This Report will provide you with a pathway to increase your business success. The first step in the
process is to know the Turnover and Activity you require to maintain your personal income and pay
business expenses, we refer to this as your Present Breakeven or maintain the Status Quo.
The next step is to set new personal income and company profit goals for the next 12 months, and then establish the Turnover and Activity required to achieve the desired goals.
For many the hardest process in developing a Business Plan is goal setting and establishing the
Activity required to achieve the desired outcomes, you may have heard the saying ‘Businesses do not plan
to fail, they fail to plan’.
Once you have established your Turnover and Activity goals the next step in the planning phase is the
‘how to’, which is how you are going to achieve those goals.
In this report the ‘how to’ is referred to as your ‘Action Plan’.
This report will list your goals for the next 12 months and the Activity required to achieve those goals.This is your recipe for success.
We have divided the report into 4 sections as follows;
The first step in developing your Business Plan for the next 12 months is to establish the Turnover
(total sales/revenue) required for the business to Breakeven. The Present Breakeven, for our purposes,
is based on your previous year’s business performance, it will include Owner Income and it will also
include business Operating Profit (as stated on your end of year Profit and Loss Statement), for an
established business it is maintaining the status quo from last year to the next year.
The Present Breakeven Analysis is based on the following information:
To Achieve Present Breakeven
Congratulations, you now know the annual and monthly Turnover required to breakeven (or
maintain the status quo). The next step is to discover the activity required to achieve your revenue
target (Turnover).
The Following ‘Activity’ is required to achieve Present Breakeven
Activity is the business functions from which income (revenue) is the result, and in our Business Plan we
want to know the number of Sales required (based on your Average Sale Value), the number of Leads
(people interested in your product or service) and the number of Quotes/Proposals submitted to obtain
sales. By knowing this data, you can them plan your Activity to achieve your Sales and Turnover goals.
The Activity numbers below are based on the following:
You have a Sales Conversion Rate from Quotes/Proposals submitted of
20.0%, and you have an Average Sale Value of
$400
The Activity required is provided below:
To achieve your monthly sales goal (individual sales) you require;
You now have the information required to achieve Present Breakeven for the next 12 months. This is based
on your present Activity and business functions.
To help you evaluate the impact of setting goals to increase Turnover Drivers, we have also provided a
comparison between Present Breakeven and Breakeven with your Turnover Driver Goals having been achieved.
By making small changes to your Turnover Drivers, will have a significant impact on your
Turnover (revenue) and the Activity required to achieve your Breakeven Goal. In the
Questioning phase you made some Turnover Driver Goals, so let’s look at the impact these goals would
have on the Turnover required to achieve Breakeven (Status Quo) and on the Activity required to achieve
the new Turnover Goal. But first, here are your Turnover Driver Goals.
Gross Profit Goal
You stated you wanted to Increase your Gross Profit by
5%, this will increase your Gross Profit to
47.25%
Sales Conversion Goal
You have stated you wish to increase your Sales Conversion Ratio from Quotes/Proposals submitted by
1, which is winning
3 sales from 10 Quotes/Proposals
submitted, which equals a new Sales Conversion Goal of
30.0%
Average Sales Value Goal
You have stated you want to Increase the Average Sales Value by
5%, additional to a price increase due to an
increase in Gross Profit (if any), the Average Sale Value Goal has increased to
$437, a total percentage increase of
9.27%
First, the impact on the Turnover Required:
New Breakeven | Compared to Present Breakeven | ||
---|---|---|---|
Annual Turnover = | $1,321,481 | Decreased by | $66,074 |
Franchise Fees Included = | $0 | Decreased by | $0 |
Monthly Turnover = | $120,135 | Decreased by | $6,007 |
Now, let’ s look at the impact on the Activity required to achieve the new Turnover Goal:
New Breakeven | Compared to Present Breakeven | ||
---|---|---|---|
Sales Per Month = | 274.9 | Decreased by | 40.5 |
To achieve your monthly sales goal (individual sales) you require:
New Breakeven | Compared to Present Breakeven | Net Result | |
---|---|---|---|
Number of Leads = | 1,527.0 | Decreased by | 1,101.0 |
Quotes/Proposals = | 916.2 | Decreased by | 660.6 |
As you can see, Small Changes = Massive Results.
By achieving the goal of making small increases to Turnover Drivers will decrease the Turnover and
Activity required to achieve Breakeven.
You are now aware what is required to achieve Breakeven (Status Quo) with and without changes to your
Turnover Drivers. However, as a business person your goal is to grow the business to increase your
income, and develop a valuable asset which later can be sold for a good sum of money (Exit Strategy),
during the Questioning process you were asked to set an Owner Income Goal and an Operating Profit Goal.
Setting Income Goals are self-explanatory, after all we all like to increase our personal income each
year, however, some people do not necessarily understand the reasoning behind setting Operating Profit
Goals, I have provided an explanation to stress the importance of achieving an Operating Profit.
When a person looks to buy a business, they are looking for a business which will provide a return on
their investment. Some people will argue that having a reasonable income within the business is a
compelling reason why a person would buy the business, but this is false reasoning. Purchasing a
business on the basis of obtaining a good income when working the business is akin to buying a job with
overheads.
A business in general will have 2x factors under which it is valued, 1) The asset value, that is the
value of any assets the business may have, and 2) The Operating Profit, which will become a dividend to
the owner (or shareholders) of the business. It is the Operating Profit which provides the ‘Return on
Investment’ to a purchaser. This is one of the reasons why it is important for a business to have an
Operating Profit, the larger the profit the more valuable the business will be when it is sold. And in
general terms, depending on the type of business a multiplying factor of between 2-4x the Operating
Profit will be applied to provide an Intangible, also known as a Good-Will, value.
There can also be a Future Opportunity Value when selling a business, but this is another matter.
Building a successful business requires goal setting and planning, and it should be a yearly process.
Each year, you build upon the success of the previous year, set new financial goals, increase Owners
Income, increase Operating Profit and you will create a valuable asset, your business (wealth creation),
which one day you will sell.
From a goal setting perspective, aiming to increase Operating Profit will also increase Owner Income (end
of year owner dividend), and increase the value of your business, which will provide a valuable asset to
be sold at some time in the future. By providing you with an indicative business value, may be
subjective, but knowing you will gain Hundreds of Thousands of dollars, or even more, in personal wealth
is a strong motivator for you to achieve your goals.
Another good reason for having an Operating Profit Goal, is to develop a financial buffer, should it be
required.
Our first task is to look at the Turnover required to achieve Owner Income, and Operating Profit Goals,
plus any additional expenses to increase Spare Capacity and additional Marketing (if selected), followed
by the Activity required without an increase in Turnover Drivers. Then I will provide the Turnover and
Activity required with Turnover Driving Goals having been applied. Both sets of numbers have been
compared to the Present Breakeven numbers (without changes to Turnover Drivers). You may be pleasantly
surprised to discover the additional Turnover and required Activity will not be significantly more than
your present Breakeven numbers, and easily obtainable.
But first, below are your stated Personal Income and Operating Profit Goals, and additional budget (if
required) to increase Spare Capacity within your business, and any additional Market budget you may have
provided in the Questionnaire section.
Below are YOUR financial goals:
Spare Capacity – You have indicated you have ample ‘Spare Capacity’ .
Additional Marketing Budget
An additional monthly Marketing Budget of
$0 has also been set aside to increase
Leads if required.
Increase in Gross Profit required to achieve Financial Goal
Increasing Owner Income, Operating Profit, budget to increase Spare Capacity and Marketing will also
increase the Gross Profit required to achieve your Financial Goal , see below:
To achieve Next Year’s Goal – Excluding any changes to Turnover Drivers
Next Year’s Goal | Present Breakeven | |||
---|---|---|---|---|
Annual Turnover = | $1,698,667 | $1,387,556 | Increased by | $311,111 |
Franchise Fees Included = | $0 | $0 | Decreased by | $0 |
Monthly Turnover = | $154,424 | $126,141 | Increased by | $28,283 |
The following ‘Activity’ is required to Achieve Next Year ‘s
Goal
Next Year ‘s Goal | Present Breakeven | |||
---|---|---|---|---|
Sales Per Month = | 386.1 | 315.4 | Increased by | 70.7 |
To achieve your monthly sales goal (individual sales) you require:
Next Year’s Goal | Present Breakeven | |||
---|---|---|---|---|
Number of Leads = | 3,217.2 | 2,627.9 | Increased by | 589.3 |
Quotes/Proposals = | 1,930.3 | 1,576.8 | Increased by | 353.5 |
Setting goals to increase Turnover Drivers should be included in your next year’s business plan. Small changes to increase your Turnover Drivers will have a significant impact in lowering the Turnover and required Activity to achieve your Next Year’s Financial Goals.
First, the impact on the Turnover Required:
Next Year‘s Goal | Present Breakeven | |||
---|---|---|---|---|
Annual Turnover = | $1,617,778 | $1,387,556 | Increased by | $230,222 |
Franchise Fees Included = | $0 | $0 | Decreased by | $0 |
Monthly Turnover = | $147,071 | $126,141 | Increased by | $20,930 |
Now, let‘s look at the impact on the Activity required to achieve the new Turnover Goal:
Next Year‘s Goal | Present Breakeven | |||
---|---|---|---|---|
Sales Per Month = | 336.5 | 315.4 | Increased by | 21.1 |
To achieve your monthly sales goal (individual sales) you require:
Next Year‘s Goal | Present Breakeven | |||
---|---|---|---|---|
Number of Leads = | 1,869.4 | 2,627.9 | Decreased by | 1.0 |
Quotes/Proposals = |