subscribe to RSS feeds

« back to all blogs

A Forecast is Not a Business; A Budget is Not a Plan. How Will Those Numbers Happen?

Focus on the processBuilding a business is not just about numbers. It's about how you make those numbers happen. Many early stage entrepreneurs make the mistake of focusing on detailed spreadsheets with multiple pivot tables and assumptions, being able to model even the most insignificant detail of their proposed business.

Forecasts and budgets are simply objectives. Their achievement is your planned results. But success is not about focusing on the results, but on the process to get those results.

And that is what strategies and tactics mean. Executing them, makes the numbers happen! Without them, all you have is a great spreadsheet model and a theoretical business. The same applies to enormous markets.

It isn't about only having to gain 0.1% of a huge market to be successful, but how to capture that minuscule percentage that's critical.

Curiously, even mature small businesses suffer from the same mistaken notion. More often than not, when I request to see their plans from prior years or the current year, most often what I get is a "budget book" describing in excruciating detail, line item budgets for every department and function, but little in the way of how that budget is going to be met or beaten.

Now, make no mistake, results, as typified by the numbers, are what matters. But what matters MORE is the process to achieve those results.Again, strategies and tactics. The HOW that delivers the WHAT.

So, the critical question you should be asking is how am I going to make those numbers happen? Developing strategies and tactics doesn't have to be a challenging and time-consuming process. Here's some guidance to help you get through it and make your results happen, whether you're a startup or have been in business for years:

What are the key indicators of success? And why?

To meet a forecast or a budget, you can't manage every number. A few like sales and cost of goods drive all the rest. You need to determine what are the key indicators that drive those numbers for your business, like some qualified leads, conversion rate, sales cycle, etc., for sales. And the material cost and lead time, labor costs, returns, etc., for COGS. Every business is a little different.

What are your business's key indicators
and why are they crucial to making your numbers?

For every key indicator, answer the how question.

For each indicator, you should develop a strategy or tactic for how to achieve them. For example, converting sales leads is not simply a mathematical exercise. How do you acquire leads, how do they get converted and how will you optimize your conversion rate? Do you need better sales presentations or to provide more opportunities for prospects to sample your product? Or, do you need better-qualified leads? Developing and answering these kinds of questions forms the basis for your strategies and tactics.

What resources will you need to execute? Are they in your numbers?

For example, if you're a start-up, have you considered the level of marketing resources you'll need to gain market awareness and then some market traction? Will they come from inside your company or will you contract with them? Or, if you're trying to keep the number of returns at a minimum, have you properly budgeted for a quality program, no matter how rudimentary? For every strategy or plan, you need to know what resources you'll need to execute on it.

What's your "Plan B" if "A" doesn't work...and don't be afraid to use it.

If you positively believe they are attainable, your objectives (forecasts and budgets) shouldn't change.But, do you have fallback strategies and tactics if the ones you embark on don't work? What happens to the cost of goods if your supplier raises the price of necessary materials or parts?  Do you have an alternative? What if your marketing campaign falls woefully short of expectations regarding qualified leads?How much time will you give it?  Have you explored other options? In a nutshell, this means that while you might hold your objectives firm, you should tweak your strategies and tactics, as market and business conditions change.

No matter how detailed or sophisticated your forecasts or budgets are, entrepreneurial success is not about focusing on those forecasts and budgets, but how those results are achieved - the strategies and tactics that make the numbers happen!

"The Entrepreneur's Yoda" knows these things. He's been there. May success be with you!

What are your key indicators for success for your business?  Please share your thoughts in your comments.  It can help another entrepreneur.

If you like this post, by all means, share it with your networks and colleagues.


Related blogs


Dispelling business plan myths  Customer service impacts small business culture


by

« back to all blogs

1 COMMENT(S)

2013-12-12 10:08:44 by Richard Klein

Dear Lonnie;
I love your post, especially the Plan B piece with the objectives staying intact. We've found that asking the question, how are we special to our customers drives very effective actions and that trainings are a big differentiator across all of the markets we serve.
I'm curious how often you recommend reviewing your results and how you decide to switch gears and implement plan b if plan a isn't producing the desired results.

POST A COMMENT

Name (required)
E-mail (required but not shown)

 

Blog Articles

Blog Archives

Categories

search




Do you like these articles? Read my book for more advice you can use immediately.

Get Your Free Chapter!