It’s time to move beyond the chaos of 2020 and get back to a strategic plan for growth. Here’s a step-by-step guide to creating a quarterly business plan for small business owners.
In 2020, many small businesses have had to throw their business plans out the window and create new strategies instead. It may have been necessary for 2020, but now is the time to close the window and update the Q1 business development plan.
Top 10 small business tips to help you plan successfully for the first quarter:
- Perform a gap analysis
- Enjoy a palate cleanser
- Set goals Q1
- Create an action plan
- Establish your KPIs
- Align incentives
- Schedule monthly and quarterly reviews
- Communicate your project
- Measure performance
- Communicate the results
1. Do a gap analysis
It is useful to perform a gap analysis before developing your strategy. Focus on four areas:
- Analysis of performance gaps: Analyze your plan for the last quarter to understand why strategic objectives were not met.
- Market gap analysis: Examine your position in the market and define what has changed. Look for openings that may have appeared as competitors made changes.
- Staff gap analysis: Many small businesses have had to make tough decisions about staffing in 2020. Do you have the right people on board – and the right number?
- Profit gap analysis: Identify any gaps between your target profitability and actual results.
With your gap analysis complete, it’s time to cleanse your palate.
2. Enjoy a palate cleanser
In gastronomy, chefs often offer a sorbet between courses. A palate cleanser neutralizes food flavors to prepare you for the next course. It makes sure there are no lingering effects that can get in the way of savoring the richness of what is to come. You must do the same with 2020. Shake off any remaining anxiety about 2020. There is nothing you can do about it now. Put what happened aside.
What should not be forgotten are the lessons learned. The most successful companies have learned to pivot under intense conditions. This agility can come in handy in the future when setting goals for your quarterly business plan.
3. Set goals for the first trimester
Start with broad goals, then work more narrowly to create actionable items.
4. Create an action plan
Next, your small business plan should create the specific actions you need to take to achieve your goals. This helps break down your goals into smaller, incremental steps.
If your goal is to increase your net income by 7%, you need to figure out the steps you need to take to get there and spread them out as much as possible.
Let’s say you’re a plumbing contractor trying to figure out how to reach your sales goal. To reach this number, you determine that you need to attract 10 new customers per month. Since you close – on average – 25% of the leads you get, that means you need 40 leads per month. Now, what does it take to generate those 40 leads?
5. Establish your KPIs
To move forward, you need to have a way to measure yourself. Depending on the goals you set, you can develop different key performance indicators (KPIs), but start with the KPIs that monitor the health of your business. Incorporate these KPIs into your quarterly business impact analysis.
This is a metric you should track over time. It can quickly tell you if you are heading in the right direction. It tells you if you are more or less profitable during the tracking period.
Net profit = Income – Expenses
The net profit margin
You also want to know if you are making a reasonable return on your investment. This measures the profit you generate from the money you take out.
Net Profit Margin = Net Profit / Revenue
For any business, cash flow is essential to pay bills and keep things running smoothly. Your quick ratio lets you see if you have enough cash and receivables to cover your outstanding debts.
Quick Ratio = (Cash + Securities + Account Receivable) / Current Liabilities
If the quick ratio is less than one, you will be challenged to cover your debts.
Customer acquisition costs
Anything you can do to reduce your customer acquisition costs (CAC) will improve your overall profitability. This can help you determine the ROI of your marketing efforts and whether you need to make any changes.
Customer acquisition costs = (Advertising + Marketing costs) / Number of new customers
These metrics all work together to determine the health of your business. Tracking performance against these goals and other KPIs specific to your quarterly business plan will keep you on track.
6. Align incentives
We all want to think that if you tell employees what needs to be done, it will magically happen. Back here in the real world, we know it’s never that simple. The best strategy is to align incentives with your goals. If you meet your revenue goals, what do employees get out of it? If the answer is nothing, you might want to reconsider.
While financial rewards are always nice, there are plenty of other ways to keep employees happy and share in the success.
7. Schedule monthly and quarterly reviews
Here is a simple but important step. Take your calendar and schedule monthly and quarterly reviews. When things are bad, it’s easy to forget. By scheduling it now and setting reminders, you’re more likely to make it happen.
8. Communicate your plan
A business plan is no good if it sits on the shelf. The more employees understand the company’s goals, the steps to achieve them, and the potential rewards for achieving them, the better they will perform.
If you are a small business with significant revenue, be sure to communicate your plan as part of your onboarding process.
9. Measure performance
Measuring your turnover should be done in two ways:
- Performance against objectives
- Performance against the market
This is great when you hit your income goals, but it can also blind you to other opportunities. For example, suppose you define a business development plan for the first quarter to increase sales by 6%. When you end the term with a 7% increase, you feel pretty good. Would you still feel this way if you found out that your closest competitors increased their revenue by 15%?
10. Communicate results
Yes, the communication is here twice. It is so important.
You defined the plan and asked your employees to enthusiastically adopt it. Don’t forget to let them know about the results, whether good or bad. If they played as needed, let them know and celebrate! If not, discuss how changes or adjustments need to be made to get back on track.
Connect the dots
Do you remember doing these connection puzzles when you were a kid? You had to move your pencil from number to number and connect most of them to see the big picture.
It works pretty much the same way in business. The more points you have, the harder it is to see results. The more you can connect your business plan to concrete, measurable results, the easier it will be for everyone to see the big picture.