Create Your Business’s 2023 Financial Targets in 30 minutes or Less
Welcome to the middle of January! Do you have your 2023 plan 100% finalized? Don’t stress if you haven’t started, don’t know where to start, or didn’t even consider building one. I’ve got you covered!
Plans should never be set in stone because things come up that you cannot anticipate. At the end of the day, targets, goals, and strategy should be viewed as guardrails to keep you focused. Unless you have to report to the SEC, you can manage your business however you want (as long as it’s legal ). Planning on $500K in annual revenue, but get to $2M instead - WELL DONE! Planned for $2M, only made $750K, but had positive cashflow and fed your family- Equally WELL DONE! Plans are key, AND you can never perfectly anticipate the future so prepare for it to be incorrect.
So where does that leave us? Let’s get you a plan in 30 minutes or less so you can have clarity on the following:
Gross Revenue Target for 2023
Personal Income Target (if you’re the business owner)
Current Products / Services & Pricing
New Products / Services & Pricing
What you need to get there (i.e. people, investments in hiring / equipment / marketing)
If you can’t download (or don’t want to)totally fine- grab a pen and paper and let’s get started.
Starting from the top, what is your revenue target?
Gross Revenue:
What was your gross revenue in 2022? Was it higher or lower than expected?
Will revenue be the same in 2023, more or less? Why or why not? Don’t overthink this; you can come back to confirm if you’re off track after we get through products and expenses. Really challenge yourself to set a high target!
By setting a “target” you’re saying what you want to achieve vs. putting in some % growth around 2022 revenue and calling it a day. Be bold and say what you want.
Personal income:
This is something many owners leave off; some don’t pay themselves a full salary or never consider a raise. That’s totally fine, but think about it like this - Why did you want to run a business instead of being employed by other people? As an employer, you are providing a much-needed job to someone else. It’s okay for you to set a high personal income goal and attain it.
Again this is a TARGET, so set it high, aim big and then make the business work for you.
Products / Services:
What are your current products or Services?
List them out in a table on the guide or make your own table like this:
Product, Average Price, Estimated Volume
Repeat for new products and services and add in the quarter you plan to launch
Then do some quick math
Price x Estimate Volume = Gross Revenue for Product A
Repeat for all your products
Add them all together - adjusting for the starting quarters of the new products.
Are you close to your target? If not, adjust.
Investments & Major Expenses
Potential Investments: New People, Equipment, Technology that you are adding in 2023
Major Expense: Existing large expenses (over $1000) that will increase in 2023 and / or a cost you need to plan for
Use the buckets below to categorize your investments and expenses. List out what quarter they start.
Overhead - these are your people and general business expenses needed to keep the lights on
Sales & Marketing- Second to people, this is typically the next largest expense.
Other Examples:
Tech
Product development
Operations
Manufacturing
Quarterly View:
Finally, break it all down per quarter and list out the main actions you need to take to make it happen.
Revenue
Simple option: take your gross revenue and divide it by 4
Detailed option: take your gross revenue for current products divide it by 4. adjust each quarter to include the new products & services launching in future quarters.
Now you have a great Annual Plan for your business. You have a quarterly breakdown of revenue, personal income, investments & major expenses.
Tips for Going Deeper:
Break it down by month and create a full 2023 forecast
Create a list of small recurring expenses so you can track what’s due monthly, quarterly, and annually
Review your working capital requirements (stay tuned for next week where I’ll give you a guide to calculating working capital)
Create simple KPIs tired directly to the targets you’ve set in here
Just get started! Look back at your numbers, how do you feel, and where and how do you want to improve? Start from the top→ down. Annual goals, to quarterly, then to monthly goals. List major expenses, write down any major purchases, and work these into your plan. Remember! This is DYNAMIC, ever changing based on circumstances, within and beyond your control.