Tips to make this your best business year yet: How smart planning sets you up for success
It’s the start of a new year, a perfect moment for small businesses to hit refresh and set the stage for growth.
Whether you’re a seasoned entrepreneur or just getting started, now’s the time to review your business plan, tackle those last-minute tax prep tasks, and map out your revenue streams.
This isn’t just about good financial hygiene; it’s about staying true to your core values and setting yourself up for a winning year ahead.
Forecasting matters and how you can use it as a powerful tool. While forecasting sales can feel intimidating, you’re not alone. It’s part art, part science, and yes, a little bit of guesswork. Still, getting it right is crucial; poor forecasting can derail even the most promising business. So, how do you create a sales forecast that’s both realistic and actionable?
A good first step is to create a sales breakout. List your goods and services and decide what your financial “base” will be. Maybe it’s revenue accounts, service categories, or individual product types. If you offer multiple items or services, group them into categories — this makes forecasting much easier and helps you track actual sales against your projections.
Let’s say you made $100,000 in sales last year. If your business model hasn’t changed, that’s a solid starting point. But don’t forget to factor in inflation predictions for the coming year. And to keep your forecast sharp, identify key performance indicators (KPIs) like conversion rate, customer retention, and average order value. These metrics show what’s driving sales and where you might need to adjust.
Embrace change by leveraging technology and AI to help you with the heavy lifting of analytics. Today’s business owners have powerful tools at their fingertips. AI and analytics platforms can analyze past sales, market trends, and broader economic indicators to help you build more accurate forecasts. Most businesses see ups and downs throughout the year, so use software to breakdown your projections by quarter, month, or even week. Many platforms let you create multiple scenarios — optimistic, pessimistic, and realistic — so you can plan for whatever comes your way.
If your sales spike during the holidays, weight your forecast toward November and December. If summer is your busy season, adjust your numbers for June, July, and August.
While revenue matters, it’s not the only factor. It’s possible for a company to make plenty of revenue and still end each year in the red. Your expenses throughout the year will help you better project profits. First, start with your fixed expenses, or the relatively flat things, like rent, electricity, water, and property taxes. Then, consider your variable and/or irregular costs — some of these could be areas to cut should expenses exceed sales. Any increased inventory or product costs should be included as well.
Stay flexible and update and adjust as you go. Business is rarely static. Maybe you’re launching a new marketing campaign, phasing out a product, or introducing something fresh. Your sales forecast isn’t set in stone; update it quarterly or monthly as new data rolls in, especially in unpredictable markets.
Here’s to a great year for you and your business.
• Steve J. Bernas is president and CEO of the Better Business Bureau and can be reached at sbernas@chicago.bbb.org.