No matter how well your small business performed in 2016, let’s hope 2017 is even better, especially when it comes to cash flow.
One new habit you may want to take up in the New Year is forecasting your business’ goals and objectives several months in advance. A tried-and-true method for this is quarterly business planning which, as the name suggests, involves plotting the course you hope your company will take over the next 13 weeks.
While every small business owner has a general sense of where they want to take their company over the next several years, few have concrete plans on how to get there. This is when quarterly business planning becomes an incredibly useful tool. When you plan ahead, you know the precise goals you hope to accomplish over the near term. You’ll also know what you need to get there. This significantly reduces the likelihood you’ll run into problems relating to inventory, staffing, or finances, among other things.
If you know that you’ll have to cut a lot of checks to suppliers two months from now, for example, you can take steps today to ensure your finances are in order. By reining in spending over the next few weeks, you can be certain money will be in the bank when you need to settle your accounts, thereby avoiding cash flow problems. Additionally, if you know your restaurant is going to be super busy seven weeks from today during graduation week, you can start planning today for the supplies and staffing you’ll need to handle the looming rush.
If you’ve never put together a quarterly business plan before, here are the basic steps:
Write down a handful of goals (like cash flow) you hope to accomplish over the next quarter
Make sure your goals are SMART goals, i.e., ones that are Specific, Measurable, Achievable, Realistic, and Time-based. If you run a small restaurant, for example, a SMART goal would be aiming to achieve a 10% increase in sales this quarter compared to the same period last year.
After figuring out your goals, identify specific steps you can take to reach them
The restaurateur, to continue the example, seeking to bump sales 10% might think of certain promotions or marketing campaigns that could be launched over the next several weeks. That would entail steps like designing marketing materials, forecasting the food and drink requirements over the next few months, and making sure there re enough staff members to handle increased traffic.
Determine who should be in charge of each step
Once you’ve identified the steps you need to take to reach your goals, it’s time to assign responsibility to each one. As a restaurant owner, you might delegate staffing responsibilities to the manager while forecasting the food and drink requirements yourself. You may also decide to outsource marketing responsibilities to a third-party agency. Bottom line: Make sure someone’s in charge of getting each step done.
When the next quarter approaches, evaluate your efforts and refine your plan moving forward
As the quarter winds down, it’s time to assess the progress you’ve made and start planning where you’d like to take your company over the next 13 weeks. Some things may have worked out perfectly while others simply did not. Retool your approach to increase the chances you’ll have more success over the next quarter. Repeat the process again at the end of the next quarter.
While quarterly business planning should help give you a better idea where you stand today and where you’re likely to stand tomorrow, remember that you can still be blindsided by unexpected calamities at any point in time. A massive power outage during the summer, for example, can knock your marketing company offline for a couple days—leaving you incapable of serving clients and therefore falling short of revenue expectations.
In addition to quarterly business planning, you should also have contingency plans to overcome unplanned disasters. For example, when revenue dips unexpectedly and you’re low on cash but have a stack of unpaid invoices collecting dust on your desk, you can use an invoice financing service to advance payments on them. That way, you can get access to the money you need to grow your business even if you’re dealing with a situation that’s out of your control.
By utilizing quarterly business planning and becoming familiar with the financing options that are available, your small business can avoid predictable problems—and cash flow problems in particular—giving you more time and energy to focus on what matters most: serving your customers.