There’s a problem with the way many business owners plan their revenue and sales goals.
They say something to the effect of “I want to make more than last year” or “I want a bigger profit percentage than last year”.
Great. Don’t we all?
The issue is that there’s no specificity. How much more? What profit percentage?
Just like the old GPS analogy. . .you can’t get where you’re going if you don’t know where you are. You also can’t get there if you don’t know where “there” is.
When planning your revenue (and/or profit) goals, it’s helpful to have a few numbers handy. For purposes of this article, we’ll focus on revenue from sales of your primary product or service.
You’ll want to gather the following information in order to plan for your 2017 revenue:
- Your 2016 revenue from sales
- Your total number of paying clients for 2016
- The total number of programs, products and services sold in 2016
- How much more you want to make in 2017 than you did in 2016 (see here for an article on planning for profit)
Let’s pretend our answers to the above are:
- $265,000 in 2016 revenue from sales
- 54 paying clients
- 12 total programs, products and services sold in 2016
- $35,000 additional revenue from sales you wish to create in 2017
Okay, now a little math (click here to download a simple revenue planning excel template which has these formulas in it or break out your calculator and jot down on some paper):
- Divide your total sales revenue ($265,000) by total number of clients (54) to get your average revenue per client ($4907)
You now have two choices:
- Decide you want all your new 2016 revenue to come from new clients. In which case you take the amount more that you want to create ($35,000 in our example) and divide it by the average 2016 revenue per client ($4907).This totals 7 new clients in our example ($35,000/$4907). Before nodding your head saying “yep, new clients”, stop and think about what that entails from a lead generation, marketing and time/energy cost standpoint.Then…since all these clients won’t be starting with you immediately, add some more of them. The longer it takes to bring them in, the more you need to bridge the gap to how much more revenue you want to create. This means our “7” new clients could be 10, 15 or more.
While we’re stopping this exercise here, truth is, the number of “new” customers you need depends also on your conversion rate from strangers to opt-ins and opt-ins/leads to paying clients. If you speak with 50 people for every 1 new client, you’ll need to have a lead generation plan in place which brings in 350 people in order to welcome 7 new clients or 750 people for 15 new clients.
- Offer more items (or more of the same items if appropriate) to existing customers. What if, instead of spending $4907 with you like in 2016, 5 of your existing clients spend $9900 with you in 2017. 5 clients x $5000 in new sales revenue = $25,000 additional. Now instead of 7 new clients, you only need 2 -3 to make up the additional $10,000 for your desired $35,000 in new revenue.
Reality is that your business requires (and will have) a mix of both existing and new clients and customers. This requires you to create not only a lead generation plan to bring in new customers, but also an Extreme Client Care™ and retention marketing plan to keep existing clients, discover what they want and need most and find a way to offer it to them.
Once you know your numbers, it’s time to put together an implementation plan to achieve them. Your implementation plan allows you to plan your quarters, weeks, months and days such that you consistently take the actions necessary to achieve your goals.
Updated for dates and relevance on December 29, 2016