Strategic Planning Guide – Step Two… Doing the Math

If you read our first installment of strategic planning for business owners, by now you have hopefully carried out the first step; reviewing and asking ‘why’ things happened the way they did. Now it’s time to focus on really understanding the operations of the company. This is the next logical step after we’ve taken the time to reflect on the root cause behind wins and losses.

One powerful way to this is to look at the numbers. When it comes to handling and analyzing the business finances most of us run in the opposite direction! Looking at the numbers means focusing on the math, and even for business people, math can feel unfamiliar or even intimidating. The good news is, the math required for this is very simple. So don’t panic! We’re not suggesting any crazy algebra here. The best approach is to use simple formulas on a spreadsheet, like Microsoft Excel or Google Sheets. We promise you, taking the time to do this step will make all the difference.

Start With Sales

At this point, we’re still looking back on historical data and assessing the performance of the previous year. We need that sound foundation of understanding in order to build a stronger strategy for the year ahead. Start by looking at the sales from the previous year. How did you do? How did it compare to the years before that? If you do this exercise consistently every year, you start to build up a picture of how your strategy and implementation had a direct impact on sales. Or where the strategy fell down, where you faced obstacles. Just answer these questions:

Are the number up, down or about the same?
Can you see any high-level trends developing over time?
Is there a clear upward growth, or do you need to intervene somewhere and correct the path?

Correction is different from improvement. If things are going well, improvement is necessary just to take things up another level. Correction is needed if the figures are down or you noticed a negative trend occurs.

Break It Down

Break this down further and start to look at the sales on a monthly or even weekly basis. Only move on to this stage after you’ve looked at the yearly figures. There’s little point overwhelming yourself with lots of data straight-away. If you don’t understand something, really try to figure it out before moving on. Answer these questions:

Are there specific times in the year when you receive more orders?
If yes, is this due to overall industry trends or is it associated with specific promotional campaigns you ran?

If you notice drops in sales over certain times of the year and these are due to the industry you’re in, this will have implications for cash flow. Answer these questions:

Do you need to plan for slower times and set aside money to manage cash flow?
Are there special promotions you can run to boost demand during those slack periods?
Can you replicate successful campaigns from last year?

At the very least, just understanding the seasonal flow of our business, can help us be better prepared. In the next series of strategic planning tips, we will look at the patterns within the numbers and how to complete the financial assessment before moving on.

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