Do you have income projections and goals for your small business?
If the answer is yes, stop reading and do something else productive with your time.
Did you answer no? Saying no to income planning is saying no to money. What do you think? Is it smart for any small business owner to say no increased profits?
Although it may sound a little silly when worded that way, not setting income goals for your business is letting money slip through your fingers. If you do not know how much you need to make this month, how do you know what you need to do to get there?
Begin With the End in Mind
Have you ever heard of the business, organizational, and personal productivity consultant and author Stephen Covey? Years of his analysis and observation yielded a list of habits that are common to highly productive people. Beginning with the end in mind, Covey’s other habit means “to start with a clear understanding of your destination.”
If you do not start each month with an income goal for your business, you are not optimizing your profits. Having a goal does not mean you will always hit it. However, it does force you to create a plan to meet that goal. Even if you do not earn as much as you plan on in a month if you track the steps you took and the results that you did see, you will be in a much better position to make that much money in subsequent months.
Income Planning Benefits
Let’s look at an example of how great setting an income goal should be.
Target Daily Income – $500
How in the earth are you going to make $500 a day? Let’s dig into some more specific questions.
1) How much is a conversion worth in your business? ($50)
2) What is your conversion rate? (4%)
3) How many customers do you market to each day (50)
Assuming the numbers in bold next to each question are your answers, you are earning (4% * 50) * $50 = $100 a day
Suddenly closing the $500-day gap seems much more manageable, right? Well maybe not yet but we can see that we need to:
- Change or repackage what we are selling to increase the value of a conversion
- Modify our sales process to increase the conversion rate
- Increase the number of people we market to
- It is near impossible to improve everything at once, so our best bet is to focus on developing just one of these at first. Now we can identify and take concrete steps towards increasing our income and reaching our profit targets.
Income Planning for New Businesses
So the next question might be, what if I do not know my conversion rates or daily customer reach since I just started my business? The answer is two-fold.
- Start doing something
- Start tracking everything
Of course, the obvious first step for a new company is to open its doors and start making some sales. Right away, come up with some best guess estimates regarding your conversion profit, conversion rates, customer reach, and target benefits. Track everything in your business process, and at the end of a short period, you will be able to set reality based income goals.