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KNOWLEDGE YOU'LL GAIN FROM READING THIS ARTICLE
- How setting yearly, monthly, and daily revenue goals creates a target and aligns your business efforts for profitability.
- The exact system, along with the spreadsheet, I use to track goals which flipped the profitability switch from barely surviving in my business to thriving.
- How to leverage the Goal Setting for Profitability spreadsheet and set up this same system in your own business.
THE ONE PROFITABILITY HACK THAT MOST IMPACTED MY BUSINESS
People often ask me what my favorite type of client is to work with. My clients become like family because their successes become my successes. I help bring their big ideas to life and there’s something very magical about working alongside the dreamers and the do'ers. To say I love all my clients doesn’t even cut it.
I’m not playing favorites but if I’m being honest, there is one type of client experience I love best.
WORKING WITH THE DREAMERS AND THE DO'ERS
I most love any time I’m involved with a business from its inception. I love the very first conversations I get to have with new clients, sometimes shaking as they describe to me what they’re looking to do in business, dreaming of all the possibilities with such a thrill in their voice. At this point, most of them have only shared their secret with closest friends and family - the secret that they’re about to take the leap into entrepreneurship.
You may already know that I grew up the youngest child of an entrepreneur. I watched my dad in the roles of CEO and janitor... marketing director and blue collar worker bee.
And even though I grew up very well understanding the concept of entrepreneurship (ask me about the businesses I ran in grade school sometime), and even though I completed a two-year master’s in business, I STILL felt blindfolded during the entire first year of starting my own business. This alone helped me develop insane compassion for anyone else brave enough to take the leap to become an entrepreneur.
YEAR ONE AND TWO = RAMEN NOODLES
During my first year in business, I didn’t know what I didn’t know. I couldn’t seem to muster up the confidence to believe that I could actually “do the damn thing.” I lacked direction and made my fair share of mistakes because of it. My first year in business, my gross revenue was somewhere in the ballpark of $16,000. To put it bluntly, that’s ramen noodle-status, but it was something. Running a business at that time wasn’t pretty, but it was oh-so delightful and I was hooked.
My second year in business, I became somewhat more productive and slightly more confident that I could actually do 'all the things.' I still lacked direction and had little set in the way of repeatable systems. But I was making progress, and I was serving as a dream enabler all the while. It was utterly fantastic. Revenue-wise, I was still eating Ramen.
When people confide in me how hard starting their business is/was, suddenly and without fail, I see a vivid flashback to checking my bank account one day during Year Two. There sat all of $0.63 and I had bills due the next day. So yea, business is tough.
Regardless of the fact that I had no idea what I was going to do to get my bills paid, something deep within the pit of my soul whispered that I could make this work. The reason those bills were paid on time was because a client of mine paid early - that same day, actually (Word up, Meg.).
SOMETHING HAD TO CHANGE
Because I was hooked on serving my clients' needs by fastening all the details together on the backend of their businesses - I had found my passion...and because my stomach was beginning to churn at the crinkle of opening another package of sodium-latent Ramen... I knew something needed to change in order to take my little company from barely surviving to making a bigger impact on my clients’ businesses.
I’m insanely passionate about goal setting and each turn of the “New year, New me” is basically holy territory. It’s when I set big-picture goals for the year ahead, shed what’s no longer serving my needs, and dream big...I mean really big.
GOAL SETTING STUDIES
So when I read about Harvard MBA students’ goal setting results, I about freaked at the epiphany. If you aren’t familiar with the supposed study, read ‘Why 3% of Harvard MBAs make Ten Times as Much as the Other 97% Combined' or this Forbes article 'How to Set Goals (and Why You Should Write Them Down)' .
In my research, I found out this famous study was actually a myth, but it doesn’t negate what goal setting does for achieving results because here’s an actual goal setting study that DID happen by Dr. Gail Matthews from Dominican University and Steven Kraus, a social psychologist from Harvard, on the goal setting study along with the results.
Here’s the quick and dirty of the Matthews and Kraus study.__________________
“Participants were randomly assigned to one of 5 conditions (groups):
Group 1- Unwritten Goal
Group 2- Written Goal
Group 3- Written Goal & Action Commitments
Group 4- Written Goal, Action Commitments to a Friend
Group 5- Written Goal, Action Commitments & Progress Reports to a Friend.
Participants in Group 1 were simply asked to think about their goals (what they wanted to accomplish over the next 4 weeks) and then asked to rate that goal on the following dimensions: Difficulty, Importance, the extent to which they had the Skills & Resources to accomplish the goal, their Commitment and Motivation to the goal, whether or not they had Pursued this goal before and if so their Prior Success.
Participants in Groups 2-5 were asked to write (type into the online survey) their goals and then to rate their goals on the same dimensions.
Group 3 was also asked to formulate action commitments.
Group 4 was asked to formulate action commitments and send their goals and action commitments to a supportive friend.
Group 5 was asked to formulate action commitments and send their goals, action commitments and weekly progress reports to a supportive friend. Participants in this group were also sent weekly reminders to email quick progress reports to their friend.
At the end of 4 weeks participants were asked to rate their progress and the degree to which they had accomplished their goals
Goal Achievement Results
Group 5 achieved significantly more than all the other groups; Group 4 achieved significantly more than Groups 3 and 1; Group 2 achieved significantly more than Group 1."
And while their results are impressive to ponder, this was no revolutionary concept to me. I had already generally experienced similar results in my own life through goal setting habits.
The results of the study proved to be supportive to what I already knew in my own life, which is that goal setting and accountability are habits that lead to results. I knew that setting goals made a positive impact. I knew attaching quantifiable numbers to goals also made a positive impact. I knew setting timelines made a positive impact.
THEN, SOMETHING CHANGED
And this is where the profitability switch flipped.
When I began tracking my billable time at the end of each day and compared it to my yearly, monthly, and daily goals, my revenue and profitability rose significantly. Why? Accountability.
Without clear cut goals, I had nothing to answer to. I knew generally that I wanted to run a successful business because that reflected the value I was delivering clients, but really I had no target or quantifiable indication of what success meant.
I had no real plan for how I was even going to become profitable. Before I began documenting my progress, I just knew I wanted to make my business into a viable income stream and a real career because I loved the work I was doing, believed in my clients, and somewhere in the pit of my stomach started understanding my value.
This is where I nail down the exact system I used, which you can also easily apply to your own business.
I’m in the business of providing services, but this concept will also work for businesses that sell a product. The results are the same.
THE GOAL TRACKING FOR PROFITABILITY SYSTEM
I’ll explain the thought process behind this goal tracking system below, but make sure you also download the Goal Tracking for Profitability spreadsheet here and apply this process to your own business.
Please know that this spreadsheet and goal tracking system focus on gross revenue, which is what you make without considering expenses. The underlying assumption is that you already have a solid grasp on what it takes to be profitable according to your business model. If you don’t have that grasp yet, get an accountant yesterday.
- Start by identifying your annual revenue goal. Don’t just throw a number out that sounds good. Do your research. What’s realistic? How much can you actually produce in a given day, month, and year? Consider your expenses and what you must cover in order to become profitable (Gross Revenue - Expenses = Net Revenue). Your gross revenue must be larger than your expenses in order to be profitable. If your expenses are larger than your gross revenue, you’re in the red. Consider your business model. If you’re in the service business, you may not have much overhead to cover. If you’re selling a product, your expenses will be a bigger consideration in the profitability equation. Bottom line: if your goals aren’t realistic, you’re setting yourself up for failure. Do your research.
- Break your annual goal into monthly goals. It’s unlikely that you’ll produce the exact same revenue each month, so don’t simply divide your annual goal by 12 months. Take into consideration seasonality, when you’ll take vacations, whether you’ll add or take away employees at any time during the year, and so on. Maybe you’re having a baby or planning to have surgery later in the year. Maybe you only want to work four days each week. Take that time off into consideration. This piece is insanely customized to your business, industry, and lifestyle. In essence, consider all the ebbs and flows that will impact your annual revenue. Doing this will give you an idea of what you’ll need to make each month to meet your annual revenue goal.
- Break your monthly goals into daily goals. This gives you an exact average of what you’ll need to hit each working day in order to meet your monthly goals. Again, if you’re only looking to work four days each week, you’re cutting the time you can devote to value added activities (results you produce in your business that customers are willing to pay for) by 20% of a normal 5-day work week, which is a major consideration for productivity.
- Look at the big picture. This process gives you a detailed perspective of what what you should strive for and how you should align value added activities each day in your business. If you haven’t already, download the Goal Tracking for Profitability spreadsheet so you can get to work right after you finish reading this post.
WHY THIS SYSTEM WORKS
Here are five reasons why this system works:
- Even if you aren’t a “numbers person,” there’s no denying the accountability this system provides. It’s a way of breaking a massive 365-day goal (annual revenue) into what you should and could be doing daily in order to optimize each working day for profitability. If you aren't meeting your goals, 'somethings gotta give.'
- If you aren’t meeting your goals and you find yourself with free time, the temptation to “call it a day” early or get distracted by non value added activities is insanely convicting. It also helps you brainstorm what you can be doing differently to make the numbers pan out.
- This system provides a tangible immediate detailed perspective of why value added activities matter.
- Without breaking down goals in this way, you have no idea where you’re falling short. Identifying that you’re falling short helps you understand that something needs to change. OR identifying that you’re consistently meeting or exceeding goals helps you understand that you’re capable of much more than you imagined and helps you understand that your goals should be set higher.
- I included a percentage column in the spreadsheet so that at the end of each day, the spreadsheet automatically tabulates the percentage you are to your monthly goal. If you get half way through your number of working days for the month, you know that the percentage you are to your goal should be 50% or higher.
Listen. There’s no playbook for how to run your business profitably. The obscurity of what you should be doing to succeed is what makes running a business challenging.
All you can do is identify and commit to habits that lead to success.
One thing is certain: Establishing repeatable systems that set you up for meeting your goals is one of the keys and secrets to business success. What you spend time on each day, each hour, matters. If you’re the one running a business, your success depends on no one else but you. I’m just here to support your understanding of what it’s going to take to become effective and profitable.
WHAT WE COVERED ABOUT ESTABLISHING A YEARLY, MONTHLY, AND DAILY GOAL TRACKING SYSTEM FOR PROFITABILITY
- Why setting yearly, monthly, and daily revenue goals creates a target and aligns your business efforts for profitability.
- The exact system, along with the Goal Tracking for Profitability spreadsheet, I use to track goals which flipped the profitability switch from barely surviving in my business to thriving.
- How to leverage this spreadsheet and set up this same system in your own business.
My goal in every post is to make the most of your precious time and pack these articles with insanely actionable content. Have I done that for you today? I'd love to hear your feedback. Contact me or comment below.
And please do me a little favor and share this post with others because there's a good chance it will help them with their business.
Your business matters. Now go do something awesome in the world.
ABOUT THE AUTHOR
For proper introductions, I'm Francie. I started my business, Simply Integrated, in 2015 and have fallen madly in love with teaching small business owners how to run their companies more successfully and marketing to impact bottom line profitability.
My knowledge and experience comes from earning an MBA and from coaching small business entrepreneurs while managing and marketing their projects. I focus solely on business strategy and marketing and created this blog to help others run more successful businesses. If you’re interested, you can read more about me on the About page of Simply Integrated’s website.
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