Six Simple Steps to Build Your Own Profit Plan
You can ensure that your business is going in the direction you want it to go by building your business’s profit plan. If you haven’t made one yet, here’s a simple guide you can use for your business profit plan.
Building Your Business Profit Plan - How To
Do a Business As Usual (BAU) model.
Start with a blank worksheet on Excel or Google Sheets. Then start by labelling one tab your Business As Usual or BAU.
👉 For the columns, put each month of the year. You don’t need to begin in January; you can start this at any point of the year you want and pull it up to 12 months. Then add a column for the 12-month total.
👉 For the rows, put in your income by source name and total revenue in one group, then your expenditures by actual supplier name and total expenditures in another group. If you have employees, you can also add their salaries under the expenditure group.
✔️ Now start putting in the actual figures of your revenues and expenditures. This way, you can see how the business currently works and operates or how your “business as usual” looks.
✔️ Then you can add a row for your profit—before you pay yourself or before the owner’s pay. This is just the monthly income, less the monthly expenditure.
✔️ You can now add the row for the tax line since all the figures you should have inputted are exclusive of value-added tax.
✔️ Then add a row for your own pay or how much you’re taking home every month.
✔️ Finally, you can now add a row for what’s left of your income after all payments have been made or the bottom line.
The BAU gives us a picture of what the next 12 months would look like for the business if we don’t change anything—no additional advertising, no promotional campaigns. From this, you can see where you need to improve and what strategies you need to change so that your business can make more profit.
Evaluating your business’s expenditure
Copy the cells from the BAU spreadsheet to a new tab called the Profit Model. You will now need to look at your expenses and evaluate which ones you need to keep or let go to make the business more profitable - I call this evaluating and eliminating Money Leaks. Here are two questions you can ask yourself during this stage:
- Is this 100% necessary to keep the business running and operating?
- Is this delivering me a positive return of investment (ROI) in terms of money or in terms of time?
If you can answer both questions with a yes, then the expense is necessary. However, if you can’t answer yes to both questions, then they are just nice things to have and are just money leaks. You might have had them for the longest time, but it’s good to clarify whether they’re actually necessary. After evaluation, take out those you won’t need from your Profit Model.
Now the hard part is you have to evaluate your employees. If you have employees, they should be delivering at least twice the salary that they’re getting. If some of them aren’t delivering, you may take them out from the Profit Model after a three-month notice period.
Again, you need to evaluate each expense that your business has and ask yourself whether they’re 100% necessary to keep the business running.
Build out a revenue plan with a clear vision for your business.
What do we want, in terms of revenue, for the business? Always think big for your business. What we don’t want to happen is that when you hit a certain mark, you’ll be telling yourself that this is not the business you wanted to do, this is not the service you wanted to offer, or this isn’t the day-to-day process you’ve imagined yourself doing.
It is okay to re-evaluate what you’re offering the market, even when you have a million-pound revenue stream, if that is something you can see for your future. Building this plan doesn’t just mean delivering the profit but also delivering your vision for the business and for your life.
When you look at your revenue streams, do you enjoy delivering them?
Are these revenue streams able to deliver you the overall revenue that you want for your business?
For example, you’re doing a lot of one-to-one client calls, and you want a business with a five-million-pound revenue. That means you need to have more than 700 clients in a month. That’s just impossible! That’s why you need to be clear about the pricing, the number of services you offer in your programs now, and the number of services you offer at your version of success.
It might be that you need to add another revenue stream or stop a revenue stream in the middle of the year (like product launches), so you can focus on your other sources of revenue (like an evergreen program). Monthly, it can look like you’re dropping revenue, but when you look at the annual figures, it’s just you trying to position your business in a place where you want it to be for its future growth.
Personally, I am a firm believer in concentrating on a few revenue sources in your business as much as you can until you nail and master those before introducing another source of revenue. Suppose you’re the only one serving as the business’s leadership team. In that case, this is important so you can focus on one instead of juggling a lot because they may all end up performing poorly instead of having one that performs excellently.
Look at the percentages.
Make a percentage allotment of what goes where. For example, 20% goes to tax, 5% goes to your pay, 30% goes to revenue, 20% goes to expenditure, 25% goes to the bottom line. Fix the percentages realistically.
If the percentages seem lumpy, especially when you’re viewing it monthly, you have to go back to steps two and three to re-evaluate and rethink your strategies.
Include your debt in the plan.
If your business has a debt that you’re currently paying or if you have a personal debt that you had because you’re running the business, you can add the debt payments you have on your expenditures.
Adding this will alter your percentage allocations and your bottom line. If your bottom line generates a negative figure or something that’s too small for you, then you have to go back to steps two and three again to evaluate which revenue and figure you need to change.
Track how you’re doing on a monthly basis through the Profit Model for your Profit Plan.
Remember that your revenue stream is your key performance indicator (KPI) or targets for each month. You will need to hit them to achieve your vision for the business. However, your expenditures are also targeted that you need to be hitting. Make sure that you keep hitting the revenue and expenditure so you can keep making the money that you want for your business and bring home the money you want for yourself.