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In our last lesson on the Key Elements of a Business Plan, we worked through a five-step process that led to the development of a sales plan. You may have noticed that the process built your budget from the bottom up; first starting with the profit you want to generate. This is contrary to the way most people think about budgeting. Most people start by asking, "How many sales do I want next year?"
At any rate, once you've completed the five-step, bottom-up budgeting process, you can begin to really polish your budget.
- Determine how many new people you will be hiring, along with the timeline for bringing them on board.
- Establish your wish list for additional capital needs – i.e. facility improvements, trucks, equipment, computers, etc.
- Establish your pricing strategy adjustments by type of work.
- Prepare a monthly spread of the budget by accounts, so you can compare actual results to budget throughout the year. Also prepare the monthly cash flow budget—which will determine when you will need to go to the bank to borrow money, along with when you intend to pay it back.
- Update your long-range goals. Do this particularly if your short-range plans have required a change in the course of your company's development.
Tips for setting goals. My suggestion is to include your management team in the goal-setting process. Once established, the goals must be frequently assessed—at least monthly. Determine if they are being reached, and why or why not.
For example, once the budget is completed, you will have established your sales goals for the coming year. Tracking sales activity vs. sales goal is extremely valuable as an early-warning barometer because, in most companies, the lead time from contract signing to actual installation is at least two or three weeks, if not several months. If you have enough warning to see that you are falling short of being able to supply your crews with work, you can make appropriate adjustments before it is too late to respond.