The Top 10 Small Business Tips to Create Your Quarterly Business Plan
In 2020, many small businesses had to throw their business plans out the window and create new strategies instead. That may have been necessary for 2020, but now it’s time to shut the window and update the Q1 business development plan.
10 top small business tips to help you plan the first quarter successfully:
- Do a gap analysis
- Enjoy a palate cleanser
- Set Q1 goals
- Create an action plan
- Establish your KPIs
- Align incentives
- Schedule monthly and quarterly reviews
- Communicate your plan
- Measure performance
- Communicate results
1. Do a gap analysis
It’s helpful to conduct a gap analysis before building your strategy. Focus on four areas:
- Performance gap analysis: Analyze your plan from last quarter to understand why strategic goals were not met.
- Market gap analysis: Examine your position in the marketplace and define what’s changed. Look for openings that may have emerged as competitors have made changes.
- Staffing gap analysis: Many small businesses had to make difficult decisions about staffing in 2020. Do you have the right people on board -- and the right number?
- Profit gap analysis: Identify any gaps between your target profitability and actual results.
Once your gap analysis is complete, it’s time to cleanse your palate.
2. Enjoy a palate cleanser
In fine dining, chefs will often offer sorbet between courses. A palate cleanser neutralizes food flavors to prepare you for the next course. It makes sure there are no lingering effects that can get in the way of savoring the richness of what’s to come. You need to do the same thing with 2020. Shake off any leftover angst about 2020. There’s nothing you can do about it now. Put what happened aside.
What you shouldn’t forget is the lessons learned. The most successful businesses learned to pivot under intense conditions. This agility can serve you well in the future as you set the goals for your quarterly business plan.
3. Set Q1 goals
No matter where you ended the year, your quarterly business plan should focus on growth. If possible, clear the table of any business goals that aren’t tied to revenue enhancement.
Start with broad goals and then work narrower to create actionable items.
4. Create an action plan
Next, your small business plan needs to create the specific actions to take to achieve your goals. It helps to break your goals down into smaller, incremental steps.
If your goal is to increase your net revenue by 7%, you need to determine the steps it will take to get there and break it down as far as you can.
Let’s say you’re a plumbing contractor and you’re trying to determine how to reach your sales goal. To hit that number, you determine you need to land 10 new customers a month. Since you close -- on average -- 25% of the leads you get, that means you need 40 leads monthly. Now, what’s it take to generate those 40 leads?
5. Establish your KPIs
Moving forward, you must have a way to measure yourself. Depending on the goals you set, you may develop different Key Performance Indicators (KPIs), but start with the KPIs that monitor the health of your business. Make these KPIs part of your quarterly business impact analysis.
This is a metric you should be tracking over time. It can tell you quickly whether you’re headed in the right direction. It tells you whether you are more or less profitable during the tracking period.
Net Profit = Revenue - Expenses
Net profit margin
You also want to know if you’re making a reasonable return on your investment. This measures how much profit you’re generating from the money you’re taking in.
Net Profit Margin = Net Profit / Revenue
For any business, cash flow is crucial to pay the bills and keep things running smoothly. Your quick ratio lets you see whether your cash on hand and receivable are enough to cover your outstanding liabilities.
Quick Ratio = (Cash + Securities + Account Receivable) / Current Liabilities
If the quick ratio is less than one, you’ll be challenged to cover your liabilities.
Customer acquisition costs
Anything you can do to lower your customer acquisition costs (CACs) will improve your overall profitability. This can help you determine the ROI of your marketing efforts and whether you need to make changes.
Customer Acquisition Costs = (Advertising + Marketing Costs) / Number of New Customers
These metrics all work together to determine the health of your business. Tracking performance against these goals and other KPIs specific to your quarterly business plan will keep you on track.
6. Align incentives
We all want to think that if you tell employees what needs to be done, it will somehow magically just happen. Back here in the real world, we know it’s never that simple. The best strategy is aligning incentives with your goals. If you hit your revenue targets, what do employees get out of it? If the answer is nothing, you might want to rethink it.
While financial rewards are always nice, there are plenty of other ways to keep employees happy and share in the success.
7. Schedule monthly and quarterly reviews
Here’s a simple -- but important -- step. Grab your calendar and schedule monthly and quarterly reviews. When things get business, it’s easy to forget. By scheduling it now and setting reminders, you’re more likely to make it happen.
8. Communicate your plan
A business plan is no good if it sits on the shelf. The better employees understand the business goals, the steps to achieve them, and potential rewards for getting there, the better they will perform.
If you’re a small business that sees a fair amount of turnover, remember to communicate your plan as part of your onboarding process.
9. Measure performance
Measuring your sales revenue needs to happen in two ways:
- Performance against goals
- Performance against market
It’s great when you hit your revenue targets but it can also blind you to other opportunities. For example, let’s say you set a Q1 business development plan of increasing sales by 6%. When you end the quarter with a 7% increase, you’ll feel pretty good. Would you still feel that way if you found out your closest competitors increased revenue by 15%?
10. Communicate results
Yes, communication is in here twice. It’s that important.
You’ve laid out the plan and asked your employees to embrace it enthusiastically. Don’t forget to clue them in on the results, whether they’re good or bad. If they performed as needed, let them know and celebrate! If not, discuss how any changes or adjustments need to occur to get back on track.
Connect the dots
Remember doing those connect-the-dots puzzles as a child? You needed to move your pencil from one number to another and connect most of them to see the big picture.
It works much the same way in business. The more dots you have, the harder it is to see the results. The more you can connect your business plan to actionable and measurable results, the easier it will be for everyone to see the big picture.
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