How To Make Money In Your Business

Both my partner Jack Mencini and I have quite a bit of experience with helping companies that are struggling to make money turn themselves into profitable organizations. Each time, a Profit Plan has been a key component.

What is a Profit Plan? Well it's routinely called a Budget or Forecast by most people. It's a financial projection of your revenue and expenses for the next 12 months. We call it a Profit Plan, because once you subtract all of your expenses from your revenue you should have a profit left over. If not, you need to figure out a way to either increase your sales or reduce your expenses.

What's nice about a profit plan, is that it not only covers the numbers portion of the projection, but also the underlying assumptions. For each line item under revenue and expenses, you should have a written assumption that explains how you've arrived at that figure.

Pulling together a Profit Plan does a couple of great things for an organization:

1. It Pulls Everyone Together: chances are, you as the owner cannot put together a full profit plan without input from some of your people. You'll need to have discussions with each of the key people in your organization to pull it all together. It gets all the key players in your organization focused on the future which is where you can make changes and have an impact.
2. It Allows For Ownership: everyone in your organization can be assigned responsibility for one or several lines in the Profit Plan. For instance, you can nominate someone as the Utility Czar for your organization and her job is to make sure that your Utility expenses meet or beat the projected figure.
3. It Prevents Monday Morning Quarterbacks: that's the phrase used when people analyze football games the day after and second guess decisions made during the heat of battle. Usually it's someone on the outside of the organization who plays this role. If you have all the key people on your team involved in the planning process, they have to each sign off on the plan. The fact that things are written down prevents them from going back and rewriting history.

The first year is always the hardest because you'll be starting from scratch. Each successive year gets easier because you can now build on prior year's experiences.