How to Successfully Plan, Budget and Thrive in 2022
A new year is officially upon us and with that comes the perfect time for any business owner to assess and evaluate their company—and goals. New chapters can sometimes introduce new opportunities as well as new threats. That’s why business planning and smart fiscal budgeting disciplines are key. Traditionally, business strategic planning takes place once a year, and attempts to set a business strategy for an extended period. Of course, the pandemic taught business owners that in a volatile business environment it’s extremely unlikely that a plan that is only updated once per year is sufficient to guide every strategic decision that CEOs will need to make over the next twelve months. When you assess where your business stands today, then develop budgets, financial models, tax strategies, and cash flow forecasts, you can be ready for any roadblocks and adjust as you pursue your goals. An effective business planning process should aim to help your leadership team understand the company’s strengths, weaknesses, opportunities and threats. Simple steps to planning include:
1. Assess your 2022 goals. Where do you want to go and why.
2. Review your market analysis/industry analysis. Where has your industry been, how has it changed, forecast for where it’s heading.
3. Preform a competitive analysis to determine who and what you’re competing against for customers and market share.
4. Detail a 12 month sales and marketing plan to understand how you’ll reach your audience and your projections for why your specific sales and marketing strategies will ensure you’ll meet your 2022 goals.
5. Assess financial information data including sales forecasts, anticipated expenses; budget for expenses, cash flow analysis, and profit and loss from the last twelve months.
6. Outline what results the organization is committing to deliver in terms of goals and objectives.
7. Create a road map of how and when the results are going to be delivered. Who is responsible for each portion of the plan and how will you measure, monitor and pivot if plans and goals need to change.
Creating a Budget to Match Your Planning
If there’s anything the pandemic has taught us it’s that curveballs can hit your business at any given time and it’s crucial to have safety nets, emergency funds and savings set up that give your company a life jacket in the storm.
In addition, budgeting just makes perfect sense to be financially prepared as to how the future of your business’s finances will look. It requires examining what happened last month, what happened three months ago and what this month last year looked like — then using that information to make wise financial decisions for the months and years ahead.
Carve out plenty of time to work through your business budget. You will need to have access to important financial information to help.
Estimated revenue: This is the amount you expect to make from the sale of goods or services. It’s all of the cash you bring in.
Profit: Profit is what you take home after deducting your expenses from your revenue. Here you’ll plan out how much profit you plan to make based on your projected revenue, expenses, and cost of goods sold. If the difference between revenue and expenses is not on par, you need to rethink your cost of goods sold and consider raising prices.
Putting “Pen to Paper”
The best way to truly plan your budget is working with a CFO or financial advisor/consultant on adding the above calculations onto a spreadsheet where you also have prepared other foreseen costs.
These costs can include your personal plans for retirement, investments your company needs to make technology or marketing-wise, the status of your working capital reserves or the need for a lump sum of money to grow your business. Moreover, this is where you prepare your “safety” fund; stability comes from these prepared safety nets!
Your financial go-to should then work with you to plan for the profit you’ll need to generate the sufficient cash flow to maintain all these factors and budgets. This will then lead to preparing the number of sales your product or service will need to undergo to meet this net income.
Listen to the Numbers
At the end of the day, data doesn’t lie— numbers ultimately tell you the big picture. If they’re not adding up, it’s time to take the proactive steps and cut back on the projects, the talent or expenses you can live without. If your departments are spending too much, work with their leads to see how to cut the right corners.
Again, work with your financial support team or advisor on what exactly can be cut this year— exactly how much can you tweak your gross margin?
You’re Not Alone
As a CEO or business-owner, you don’t have to figure out your 2022 business planning and budgeting on your own. We mention throughout this piece the pivotal role your financial department plays— they, after all, are the number interpreters.
If you need a guide, consultant, advisor or part-time CFO, look no further than AETucker Consulting. We work with business owners and management of small to midsize privately held companies to develop and implement strategy, improve cash flows, increase company value and provide successful business transitions.