This is the fourth in a series of articles about how to put together your business and financial plan for 2017 which started with Understanding Business Growth Strategy. In this article, I’m going to focus on a key point in the life of a small business that most entrepreneurs neglect. The breakeven or ‘sleep easy at night’ point.
Breakeven point is your first key marker on the road to profitability and financial success. Achieving this means that your business is self-sufficient, a major feat for most small businesses. But too many businesses fail to reach breakeven point, and then have to shut up shop.
In my previous article, How To Prepare A Sales Forecast – Part 1, I explained how to go about preparing a sales forecast. Preparing a sales forecast is mainly educated guess work so you can’t expect it to be perfect or accurate. But you can make a reasonable assessment of what you think will happen, based on your market research, understanding of your industry and historical information.
In this article, I’m going to look at the three main factors that could affect your sales forecasting. When you’re putting together your sales forecast for the coming 12 months, you’ll want to consider whether your business is affected by any, or a combination of these factors.
This is the first in a two-part series about how to prepare a sales forecast, the first step in putting together your 12-month budget, and the backbone of your business plan. Put simply, your sales forecast is a way of estimating the volume of products or services that you realistically expect to sell over a given period of time. It’s usually prepared on a month-by-month basis and projected over a 12-month period.
If you’ve never prepared a sales forecast before, be assured that you don’t need a business degree, accountant’s certification or any other qualification to do so. What you do need is common sense, research and information about the key factors that impact on your sales. If you sell a lot of products, it’ll take you a bit more time to prepare your sales forecast. But I’ve put together this handy spreadsheet to make the task of forecasting easy for you.
This is the first in a series of articles to help you plan your business growth strategy in 2017. Over the next few weeks, I’m going to take you step by step a process for putting together your business plan which will include how to prepare a sales forecast and marketing plan. We’ll also delve into exactly how to put together a marketing budget and how much you should invest in your marketing.
When it comes to growing a business, any business, there are only four business growth strategies. These are to:
- Market existing products to your existing market
- Take existing products to new markets
- Create new products for existing markets
- Create new products for new markets (what you’re doing as a start-up)
I’ve listed these in order of the easiest, least risky business growth strategy, with the greatest potential return. Let’s explore each in turn.
Oh no, I hear you groaning! You’re not really asking me to write a mission statement, are you? Isn’t a mission statement just a load of hot air, a meaningless set of words that you find displayed in corporate brochures and reports? If your mission statement is nothing more than a generic platitude or trite slogan like “this company is customer-focused” or “this company is committed to delivering excellence,” then yes you’re right. Because that’s not a mission statement.
I believe the words ‘mission statement’ are two of the least understood in the business vocabulary. I also know that putting together a decent mission statement is no easy task because its job is to encapsulate, in as few words as possible, precisely what the company stands for. There are no unintentional words in a mission statement; the words used are concrete, clear and concise. E.g.
- Nike: To bring inspiration and innovation to every athlete in the world.”
- Starbucks: To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
- Amazon: To be the most customer-centric company in the world, where people can find and discover anything they want to buy online.
Last month I came across a statistic that astounded me. Here in the UK, we have 5.4 million businesses of which 95% of businesses have less than 10 employees. And less than 1% have more than 250 employees. This got me wondering whether this is a ‘UK thing’ or whether the same applies to other countries. So I crunched the numbers for the US. Of the 28 million businesses in the US, 0.3% employ between 100-499 people whilst 0.06% employ more than 500.
Now I know that a lot of business owners want ‘lifestyle businesses’ whilst others are happy with the small business they’ve built. But there has to be a significant chunk of people who want to create a profitable business and scale.