These following 3 exercises are unquestionably the number one way for businesses to succeed. Strategic planning, budgeting, and forecasting will become regular cadences that will help the decision-making process easier, create achievable goals, and hold team members accountable when those goals aren’t met.
1. Budgeting & Performance Review
A budget should be a monthly review of detailed, monthly goals the business wants to reach, such as how much more revenue the company wants to make, or if the price per unit should change. The budget should still be aspirational and in line with the strategic plan, but it should also be realistic. It also provides a way to track the short-term goals of the company, because if they aren’t measured and recorded, then the company cannot improve.
The performance review gives the owner a chance to hold their employees accountable. They should be given a set of goals, and during the performance review meeting, owners can see how well employees achieved those goals. If the company fell short, ask them where they wrong. If they performed well that month, perhaps grant them a raise.
The accountability and responsibility, and the chance to be rewarded for good work will make your team more successful and empower them to make better, more confident decisions for your company.
2. Rolling Forecast
The rolling forecast is an honest, sober, and practical conversation about where the business really stands and where it is going in the short term. This is where business owners can really make the decision of whether the company can afford to buy or lease a piece of equipment.
Although business owners want to make the better decision to buy equipment, they also need to consider if they have the cash to do so. If there is not, it may be a smarter option to lease that equipment.
Another example is hiring new employees. Is there enough cash to hire someone this month, or do they have to wait a few months to build up that revenue? The rolling forecast is meant to make these decisions a little easier when the time comes to make them.
3. Strategic Planning
The Strategic Plan is the vision for the future. It sets a comprehensive set of goals for the company to achieve over the next three to five years. It asks questions like, “Where do we want to take the business? How do we want to improve?”.
These are high-level, company-wide goals, and planning for “what if” scenarios and what kind of impact those scenarios will have on the business. Practically speaking, this is also where all the stakeholders, regardless of number, can come together and agree on the vision for the future of the company.
By implementing these 3 processes, business owners will be empowered to make better, more confident decisions, and enable themselves to plan for a brighter future.