I often tell people I live in this week, 3 months from now, and 5 years from now. That is where my mind is constantly. True to that, this time of year is not only busy season in the carpet cleaning world, but it is also time to make plans for the next year.
We all have heard over and over the importance of setting goals, but how does one do that, especially in business. Remember the adage that goals need to be SMART? Specific, measurable, actionable, realistic, and time-bound? I find all of those attributes good when I am trying to set my goals for the next year. I also want to try to create a plan of attack, a method for trying to achieve those goals. As such, I start with the end in mind- what are the results I’m looking for over the course of the year, and what do I need to do to get those results.
For example, if I have the goal to hit a certain revenue this year, is that number specific, measurable, actionable, realistic and time-bound? Well, yes, to most of those questions. The realistic part may be the hardest part of the whole pie when it comes to revenue. If I want to hit a 40% growth mark, what do I need to do to attain that, and is it possible? I can say that up to the point that I am at, it is possible to grow 40% in a service business year over year. I’m not sure if it is beyond where I am, but we will give it a shot.
So how do we calculate that? I simply take the projected revenue from this year, and multiply it by 1.4. So if I did $1.5 million this year, 40% growth would be $1,500,000 x 1.4 = $2,100,000. I’ll be honest, my projected revenue for this year is a little higher than $1.5, and the number I came up with scared me a little bit. In fact, I seriously thought about changing the number to be lower. 40% is certainly a stretch goal, and one that will require a lot of work. As Jim Collins calls it, its my BHAG (Big Hairy Audacious Goal). What’s crazy to me is that we have come really close to hitting our BHAG this year, and so why not go for it again? And if we don’t set it as the goal, we won’t hit it.
Ok, so we set the number, now what? Now it is time to figure out what we need to do to obtain that goal. I start with how many jobs or clients that is going to take. While all my customers individually spend different amounts, there is a job average that we can look at. We simply divide our goal by this number, and that gives us the number of jobs we will need to hit this number. For instance, if I have a $300 job average, $2,100,000/$300=7,000 jobs. Now because I’ve been doing this for a while, I know that I will need at least 10% more jobs booked than the goal completed because of cancellations and reschedules. So I multiply 7000 x 1.1 = 7700 actual bookings are needed to hit my target goal.
I also have to plan for a certain number of re-services, because, as good as we are, we are going to have some. I strive for as few as possible, but we figure that having a re-service rate of less than 3% is acceptable. So to find out how many re-services I need to plan for, I multiply 7000 x .03 = 210 re-services. That sounds like a lot, but at least I have a few months to wrap my head around it, and come to grip with it before the year even starts.
This so far is the easy part of setting the goal and starting the plan. The hard part comes in implementing it, and drilling down even more specifically into the numbers and what they mean. Other numbers that need to be figured out include: how many employees will I need? How many trucks (in my case, or stores, chairs, technicians, etc.) will I need to accomplish this? When will I need them by? What kind of turnover can I expect? How many candidates will I need to interview and then hire to find the right one? What are some of the specific line items and their numbers will we need to hit? Along with all that, how much advertising will I need, and in what mediums? How much will I allocate to those? What about space? Is your office space big enough, or will you need more? What kind of time commitment will you need?
All these questions should be answered before starting the next year, if not perfectly, at least to give you an idea of the direction you want to be going in. Setting up a pro forma is a great next step after this, planning out your revenue and expenses for the up-coming year.
Remember, keep the goals SMART!
DaveGrigsby.com 