The Benefits of Crafting a Profit Plan
The economic climate has been unpredictable and volatile, and 2023 may hold even more uncertainty. As a business owner, consider creating a profit plan, which can reinforce a strategic mindset and help companies make solid decisions, even amid uncertainty. A good profit plan includes both an operating budget and forecasted cash flow and defines the business results you want to achieve and how you will make it happen.
I recently helped five clients develop or update profit plans for 2023. During the process, they expressed a renewed sense of optimism and level of control over the direction of their business. The companies who already had a profit plan in place, and adhered to it, experienced growth in 2022. Their experiences illustrate ways you will benefit from your own. A profit plan supports financial goals, creates visibility, and provides clarity and accountability.
Support of Financial Goals
A profit plan:
- Helps business owners achieve their identified financial goals by charting a course for their path forward that is based on data and history, not guesstimates.
- Enables long-term planning with the flexibility to make short-term changes.
- Dovetails with strategic planning to identify and articulate the actions needed to reach profitability objectives.
- Creates a baseline against which to measure progress.
- Builds in accountability.
A profit plan:
- Illuminates the need to address issues and adjust – which is of great valueAs, especially during uncertain times.
- Provides a level of detail that the business may not ordinarily see.
- Informs and becomes a detailed extension of your business plan.
- Using quarterly, rolling forecasts, provides the data you need to make difficult business decisions related to:
- Inventory control
- Staffing adjustments
- Tightening credit with customers
Greater Clarity and Focus
A profit plan:
- Affords a clear picture of whether there is a positive return on business expenses.
- Reveals expenses that may no longer be necessary for the success of the business.
- Instills confidence in business decisions, actions, and the path forward – particularly during uncertain times when planning may seem daunting.
- Is a tool to help companies make tough decisions along the way and adjust for unforeseen events.
- Helps leaders and teams understand company objectives, more clearly define how their roles impact profitability, and create engagement and buy-in.
It’s not too late to create a profit plan in Q1, and your efforts will pay off. As other successful companies have learned, it’s an invaluable tool that is necessary for growth. To get started, review my tips for creating a profit plan or contact me. I would welcome the opportunity to help you start the year with the tools and confidence your company needs to succeed.