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The New Way To Business Plan – Reverse Engineer to Determine Activity

  • by kaibizzen
  • Dec 11, 2019
  • Blog
  • 0 Comments
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About 10 years ago I was vexed by the seemingly inconsistent success of goal-setting. Why was it that some business owners were achieving their goals and plans yet many more were not?  After deep reflection and personal introspection, I discovered, what I believed to be, one of the main reasons. Business owners were developing plans, goals and targets but they couldn’t clearly articulate HOW they were going to achieve them.  

The missing piece of the puzzle was a prioritised, executable plan of the specific activity required for them to achieve their goal. 

 Since my realisation more than 10 years ago, I have worked this process with each of my clients to develop a tailored, prioritised, and specific action plan that moves them confidently in the direction of their goals.  

THE LESSON OF THE LETTUCE FARMER 

The first client I ever worked through this process sticks indelibly in my mind to this day.  They were lettuce farmers, who by and large was doing very well.  However, they also knew though they could be doing a lot better. 

So, the first thing I did was sit with them to determine WHY they wanted to make more money – for themselves and for their business – and converted those ‘lifestyle goals’ to a dollar value.  From that determination, we reverse engineered to determine what revenue the business would need to generate to achieve that target. 

Then, because they knew what a bag lettuce was earning them (their average $ sale), we were able to identify how many MORE bags of lettuce they needed to sell on top of what they were currently selling to achieve the new revenue target.   

I do not remember how much profit they wanted, what they wanted it for, what their revenue targets were, but I distinctly remember how many MORE bags of lettuce each sales person had to sell each and every day to achieve their targets.  Each sales person had to sell16 more bags of lettuce EACH and EVERY day!   

Now, is there a lot of work involved in producing and selling x number of bags of lettuce every day?  Yes, there is.  The lettuce farmer though was diligent in tracking his production numbers and so he was able to calculate what the farm needed to do to produce more lettuce.  He was able to calculate how many more packers etc he needed to bag those lettuce and so on. 

We also were able to work with the sales people to reverse engineer even further. By using their conversion rate in each step of their sales process, we were able to reverse engineer to determine how many new stores they needed to visit, back to how many phones calls they needed to make to get appointments. 

THE LESSON IS… BUSINESS IS SIMPLE 

In that activity lies the simplicity of business.  When a salesperson can wake up every day and say “I have to make x number of phones calls, visit x number of stores and sell x number of bags of lettuce today” it makes their job SIMPLE.  They know exactly what activity they need to take. With clarity comes action.  

Here’s the numbers and facts you MUST know to be able to make the activity of YOUR business SIMPLE too: 

  1. WHY do want to make more profit? – for yourself and for your business. Convert your lifestyle goals to a dollar value.  
  2. How much does it cost to run your business?  These 2 numbers added together give you your gross profit. 
  3. How much does it cost you to produce your product/service?  Add that to your gross profit and you will determine your revenue targets 
  4. How much is your average $ sale?  That will allow you to determine how many of your widgets you need to sell to make your revenue targets. 
  5. How many existing widgets are you selling?  Take that away from the total needed and it will give you the number of how many MORE you need to sell. 
  6. What’s your conversion rate from proposal/quote/tender to sale?  You’ll now know how many proposals/quotes/tenders you need to do. 
  7. What’s your conversion rate from meeting to quote?  You’ll now know how many meetings you have to hold 
  8. What’s your conversion rate from initial call to meeting? You’ll now know how many initial calls you need to make? 
  9. What’s your conversion rate from lead to initial call? You’ll now know how many leads you need to generate. 

In my experience when we know these numbers intimately, working out HOW we’ll achieve our targets is so much easier. 

Do you want your business to be SIMPLER than it is?   

Well here’s the secret …. Know WHY you want to achieve more and then reverse engineer so you know WHAT to do.  

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. 

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