I’ll just say upfront I sense this might be a controversial one. But it’s something I feel strongly about so I’ll plough on anyway!
When I start working with a new client, I often find they can confidently tell me how sales or orders are doing against last year, but when I ask about how sales are against this year’s plan, not so much.
So they know where they’ve been but they don’t know and can’t see where they’re going.
There are 3 problems with that:
- You don’t need me to tell you how fast business changes these days, what worked last year may not work this year – business models are changing and evolving all the time.
- If you’re growing, then your overheads are likely to be growing too, so saying sales are up on last year doesn’t mean that much – and remember, all that actually matters is profit.
- It means that the main focus is always backward looking – and we don’t want to go backwards!
It is ok to glance at last year…
Don’t get me wrong, it’s not that I don’t look at last year, and what sales we did in previous years certainly aren’t irrelevant.In fact these are my 2 of my favourite graphs that we always put in place when we design management information for our clients. It’s really important that we can see the whole picture – where we are against previous years means we can understand seasonality and trends, and can see in an instant where the growth is.
When you have your plan, then you know what sales you need to do each month – to hit your target, not to beat last year.
So if you want better than that you need to create a route map for your business that lets you see how this will be possible. And trust me, it’s not “add 10% to last year and see what happens”
If you’re serious about finding financial freedom, and getting your business to give you the life you want, you have to create a plan that you know can and will get you there if you follow it. Now only 2% of people reach the age of 65 financially free and we know from hard evidence that most businesses that survive only just get by.
You’ve got to be looking forward
But, it’s just part of the picture. In the same way that it’s important to glance in the rear view mirror when you’re driving, but you don’t want to drive the whole journey looking backwards.
A focus on profit and cash, not sales
Because our main focus with any client we work with is about increasing the profit, cash and the overall wealth of the business owners I also run these graphs to show year on year profit – now that’s really showing the whole picture.
So please please stop looking backwards –it’s ok to have a glance but keep your focus firmly on the future and where you’re going.