Going Solo. 7. Make a Plan

Make a plan. I imagine that if you have followed these posts, then you have pretty much done this already. Certainly, you have dealt with most of the questions that need to be considered. What I really mean, is “document a plan.”

Why

“Write your why” is taken entirely from Simon Sinek’s excellent book “Start with Why”, which I heartily recommend. Whatever it is that you are doing, have a think about why you are doing it. This should provide some pointers to how you are going to define success. Why I have a consultancy business is very different from why I have a stationery business.

Budget

I come from a financial services background, so I’m big on budgets. I won’t bury you in detail, however, there is an important element to this process. The first sheet  is “Assumptions”. Here, I spell out how I arrive at a number. For example –

Assumptions

For example, if I expect 10 transactions in January, going up by 1 per month, I will type in 10,11,12,13 etc into cells. Beneath that row, I will note my logic.

Then, these cells formula copy across to sheet 2, which is where all the numbers sit.

This allows me to change assumptions, and those changes automatically update my budget sheets. This is a kind of sensitivity analysis on the fly. What happens if I double the transaction volume? If I change the assumptions sheet, everything updates. This is how I make a plan.

Revenue

Sheet 2 is made up of monthly columns, totalled to a year. The top few rows are about revenue. I break these down as far as I can. For example, in the stationery business, row 1 is number of transactions, row 2 is average transaction value. (All fed from the assumptions sheet.) Row 3 is row 1 multiplied by row 2. That way, I can easily see whether I am not doing enough transactions, or that those transactions are not big enough. The key to budgeting revenue is to be conservative. Dreaming is fine, but not in the budget.

Costs

There are many ways to define different types of cost. I keep things simple. I have costs that vary according to sales, payment fees for example. Then I have a separate section for ‘fixed’ costs. Office rent, cell phone contract etc. Here, I tend to be as realistic as I can, but if in doubt, round up.

Contribution

Contribution is revenue minus cost. An important number. Ultimately, this exercise serves to show you what sort of revenue line you need to make this work. Tweak away. What if you could pick up an extra transaction a week? What difference would it make to the bottom line? How about if you put off getting an office for six months?

With a little work, you should arrive at a budget that looks both doable and worthwhile.

To be honest, the reality will probably be vastly different – but that doesn’t matter. The important things are:

  1. Sales number. You are delivering this. Be certain that it is doable. Then do it.
  2. Costs. These are not targets – but maximums. Do not overspend.

Keeping Score

Subsequently, each month you should compare your numbers against your budget – how to do that is for another post.