Plan Your Work; Work Your Plan-2

The Cliché Remembered (Part Two)

In Perpetual Business' last post, our fictional 45-year old business owner had begun a plan to sell his business for $500,000, not later than age 65 (see Part One).  Analyzing his financial metrics, he computed his required annual cash flow and what he had to do monthly to reach his goal.  While computing the math is elemental, most owners don’t even get this far.  We’ll assume you’re among the select and have established your goal.

As the title reminds us, once you have the goal, a plan must be in place to attain it, and regular attention devoted to ensuring you’re advancing steadily.  Although owners clearly understand this message, it rarely happens.  Why is that?

One reason, easily remedied, is the lack of a simple tool to report the financial information that will measure your daily progress.  We call it a Daily Operations Control Report or, simply “DOC.”

Your DOC may be as detailed as you want it to be; however, we prefer simple and useful.  At a minimum, your DOC should contain:

1. Revenue Goals: Daily and Monthly objectives
2. Actual Revenue relative to goals and percent attained
3. Gross Profit Goals: Daily and Monthly objectives
4. Actual Gross Profit relative to goals and percent attained

Here is an abbreviated example of a monthly DOC for day 10 in a 20 workday month:

Halfway through the month, this example indicates a modest shortfall from targets.  If the percentages were above 100%, then the business would be tracking better than targets.  Modern bookkeeping systems allow you to create reports like this with an amazing amount of detail.  Even if you do not have a modern system, you can create any report format you want using Microsoft Excel.  Provided you have goals, input your financial information daily, have a report template, and use it, you will know the health of your business every day.

Would you like to make this data even more powerful to the success of your business?  Share your goals and data with your staff.  Educate them about how their individual and joint efforts affect the actual results.  Moreover, progressive business operators design pay plans that have a pay component tied directly to financial results, making the data personally relevant to their staff.  Imagine each team member monitoring the health of your business daily, knowing that his or her own pay is fluctuating just like yours.  They’ll be thinking like owners, rather than just doing a job (another feature of a healthy perpetual business).

Know where you’re going, how you plan to get there, then work the plan.  And, even better, include your whole team!