HOW TO PLAN YOUR REVENUE GOALS FOR THE UPCOMING YEAR
Most businesses have a clear idea of what their major goals are. Especially when planning for annual revenue, it can be fairly easy to set a target number and label it as the finish line, right? But while most companies are focused on saying what their annual goal is, most enterprises don’t know how to properly plan to achieve these goals. This is a huge downfall. After all, there’s no point in saying that you want to make a certain amount of money if you have no way of reaching that amount, right? Yet a surprising amount of enterprises continue to do so.
When planning your annual revenue goals, it’s first important to understand the difference between having process goals and product goals. A product goal is when a company identifies a general sales goal and begins to strive toward it without any substantial strategy to back it up. It’s shocking that so many companies continue to conduct a series of “random” acts that slowly but surely get them closer to their annual goals. But process goals, on the other hand, are when you take the overall project and break it down into smaller pieces that will help you reach the goal in a systemized, strategic way.
For example, instead of looking at the total revenue you plan to drive this year, break it down into three main categories: your product’s price (how much you charge the market), how many customers you have or want to attain, and how many products each customer buys within a year. If you can identify these individual numbers, it will be easier to strive toward realistic goals that you can measure throughout the year.
Within each of these categories, identifying key performance indicators (KPIs) will help you create clarity on areas of improvement to attain your goal. A realistic point to focus on, for example, might be looking at your sales meetings or interactions with potential clients, and specifically focusing on what can be improved to increase your conversion rate within these meetings.
These focused KPIs allow you to notice more precise actions within the sales or production processes and predict other potential issues as well. In result, you’re capable of having smaller, targeted successes that push you toward your eventual goal.
For example, a CEO of a company – the person who is setting these major goals but is also not involved in day-to-day company activity – might be unaware of the company’s social media marketing strategy. This is completely normal. However, if he is unaware that the campaigns are performing badly and doesn’t see that potential customers are ignoring opt-in opportunities, it will be difficult to identify this issue and work to improve it so that they reach their eventual goal. Being conscious of these realistic, small-scale numbers and creating mini-strategies to improve them will help improve the company’s overall progress in the long-run.
In order to view every aspect of the company that will impact your overall goals, write down every component of your annual revenue (as we mentioned earlier, this consists of your average product price, your average number of purchases per customer, and your total number of customers). Once you have that number, go ahead and subtract the amount that it costs to produce / buy your products and any additional overhead. This final number is your year-end profit. In order to work backwards, the next step is to figure out how much you made over the past twelve months (simply divide the number by 12 to get the monthly profit).
Based on that projected monthly number and previous results, you’ll complete a gap analysis to see where you can improve each month to meet your next yearly goal. For example, you’ll be able to identify how many more clients you need to be bringing in each month, how much you should be charging per product, how much more each client will be purchasing, and what expenses can you lower or get rid of altogether. Once you work backwards from your original goal and find each of these monthly numbers, it’s easy to see what progress points you want to hit next in order to reach your eventual goal.
There are plenty of tools that enable you to complete your revenue planning. Tools like MySP Budget Management allow you to save time on the planning process, save money by identifying “black holes” in your budget, and ensure that every department is in full communication and aligned to meet the same goals.
By Lena Elkins