Planning for Profits

“No matter how small or large your business, you’ve got to aggressively plan the work and then work the plan!”

In some previous presentations, I’ve suggested some ambitious ways to jump-start your business, such as coming up with an entirely new business strategy or totally ripping apart your business plan or completely reevaluating your products and services. Many of these steps are what I see as the “gold standard” for ramping up your business. But you might not be up for trying such extreme measures right now.

For whatever reason, maybe you’re fairly happy with your business overall, or you don’t have the bandwidth right now for a lot of difficult, comprehensive, and time-consuming changes. Nonetheless, you’d like to put in some effort to get your profits to ramp up, so what can you do?

What Not to Do

Do not just dive into each workday and say, “I’m going to work harder and longer and try to be more clever!” This is what most entrepreneurs do when they are feeling a little bit of ambition. It’s a huge mistake. It’s just the kind of attitude and approach that is likely to lead to burnout and frustration.

How do I know? First, I continually tried this approach, with lackluster results at best. Second, I had a couple of astute friends who pointed out that my solution to most business problems was just to work harder. If they were doing this in their businesses, I could probably see the mistake clearly, but in my own business I am too wrapped up, too emotional to always make the right rational decision. Furthermore, the bigger the decision, the more emotionally involved I was and the bigger the mistake I would make.

Why not just pour more energy into your endeavor? Well, let’s say years ago you were captaining a huge steamship in the middle of the Atlantic Ocean and you were determined to get to your destination faster. So you ordered all of the men shoveling coal in the boiler to work two hours longer each day and drive the ship faster. But suppose the ship was on the wrong course? Then the ship would just move off course even faster.

A small business can do the same thing. You can’t expect to make 10 percent more profits just because you work 10 percent harder!

But if you adjust your business plan to have a realistic chance of making 10 percent more in profits, then that’s a much smarter approach.

Sometimes Just Changing Small Things Can Make a Big Difference

So even though this isn’t the year to totally reexamine your overall business strategy or take apart and reevaluate each product or service, you might be surprised how much you can improve your profits by just tinkering with your plans, especially if you really execute the plan you create. By just making a few careful adjustments here and there to your business plan and your budget, you might be surprised at how much more profitable your business can be!

Maybe you can find one product or service that you slightly increase the price on. Maybe you have another product or service you can increase the volume on if you give a slight discount for repeat customers. Maybe there is a new add-on service you can offer. Maybe there is a better way to collect overdue accounts. Maybe there is a way you can cut expenses in one area of the business.

Setting an Ambitious Goal Can Get You Motivated

You might find after your first pass through the budget that you are still short of your desired profit goal. Don’t fret! That’s how it usually happens. Often, each expense looks like a great decision in isolation, but taken as a whole, your expenses and costs might be a lot more than you like. So ask yourself which costs or expenses you can further trim with the least likelihood of hurting overall profits. Or what prices can you consider increasing? Go back again, make your changes, and see whether you’re now at your profit goal.

In any event, what you want to do is come up with a profit goal that is perhaps a stretch but not unrealistic and, importantly, that really gets you excited! Because if the goal excites you, then you are going to get motivated and stay motivated and be a lot more likely to see it happen.

Once you set your new budget goal for the year, it’s important to review the results every month. You want to tabulate a profit and loss statement immediately at the end of every month so you can quickly take action if you are off track. Do a simple variance analysis, placing your projected budget beside the actual results.

Are you hitting the sales numbers? Are expenses in line? Is there a particular cost issue? In business there are no guarantees, and maybe you won’t hit a significantly higher profit goal this year, but even if you are making progress toward it, then that’s something to celebrate and be proud of, and next year you try again!

Don’t leave your success to chance! Plan for profits!

Takeaways You Can Use

  • Don’t assume that working harder and longer will increase profits.
  • Find a profit goal that is a stretch.
  • Just tinkering with your plan can increase profits.

For More on Financial Statements and Business Plans

For more on how to create financial statements and projections see my course, Accounting & Financial Statements. This course includes step-by-step instructions, samples and templates for creating historical and pro forma income statements, balance sheets and cash flows.

You may also be interested in my course, How to Create a Business Plan. This course includes step-by-step video instructions, samples and fill-in-the-blank templates for both a one page business plan and a full length business plan.

Accounting & Financial Statements and How to Create a Business Plan are among the more than 130 courses included with BusinessTown. Other popular courses include Start-a-Business 101, How to Find a Business Idea and The Complete Guide to Digital Marketing. You can try BusinessTown for free.

About Bob Adams

Bob Adams is a Harvard MBA serial entrepreneur. He has started over a dozen businesses including one that he launched with $1500 and sold for $40 million. He has written 17 books and created 52 online courses for entrepreneurs. Bob also founded BusinessTown, the go-to learning platform for starting and running a business.