Tax Incentives - November 2011
GOAL SETTING: ARE YOU STRETCHED TOO THIN?
The end of the calendar year is my favorite time of year; it’s a time to set new goals both personal and business. As an athlete and coach, in addition to running a business, goal setting means reviewing benchmarks, evaluating past effort and locking in new milestones as well as goals.
In the business world setting budgets and goals for the coming year is a critical component to growth and success. However, like many athletes, business owners can become unrealistic when setting targets for both revenue and expenses expecting greater prosperity and growth than is realistic.
As a Division I collegiate swimmer, it was expected that each year my times would get faster as I continue to train and push my body to new limits. While external factors such as school, job, friends, family, studying and social life might interfere with the achievement of those athletic goals, there was always a perception that I could overcome any obstacles that might impede my progress.
As a business approaches a new year, it is not uncommon to expect a better result than the prior year; right? We should expect the next year to be the best year we’ve ever had. So, our revenue and profitability goals reflect the best case scenario. I recalled the CEO from the prior company suggesting that our annual budget was 10% of the puzzle; the other 90% was execution; developing a plan is important but unless it is executed properly, it has little chance of success. Setting goals that are a best-case scenario are reasonable as long as the assumptions behind the goals are realistic.
Below are a list of suggestions and steps to keep in mind as you set your company goals for 2012:
Market and Business Trends
I recall watching a movie with Robert Redford and James Gandolfini called The Castle. Redford played a military prisoner and Gandolfini was cast as the overly oppressive warden. Redford staged a mock coup attempt to see how Gandolfini and his guards would react. His goal was to understand his opponent and their response. People (and as a result, businesses) are similar; by reviewing trends of your business from the last three to five years, you may identify patterns that should be considered when completing your current year budget and goals; doing the same thing as you did in prior years will most likely give you the same result. Additionally, understanding trends in your industry is critical to evaluating how environmental factors will impact your upcoming year.
While this step is critical to your annual analysis, evaluating market competition should be an ongoing exercise. Understand what your competition is doing to gain (or lose) market share, new competitors, new products or features, pricing strategies and capabilities. While you might be growing at what appears to be a comfortable and appropriate pace, others in your market may be growing more quickly. Understand what they are doing and determine if your approach is more effective.
Current Customers and Upselling
Current customers already understand and (hopefully) appreciate your product or service and are open to looking at other services you provide. A review of your current customers to both assess your current relationship and understand if there are opportunities to provide additional products or services should be completed at least annually if not more often. I recall one of my new clients telling me that their CPA firm did a good job for them but did not bring them new opportunities to reduce their taxes, services to expand their market (this company recently began operating internationally and needed assistance) or other valuable services. He mentioned that he did not have an issue paying for more services, just that they did not bring them to his attention. Unfortunately, that firm lost their client and sadly, probably never recognized the lost services (and revenue) they could have provided.
Approach to the Market and Brand Recognition
Two important things to consider when it comes to marketing and market perception; first, how are you currently marketing your products or services and are you getting the returns that are expected? Second, how does the market perceive your company? Are you going to trade shows and if so, are you getting the return on your time and investment? How are you advertising your company; through print, internet pay-per-click, yellow pages, industry publications, speaking engagements or other media? Are these methods effective and how are you measuring them? Have you spoken to your customers about your company? What suggestions do they have for you? Asking the hard questions might be difficult but provide information that will help you take the next step to grow your business.
A football coach looks to his roster to understand what skills are available to run plays and win games. Evaluating both your current talent and other capabilities are critical to your annual process. I recall listening to Marty Schottenheimer (former NFL head coach to several teams) one morning on the radio and he said,
“Teams that have playmakers will always have a distinct advantage of the competition.”
Do you have playmakers on your team? If you want to enter a new market in the coming year, do you have someone that has experience in that arena? In most businesses, people are the difference in terms of growth and market perception, make sure you are evaluating your talent honestly and providing them with the tools they need to win games for you throughout the year.
New Revenue Streams and Markets
Are you looking at launching new products or services? If so, understanding and setting the right expectations in terms of a new revenue stream or results from entering a new market are critical to your annual process. What are the obstacles you might face? Are there other competitors that operate and have a presence that could impede your success? What is the operating and capital cost to enter the new space? Is there a way to fast-track your launch with a new customer that can be your anchor point both for marketing and to defray some of the startup costs.
Updating your Business Plan
When I launched Acena Consulting, I spent a lot of time crafting our business plan. It was exciting to put pen to paper (well, type it up anyway) and create the structure, answering questions related to service-lines, marketing, growth, expected revenue, etc. Like many companies though, after completing it, I allowed it to go unopened for a long time. Your business plan should be a living document. What does that mean? It means that after completing your annual plan and updating your business plan, it should be reviewed each month or each quarter to make sure the expectations set are being realized. Call it your business constitution or overarching strategy or other name that will help you and your team give it the weight it deserves but make it an important part of your daily approach.
Scoring Touchdowns Takes a Team Effort
Developing and executing a plan is critical to growth and success. While some companies will focus on their management team when it comes to developing their annual goals and strategies, some forward thinking organizations recognize that in order to get everyone onboard, everyone should be a part of the process and solution. You might find your best new idea comes from someone that speaks to your customers every day.