When you sell your business one day, show the acquirer that you've built an important business planning muscle
Too often company owners and CEO’s plan their upcoming new year revenue only at the level of setting an overarching percentage of growth or a specific dollar target. Unfortunately, this target is often void of any real logic underpinning it other than where last year finished or gut feeling.
Build the muscle at your company of developing a sales target that is based on some logic. Here are the questions to discuss with your team that will have you “walking” your revenue from where it will end this year and what it will walk to for the new year:
- What do we think our served market will do next year in terms of growth – will our served market (and each sub-sector) grow, shrink or be flat and what will this mean to our growth?
- What changes are we planning to make with our prices for the new year – when will we implement a price change and what yield might this provide next year and what impact will this have on revenue?
- Are we expecting any changes in our customer base for the new year – any customers planning to reduce their purchases from us? Or customers that have been acquired or merged with another company and what will that result mean for our revenue in the new year?
- What do we expect our existing customers to purchase from us in the new year? Do we expect any mix changes to what they purchase from us?
- What are we factoring in to our revenue number for the new year specific to adding new customers?
- Are there any new products or services that we are planning to add to our portfolio and what revenue do we expect from this? Will adding a new product or service cannibalize anything we already sell? Might there be any products or services we are planning to cancel from our portfolio and what revenue (and margin) impact will that have?
- What are we planning for our sales team for next year – will we get incremental revenue as a result of adding new sales resources or will we lose any sales resources and what revenue impact might that have?
As you think about each of these questions and the revenue impact, you’ll then have the “walk” of your logic in terms of where one year will finish and where the next year is targeted to end. It will also help you think through the associated gross margin impact from each revenue line item which will go a long way in helping you plan your profit target for the new year as well.
With this degree of detailed thinking, you’ll be better able to set bonus programs for employees and sales targets for your sales team. Overall, this is a planning muscle you’ll want to build over time so when the day comes you want to sell to a third party, they will be impressed that you have this planning ability and it may cause them to have greater confidence in your sales projections which will be an important part of their consideration for placing a value on your business.
