Failing at creating business goals that stick? Let us show you how to enjoy a year of business success, with tangible achievements aligned with your purpose as a business owner.
6 steps to planning 2022 the right way
How many of us could have predicted that 2020 and 2021 would be the years they have been? How many of us could see a future where we would be working in very different ways? Not many I’m sure. If we take the last two years and start to look forward, how can we really plan for the year ahead? Well, that’s what we want to look at today.
Stephen Paul, our MD is passionate about helping small business owners reach their goals and if you have been watching our recent series of Facebook lives you will have heard Stephen set us along the path of understanding what our ‘why’ is as business owners and how to avoid comparing ourselves to others in order to achieve what we really want. Today Stephen is here for another leadership session in helping you get set up for your best year yet. Here is his planning method for real business success.
Step one: Accountability
Let’s start by looking at the past year or two and asking ourselves some simple questions.
- What were your business challenges during 2020/21?
- What were your wins in 2020/21?
- Then finally, who holds you accountable?
Many of you will have things to put into those first two categories, challenges and wins. How many of you will have an answer to the third question - Who holds you accountable to act and move forward?
Here’s an example. Last week Stephen met with a client who didn’t have any work for the rest of the week. He said, “You could try this and that but I don’t think work will come in that quickly.” This week that client is fully booked. Why? Was it that she held herself accountable and took action, or was it someone else holding her accountable that lit a fire in her?
We find that if you can have one person that holds you accountable or a small group of people, then actions get carried through much more effectively than if you have sole responsibility in holding yourself accountable.
Our first tip for 2022 planning in business is to have someone hold you accountable for your goals. This could be a husband, wife, partner, your accountant, essentially someone who is going to call you out if you need it.
Step Two: Goal Setting
What is the ONE thing that you really want to achieve in 2022? Don’t break this down into ten things, but just give yourself one very clear goal for 2022. The clarity of one goal will be more decisive in your action-taking. If you personalise it and make it something you really want, then that becomes a very powerful goal.
For some of you, your goal might be to pay for a holiday to the Bahamas, for example, and for someone else it might be to pay off their mortgage. It might be more business orientated than that, something like hiring your first staff member.
Once you have that clear goal, share it with those who will hold you accountable.
As you consider this goal, ask yourself why you want to achieve this particular goal this year. Then ask why haven’t you been able to achieve it previously. Was it a problem with mindset, did we just put it off? Or was it fear of the first step? Or something else?
When you have a clearer idea of why you haven’t been in a position to make this change previously, ask yourself what difference would achieving your goal make to you in 2022. This sets the impetus.
Step Three: Getting your financials straight
With the impetus squarely behind a clearly defined goal, it is time to think financially, a step that many of us forget when it comes to new year planning and goal setting.
Ask yourself: Have you set a budget for your business?
How many times do we set a goal and then 6 months, or a year down the line say to ourselves, “I didn’t do that yet, because I couldn’t afford it.” Is that an honest answer? Did we know we couldn’t afford it, or did we just accept that that was the case? This is where a budget comes in. If you do not have a budget template set up, then please download ours below.
A budget helps us quantify the monies we need in order to make progression with our goal.
Sadly, most of us set a traditional budget where we estimate 5% more on sales and 5% less on costs each year. Adding occasional lines for things like increased advertising doesn’t move the needle on what we most want. It doesn’t get us that holiday, or that extra mortgage repayment, because we aren’t planning deeper financial steps to make those goals happen.
The way we complete a budget, here at Valued, is to angle it from the perspective of what we wish to achieve and then drill down the profit margins we need to make in order to achieve that goal. Let’s say that a holiday. If we know the cost of the holiday we want, then budgeting allows us to understand how much extra profitability we need to create in order to make that holiday booking happen. From here you can drill down to the finer details of expenses and sales targets.
Working from the bottom up in your budget creates much more financial support for your goals.
Clarity here also helps you to see exactly which areas of the business need work in order to make your goal happen. This might be the negotiation of better supplier payment terms or prices. It might be pitching your services to new clients.
Step Four: Understanding your Cashflow
A cash flow is where you get to see the minutia of costs and income and how they come in and out of the business, and at what times of the month or year. It is where you see drawings if you are self-employed, dividends payments, or loan repayments, etc.
Let us give you an example of cash flow, to better understand how this has an effect on your goal.
Let’s say you send a new client an invoice for £10,000 (raising what looks like a nice profit towards your goal) and that same month you have £5,000 on staff payroll. In your budget that looks like we are £5,000 in profit. What if our new client negotiated 60-day payment terms? In our cash flow we can now see that for the first 30 days we have £0 income and £5,000 costs, showing -£5,000 in our bank. If the client is late with a payment, you might end up £5,000 down again by the end of month two.
This is the key difference between a budget and a cash flow. A budget shows your projections and forecasts and a cash flow shows you what you actually have in the bank each month. What you have in the bank really determines how and when you can make your goal happen.
We need to make sure that our cash is king and that we understand how important it is to keep an eye on the day-to-day. Cloud-based solutions and accounting software are really great at giving us this important cash flow information in real-time. Perfect for business planning!
We have seen far too many profitable businesses fail, simply because they ran out of cash. In the instance of our example, in order to draw a profit from our new client invoice, we might need to go back to our client and renegotiate 30-day terms or take a 50% deposit.
Making sure that your cash flow report is on hand when you budget for your yearly goals is crucial so that you can get an idea of when you can invest, or where you can upgrade your cash holding reserves to make things happen.
If you are really getting stuck here, contact us as we would be happy to help show you how your cash flow is performing for you and how you can budget more effectively.
If you reflect on your cash flow quarterly, or monthly and compare this to your projected budget, then you have several chances to make systemic changes to bring about the finances you need to fund your goal.
Here are 7 ways to grow your business profits in 2022 (or any year)
- Increase customer retention - did you know that 68% of customers leave a business because of ‘perceived indifference’. What can you do to show clients you care?
- Increase leads generated - do we need to create more impactful marketing, short-term PPC, or long-term engagement strategies, or do we simply need to ask clients for referrals? Find out what works and replicate it.
- Increase conversion rate - what can we do to help people to sign up with us? Is it a copy, or value-based change?
- Increase average transaction value - is this about upselling, or adding more valuable lines? Or is it simply increasing our prices?
- Increase frequency of sales - remember small changes have a massive effect on your profitability. Let’s say you offer monthly services, if you were to change that to services you provide as ‘every 4 weeks’, then you have added one extra sale per customer every year.
- Reduce cost of sales - revisit your terms with suppliers and feel confident to ask for discounts or reduced prices on bulk services.
- Reduce overheads - during Covid, many of us immediately hacked away at our business costs to reflect our sudden stop in sales, but how many of us have a plan to revisit overheads monthly, quarterly, or annually? When you are goal setting for your next year, overheads should be a consideration along with your other business costs. Top tip - always ask yourself what value you get from each area of cost, whether you are looking to reduce or increase your costs with a supplier it should be from a value standpoint.
Step Five: Set your milestones
Earlier this year Stephen walked his first marathon. It was the hottest day of the year and he struggled. Whilst walking he could see a bus that would safely take him across the finish line, but as much as his body wanted him to buy a bus ticket, his heart wanted him to finish and raise money for charity. Stephen set himself some milestones, starting in five-minute increments. “If I can just get to there, then it’s just to the next point after that” and on he went. One foot in front of the other. He finished that marathon.
You will need the same approach with your 2022 goal, one step in front of the other.
Break down your goal alongside your budget and cash flow changes with key milestones, that you can push towards. Here’s how to set your milestones (sometimes called ‘Smart goals’) if you need help.
An example of a milestone is, “I want to renegotiate 30-day terms with my all clients currently on 60, or 90-day terms, in order to increase monthly cash flow so that I payroll a new staff member.”
Step Six: Set your actions with accountability
Our final step is to set your action points from your milestones. These should include details and who is accountable for each point, with a clearly defined timeline. Some of these steps might be for you to take action on, but if you have staff, or you access freelance help, work out how much can be delegated or outsourced to give you the greatest impact. It is important to remember that you simply cannot do everything yourself, especially if you want the best result, so turn to your experts.
Your checklist for 2022 business planning success
Keep these key things in mind when you plan and 2022 will be a very different year when it comes to achieving your desired goals.
- Have someone who can hold you accountable for each goal you set
- Set one clear goal that works for you personally
- Set a budget that reflects what you need financially to make your goal happen, working this alongside cash reserves you build in from relooking at your cash flow and making the burdens on it lighter.
- Set clear milestones
- Set clear action points with timelines and accountable follow-up