5 Tips to Help You Plan for a Successful New Year in Business
By: Mike Lilly, Director of Business Development
Now that it is almost a new year, we thought that it would be great to take a moment to reflect on the events of the past year and plan ahead for 2019. Here are some important things to consider:
Financial Plan Review–Goals and Objectives
First of all, it’s important to take a moment to review your financial plan for the past year. Did you achieve your goals? If not, where did you fall short? Financing? Growth, etc? What are the milestones that you’d like to achieve for this year? It’s good to look at the prior year to help formulate your planning assumptions about how you’d like to maintain or exceed your goals, or how to get back on track.
As you put together a financial forecast for 2019, two of the most critical items in that checklist will be your cash burn and your runway. For the unfamiliar, cash burn is the amount of money the company spends per month, and runway represents X number of months until the company runs out of money based on current operations. These two numbers will be important drivers for fundraising targets or sales targets in order to sustain the the business.
Speaking of Sales, is 2019 the year you plan to start producing sales and revenue? If so, great! You will want to be thinking about a few inputs to help formulate a sales forecast. Similar to a Bottoms-Up Financial Forecast, a bottoms up sales forecast is typically most insightful. You would start this model with X amount of staff on hand responsible for making sales, multiplied by the average number of sales per month (or year) the salesperson is expected to make, multiplied by average contract value. This figure is an oversimplified revenue target, but a good ballpark estimate to get you started.
If you were hoping for a higher revenue number on the above forecast, one of things you should also look to do is assess hiring needs. What does it look like to hire more people at your company? If your sales department exceeds expectations, do you have the bandwidth to support the new clients, i.e. who’s going to service the companies post-sale? If you’re not at the point where you’re selling yet, do you have enough product development/design employees that are helping you track towards the milestones you’ve laid out for 2019? Does the financial plan support hiring them? Or will you have to contract this support? Either can work, but it’s nice to see this laid out for you based on the plan that you have put together.
Compliance and Tax Check-Up
Besides forecasting and planning, this is an excellent time of year to review compliance measures and general good practices for the health of the company. Some things to consider: What business vendors are you using? Are they delivering value or are they simply a business expense? Do you have your employees covered with payroll, benefits, and insurance? Is the business in general insured? Are you working with an entrepreneurial focused law firm or bank? Have you put in place good financial policies and procedures? We’d recommend formulating a document that breaks out vendors by service and cost. If you end up identifying gaps in your services, or value that seems to be lacking, ask around your network for introductions to better business partners.
This is also a good time to start thinking about the upcoming tax year. Has anything changed in the business that may affect your tax filings and strategy? There can be a long list of items that can either impact the business tax return or your personal tax return, so it’s important to find a firm like EGFS that has excellent start-up and technical expertise to advise you on these matters. If you are looking into a tax provider to help you with this aspect of your business, engaging early in the year allows time for discussions, correspondence, etc. This is more difficult and expensive as the tax deadline approaches as tax firms become over-subscribed.
We hope this helps make for a fruitful and productive 2019. Happy Holidays!
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