Redefining Financial Goals for 2023: Prioritize Profit Over Top-Line Revenue
When it comes to financial planning for businesses, I pose an interesting challenge: Can we think differently about our financial goals in 2023? Each New Year brings with it a rush of enthusiasm and motivation. Most of us indulge in the tradition of setting goals at the year’s onset. Whether they are personal aspirations or professional targets, they’re indicators of our ambition. With 2023 on the horizon, it’s the perfect time to reevaluate and redefine those financial objectives.
Shifting the Focus: Profit Over Revenue
Traditionally, businesses and entrepreneurs tend to focus on revenue. That top-line number can sometimes become an obsession. But a large revenue doesn’t necessarily translate to success. Why? Let’s consider the underlying reality: A considerable number of businesses, despite having impressive revenue figures, are only able to bring home a modest profit.
Instead of emphasizing the gross income, we should shift our attention to net profit. After all, isn’t the real metric of success how much a business retains after all expenses are accounted for? This is especially pertinent for startups and SMEs, where cash flow is often the lifeline.
Setting Clear, Quantifiable Targets
Having a nebulous idea of wanting to make a profit isn’t enough. Precision is key. Decide on a profit percentage you aim to achieve and translate that into a concrete dollar amount. For example, if you aim for a 20% profit on a revenue of $500,000, you’re looking at a profit target of $100,000.
These specifics will not only give you clarity but also enable you to gauge your progress throughout the year. It becomes less about “I want to make more money” and more about “I’m at 60% of my profit goal for the year.”
Dive into History to Shape the Future
Each business has that one product or service that brings in the most profit. Perhaps it’s a premium service package or a best-selling product. It’s imperative to identify this revenue driver.
Review past performances, sales data, and customer feedback. Historical analysis often provides the best insights into future strategy. If one service outperformed others in the past, it might be worth investing more resources there or even considering expansion.
Understanding Your Conversion: The Close Rate
Every opportunity that knocks on your door has potential, but how often do you convert these into actual sales or deals? If you’ve never calculated this, now’s the time. Your close rate, or conversion rate, is a crucial metric.
If you’re closing only 50% of opportunities, you’ll need to double your leads to meet your financial goals. Awareness of this rate allows for better strategy alignment, whether that’s refining sales pitches, enhancing product offerings, or investing in training.
The Power of Regular Tracking and Measurement
Success isn’t a destination—it’s a journey. Waiting until the year-end to evaluate if you’ve reached your financial goals isn’t practical. Implement a robust tracking and measurement system.
Monthly check-ins on progress, challenges, and opportunities offer a dynamic approach. Adjust strategies in real-time, pivot when necessary, and ensure you’re always on the most efficient path to your goal.
Get the Right Tools for the Job
Effective goal-setting and tracking require the right tools. For those keen on structured, systematic financial planning, I’ve created a spreadsheet tailored for 2023’s goals. It’s designed to help businesses, whether big or small, to remain aligned with their profit objectives.
If you’d like a copy to kickstart your financial journey for 2023, don’t hesitate to drop me an an email at pam at pamela-durkin.com and add ‘2022 Financial Goals’ in your subject line.
Embarking on a financial journey with profit as the focal point might seem like a slight shift, but it promises profound impacts. Here’s to redefining success and achieving more in 2023!