In the spirit of New Year’s resolutions I thought I would talk a bit about planning. We have always planned our business at a high level but in the last 18 month and really this year we have taken our planning to another level that I believe is going to make all the difference.
Planning, especially financial planning can be painful. In fact our team had a 3 hour torture session just this week as we mapped out the exact steps we are going to take and the products we are going to sell in order to add almost ten points to our gross margins as a business. The great thing about having gone through this process is that it gave everyone clear play book for 2009 and how to grow our gross margin dollars - something that will be very important if growth slows down due to the economy.
It always surprises me how many business owners that I speak with that do not even know their gross margins. So many of us live so entrenched in our business from day to day that we forget to to a look at what value we are really building. Thankfully at Everon Mike makes it a point for our team to work on the business regularly so that we have a healthy business at the end of the day.
Now if figuring out your gross margins and your profit / net margins and mapping out a plan to increase these numbers gives you anxiety you are not alone. Ultimately this does not have to be some fancy spreadsheet with fancy formulas you just need to spend some time understanding what is coming in, what is going out, and what levers you can pull to keep more of what comes in for you and your team.
Once you simplify to this level you can then begin to share the numbers and the levers with your team and from there amazing things will happen. You will have people come up with solutions to problems or take ownership of costs that you never would have thought possible.
So I guess what my message is for the new year is to make sure you are taking time out with your team away from the office to analyze where your gross margins are currently, where you would like them to be, and what steps you are going to take to get them there.
I wish us all the best in keeping as many pennies in our pockets as possible in 2009!
JC
PS - If you are working on planning you should check out the planning materials / worksheets Mike made available on MSP Coach in the bonus content area.
