When Budgeting or Planning the Future – Check the Numbers
I got reminded of this simple idea or concept by one of the Internet marketing guru’s who shared some of his valuable knowledge regarding how to create your future. And, one of the key components in his discussions was the importance of making the numbers talk to you – in advance.
What a simple concept. As I reflected upon the importance of knowing your numbers, I recalled how I had used this simple technique when I moved to Memphis and opened my business without knowing any business leaders in town. Wow, this would be very scary today given the amount of security and technology used today.
However, the numbers were my main guide during the start up years. Knowing your numbers relative to all the critical processes was required for success.
I had numbers for contacts potential clients – major details like the number of phone calls per day, the number of decision makers contacted, and the number of appointments and presentations made. Then when the sales results were added to the formulas, it was clear the numbers worked.
Today, we are tracking different types of numbers relative to potential customers, marketing plans and campaigns, and creating targeted lists of prospects and current clients.
Now, there is another factor to review which many companies fail to consider – what will it take to hit the budgeted revenue numbers for the company. For smaller organizations this is a critical piece of the financial puzzle. Why? Because when you break down all the revenue streams into activities or combinations needed to achieve your budgeted goals – they will show they are believable and achievable.
Believable and achievable are more important mindsets for reaching your results. The believability factor – due to cutting the larger numbers into manageable units for achievement – create a positive “This can be Done” attitude. And, well, results are achieved without the negativity associated with attaining high level numbers or goals.
Okay, back to the “Check the Numbers” concept you need to be following. Use the numbers for discussions with everyone to insure the numbers selected are doable. I have seen situations whereby the sales team ramps up their success, only to find operations could not deliver at the higher growth rate caused major customer relations nightmares.
Check with everyone about how to achieve the results, can these target levels be delivered by the operations group, can the financial team handle the larger cash flow needs of the higher growth level (This is often overlooked by organizations after experiencing an economic slowdown as the cash reserves are often drained with little to no surplus of cash or credit lines to fund the new growth rates.) and does the sales team have enough targeted accounts to sell to without “buying the business.”
In summary, dig into the financial numbers at all levels of the organization to learn about how and can you achieve these higher growth rates and success. When you understand how the company makes its money and the importance of cash flow, the input from multiple sources can make a difference. Think about how a team can create added energy within an organization when everyone is fixated upon achieving a common goal – a new higher growth rate.