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The New Way To Business Plan – Begin with the end in mind

  • by kaibizzen
  • Nov 19, 2019
  • Blog
  • 0 Comments
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I find it ironic that it’s the modern piece of technology in all latest model vehicles that best teaches the principle of beginning with the end in mind, taught by the late Stephen Covey.  The technology I speak of is the global positioning system (GPS).  Guided by the 3 satellites that are closest to you, you are led to the destination of your choosing. 

Let’s take a moment to ponder how that happens. 

Firstly, a reason for a destination is created – you may need to visit a client, pick up something from a supplier or simply go home to your loved ones.  Then, to get there from you where you currently are, you enter your destination into your GPS.  The GPS then calculates the most direct and quickest route for you to take to your destination.  Your job is purely to follow that route.  Even if you take a wrong turn, the GPS will tell you to make a U turn at the first available spot or come up with another route (that may take a little longer than the original route) and will still take you to your destination.

In my experience the main reason many of us do not achieve our goals is that we miss the first 2 steps illustrated by the GPS analogy.  Most people set their goals (destination) from their current position, rather than having real clarity about the reason why they want that goal

YOUR REASONS FOR ACHIEVING ANY MEANINGFUL GOAL MUST BE DEEPLY MEANINGFUL TO YOU

For example, many people step on the scales and see their weight is the highest it’s ever been.  They then set the goal of reducing their weight from 100kg to 85kg.  Some people achieve this goal, many do not.  For those who initially achieve their goal, most will end up putting the weight back on again, plus more. 

Similarly, many business owners set their goals from this financial year’s revenue target.  This year we achieved a $2m revenue, so let’s target a 50% improvement for the next financial year.  Their new revenue target becomes $3m.  Some businesses achieve this, many don’t.  Why?  There are many reasons, so let’s discuss a few. 

Firstly, the reason why you want to lose weight or grow your business is not clearly determined.  Your decision to lose weight comes from the shock of seeing your current weight.  Business owners chose to increase their revenue target because they know it’s “the thing to do” – if you are not growing, you are dying right?  As stated earlier, for some this works, for most however, it does not.

What do we need to do differently to ensure a greater chance of achieving our goals?  Firstly, we need to be really clear on WHY we want to achieve the goal.  Without a strong Why that you’re truly connected to, you won’t do what it takes when times get challenging.

WHY WE FAIL

Let’s go back to our example of the person who tipped the scales at 100kg and decided they needed to lose 15kg. Firstly, why 15kg? What does being 85kgs even mean to them? Does it mean enough that when their faced with all the sweet, rich, decadent and indulgent foods about to hit our tables between now and the New Year, they’re able to say, “No.”? To drink water when everyone else is enjoying wine? Unlikely. You and I both know it’s unlikely because, it’s highly probably both you and I have a similar experience ourselves.

Not having a strong enough Why is the same reason most people wouldn’t even consider the idea of starting a diet even two months before Christmas. The reality is that most people don’t want to say, “No” to all the delicious food and wine on offer. They simply aren’t prepared to do whatever it takes because the Why is not meaningful enough to them.

Now let’s look at how this plays out in business using our earlier example. You’ve set the target to increase revenue by 50% from $2Mill to $3Mill in the next financial year. You’re already working 60hour weeks to keep your business running and keep your team engaged and high-performing. When you get home, you’ve barely enough left in your tank to enjoy your friends and family. You’re stretched and exhausted, but your Accountant told you that you need to grow your business to get the financial returns you want.

So you set the target for $3Mill and start doing more of what you’re already doing to achieve it. The first few months you’re gung-ho and sure you’re going to hit the target. But Christmas is coming up and you’ve had so much time away from the family that you really need to have a good break. Then Easter comes around and you take the kids camping on Straddie. And then a tender comes in which, if you won it, would guarantee you’d reach your goal, but you procrastinate on getting the submission in, worrying about how you’d actually service it if you did win it, and end up missing the due date. Finally, the end of the financial year rolls around and you are barely any further ahead than you were the year before.

In this example, the business owner’s Why (the Accountant told me I should), was nowhere near meaningful enough to do whatever it would take to achieve the outcome. In Kaibizzen language, we’d say it’s because growing the business was not in alignment with the business owner’s highest priorities nor was it going to help them achieve their highest priorities. Complicating this further is the vast majority of the population have limiting beliefs around money so growth targets are stymied even when they are seemingly in alignment with a person’s highest priorities. 

APPLYING THE GPS STRATEGY

So let’s think like a GPS. 

  1. Clearly determine why you want to make more money.  Is it line with what is truly important to you?  WHY do you want more from your business?  What’s in it for you the business owner? What’s in it for your market?  The clearer our answer to these 2 questions, the more drive we have to achieve whatever it is what our business needs to achieve for these stakeholders (you and your market).

  2. Set your goals around those drivers.  In my experience people need to make more profit for 5 reasons – they want more money to:

    1. spend (on themselves or in the business – eg take their family on a holiday or employ more team members);

    2. save – we recommend that a business has a minimum 3-6 months of operating costs as a buffer for when “life” happens

    3. invest – either personally on within the business

    4. debt reduction

    5. giving.

Clearly define from these why you want to make more profit

  • Reverse engineer from your net profit goal to the revenue (not the other way around).  Add onto your net profit requirements determine in 1 above, your operating expenses to determine your gross profit requirements. Add in your cost of sales to determine your revenue. In my experience most people set income targets and hope for the best from a net profit perspective.
  • When you know your revenue target, reverse engineer back, based on your average $ sale, how many customers you need and then based on your conversion rate targets, how many quotes you need to provide, back to number of leads etc that you need to achieve.
  • Focus on this activity ONLY.  Your income and profit are the results of what action you take in getting leads, converting those leads to quotes, meetings and ultimately sales. 

Remember, your destination, revenue and profit are only the results.  Your goal is what you want that profit for.  The achievement of your goals come from knowing why you want to achieve it, then making them the destination.  Your reverse engineering calculations will give you the most direct and quickest route to reaching your destination (your goals).

If you’d like to know more about how to develop a plan for 2020 that is different to how you’ve always done it, contact us. We’d love to help you finally get the business and the life you deserve.

02 Oct

Panel Discussion

Tuesday, 6:30pm Quest Cannon Hill

What does it take to actually remove yourself from the day-to-day grind of business? Learn from our panel of Business Owners who've Been There, Done That.

 

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