plan for the next year, you need to make sure you understand where you stand in comparison with all your competition.
7. Build a base forecast, then create scenarios to explore
Using your last 12 months as a starting point, build out a reasonable, best guess strategic forecast that achieves the sales goals you have set. Once you have done that, you should create a few “what-if” scenarios, in order to give your business options for the next 12 months.
What if you raise your prices? You might sell a bit less, but will you ultimately be more profitable?
What if you spend more on marketing campaigns that had good ROI in the last year? How much can you affect sales?
Building a forecast for the next 12 months, and then using that case forecast to create a best case and a worst case scenario, will give you options as you run and manage your business over the next year.
8. Add milestones to keep your plan on track
A business plan and well thought out business strategies won’t do you or your business any good if you don’t actually implement them. Now that you have analyzed your past results, examined your key metrics, looked at your competition and built a forecast, it’s time to set down concrete milestones to make sure you implement your plan.
Think about 3-5 major projects or initiatives that you need to accomplish in order to reach your goals. Assign dates to each milestone and assign a person to be held responsible for achieving the milestones.
9. Be prepared to revisit and revise
One of the best things about creating a business plan for your business is that it gives you a road map to follow, and helps keep you focused and on track to accomplish your business goals.
But a business plan is never right, because it is just a series of educated guesses about the future. What makes a business plan good is the information you get when you manage your business to the plan, and then revise the plan based on the most current information.
Every month you need to look at your forecast and compare it to your actual results. Analyze and dig into the variance between plan and actual. Why did something do better or worse than you thought? Maybe a price increase you implemented isn’t working. By reviewing and revising your pricing strategy, you can make adjustments when they are needed, before they adversely affect your business.
If you routinely manage your actual results every month against your plan, you will gain insights to help you make better decisions.
10. Don’t overthink it
Oftentimes business owners put off creating a business plan. They are too involved in the business, wearing various hats and keeping everything running. While most people agree that having a plan for your business is good, too many people avoid creating one citing lack of time and knowledge.
But that’s the thing. You are the expert of your business, and you have all the information you need.
If there are areas you need help with you can turn to the internet, or a tool like LivePlan to help. But you actually do have all the expertise to put together a great strategic business plan. Don’t avoid it. Don’t overthink things. Follow these 10 simple business plan strategies and you will be well on your way to growing your business in a financially healthy way.
