How do I build a growth plan? Not just any plan to grow, but how do I build an intentional growth plan that's directly aimed at the reason why I started my business in the first place?
Most entrepreneurs don't have a clear and compelling roadmap for the future.
Welcome to Forecast On Purpose, where we talk about how to define your purpose, build a growth plan and track progress along the way to make sure you stay on target.
The result is clarity, confidence, and peace of mind that you are on the right track. My name is Ben Cooper and I'm the founder of Amplify. We help entrepreneurs better understand how today's decisions either positively or negatively affect your future. In each episode, we'll hear a short story of an entrepreneur facing an important growth decision,
a business concept that applies to that situation, and then a key question or action step for you to take and look at your business through maybe a new lens that you haven't thought about before. Also, someday, we may be talking about your business and the challenges you're facing. Today, we're going to be discussing how to build an intentional growth plan.
Let's get started.
Emma was still two hours away from her destination. She was on her way to a trade show. Backseat was filled up with t-shirts, hats, sweatshirts, a bunch of different products that she was excited to share with potential buyers. Emma was a graphic designer who just kind of stumbled into an opportunity a few years back where she created a t-shirt design and it kind of went viral.
It started spreading people were sharing it. Hey, where'd you buy that shirt? Where'd you buy that hat? And before she knew it, she had a full fledged business up and running. Now here she was a couple hours away, listening to her favorite for me, it would be the Beatles song or, you know, some, some oldies on the radio or something like that.
And she is thinking about last year and last month. She's two hours away from pulling into an opportunity to hopefully build on success that she's had in previous periods. But she's just unsure about what to expect. How many orders am I hoping to get? Or what would this mean for the next quarter if I'm able to hit a certain sales target?
A lot of questions are swirling around in her mind. And unfortunately she misses her exit, which leads right into the metaphor that we'll talk about, which is: having a plan is essentially like having a roadmap it's like having a GPS for your business. So as you are heading toward a destination like we talked about last episode where
we are defining the purpose, the flag in the distance, kind of the same, same way that you would type in the destination address in your GPS and you would, you know, get on the road, start driving toward it and what you see is your plan, your path to get from where you are currently to, where you're hoping to go.
So we're going to dive into a specialized framework that I've put together that breaks down a few different questions that are important to be thinking about as you build your growth plan.
If you want to read along, I find it really helpful to be looking at something as I'm also thinking about these questions, go to forecastonpurpose.com. Download the free guide and you'll see a table that outlines these questions. There are eight key questions we're going to be talking about
and they break into a two by two grid. So we have historical questions and current questions, and then we're going to view each of those types of questions through either a qualitative lens or a quantitative lens. So let's jump in.
Now when you're starting to think about building an intentional growth plan, it can be a little bit overwhelming because you might think, "Where do I even start?" There's so many places that you could look in your business in the financial statements, your purpose statements, like there are just a lot of places that you could go.
And I find it really helpful to start in the beginning, which is in that first top left section of this table. How did the business start? What's the origin story of the business? Like we talked about Mike, last episode, where as a coffee shop owner, you start a business for a certain reason. And that can, a lot of times help
paint a picture that is important for you to add context of what the plan is ultimately trying to accomplish in the first place. So how did the business start? And then what problem is the business solving in the world? Again, these are qualitative questions that are going to be originated in the past, but you should, as you look at your business today, you should be seeing those same threads be running through the decisions that you're making.
And then we can jump over to those qualitative decisions that you're facing right now. What are the current key decisions that you're thinking about? For Emma, you're showing up to a opportunity to sell some product at a at a trade show and you're wondering, "How much product am I even trying to sell? How many orders am I trying to make? Am I pricing things correctly?"
Like, all these big questions. And then a final question in the qualitative realm is who are the key decision makers that are ultimately involved in thinking about the trajectory and direction of the business. These are all important questions. They don't have to do a numbers necessarily. We're about to get into the numbers, but
those qualitative questions can be really important to help add a foundation that we're going to be building on. So let's jump into the quantitative. So the bottom half of this table breaks down historical quantitative questions and current quantitative. And the goal of this, you know, we're saying there's historical and current. Well, the logical next section is future. And that's really what we're looking at doing here is getting a
feeling of all the ingredients that are involved here, that we can then take and shape into a future picture. We're starting to extrapolate some of these numbers into the future. So let's look at historical quantitative.
Now there are more questions, obviously that you could be asking about your business; past present qualitative quantitative. But these are just a starting point for you to get the ball rolling. So quantitative historical questions. How have revenue and expenses changed year over year? Or it could even be month over month.
As you're thinking about, what is kind of the growth trajectory I'm on? Are things moving in an upward direction from a revenue standpoint, are expenses increasing are expenses on the decrease, what are the patterns that we're seeing? And then secondly, what kind of seasonality are you experiencing within your business? So you might, as Emma's walking into the trade show this might be a season of her business where she generates a certain type of revenue, like wholesale orders.
Whereas potentially, you know, the fourth quarter of the year, she might be making a lot of money by selling directly to customers, you know, through online sales for instance. And so those might have different shapes and, and, you know, the inflow and outflow of dollars required to support each of those seasonal bumps
that could be peaks or it could be valleys at different points, or there may be a slow season for Emma and her business. It's important to understand that because if you don't have a good feel for Emma, as she's thinking about her business, she might just be experiencing what is every year a slow part of her revenue
season, and she might be looking at the overall revenue picture and she might be realizing, "Man, is my business falling apart?", you know, there's, there are a lot of emotions that can creep in when there isn't an objective picture to compare or measure your feelings against. So for Emma, it's important for her to see that, oh, well maybe I shouldn't freak out right now because every year I go through a similar journey
from a revenue standpoint. And so this is always a slow point in the year until I bring in some of these sales with this trade show that I come to every year. And then let's jump over to the bottom right section of the table. And we're going to look at current quantitative questions.
This is where we can get into some of the building blocks of the forecast. And as we project out current and past patterns and shapes from a financial standpoint, this is where we can look at individual unit economics. So every time she sells a shirt or a hat,
sweatshirt, whatever product she's selling, the key question is: what are your current pricing methods and gross margins? So gross margins being what is left after the cost of goods, essentially, any variable expenses. But that gives us an idea of, okay, if we sell a hundred units or a thousand units,
we can start to make some assumptions and it gives us a fundamental building block that we're able to extrapolate and multiply future values or targets against. And then the final question, what are your current total fixed period costs per month? And this is just important from a break even standpoint because there may be months where the business
brings in a whole lot of cash and then other months where you're losing money. But sometimes if you're aware of the overall picture and you recognize that sometimes you're going to be investing back into the business or just keeping the team intact or yes, maybe you have extra capacity some months. And you're paying, for rent potentially on a space larger than you currently need, but you know, that
nine weeks from now, 12 weeks from now, you're going to need that extra space. So you might have a higher overhead than your revenue is able to cover in a given month, but that doesn't necessarily mean that something's wrong. It's just important to have an objective picture of reality and having a
clearly defined amount of dollars that it costs. It's almost like paying rent every month on your business in the system. So every 30 days the clock is ticking and you're going to have to pay to keep everything intact and the system being able to perform and generate value. That current quantitative picture of your current pricing methods and gross margin, and then your current total fixed period costs,
that allows us to actually identify a break, even number that says, okay, for us to not lose money what's the zero point where we're going to work really hard through the month and we're going to sell a lot of product and we're going to run the business and we end the month with exactly zero new dollars in the bank account.
What is that revenue amount that we have to target to make sure that we at least cover our expenses? That can provide some peace of mind. I've seen it over and over where if you don't know what your breakeven number is, and you're not sure about your seasonality or you don't have confidence in the way you're pricing things, it can just cause a lot of
questioning and insecurity about how the business is going to continue to perform into the future. So I would encourage you to do two things: read through those eight questions. Answer then. Give some thought to them. Take 30 minutes and just sit with each question and unpack as much detail as you can just to get some of the pieces of the overall picture into place.
And then I would encourage you to take that step of calculating your break even and getting a feel for, okay, what exactly is it going to require from a revenue standpoint for me to cover my expenses? Now, those are two steps to just get some fundamental pieces of a projection in place. The next step, the application of having these pieces in place is that you are then in a position where you can actually extrapolate these patterns into the future into future months.
You can apply the seasonal shape that you experience against a certain year over year growth rate and assume a certain number of units are sold at a certain price and you can calculate then the variable costs and continue pulling forward into the future your fixed operating expenses. And in doing so then you're able to get that baseline trajectory that you are able to then see, if we continue in this direction,
I'm Emma, I'm walking into this trade show, I know exactly what I hope to accomplish, how many dollars I'm hoping to bring into the business. And I know also that as there are highs and as there are lows, just like there's a Rudyard Kipling poem called "If", and it talks about not believing either imposter that the high or the low
that things won't always necessarily be perfectly matching our dreams and, everything we imagine that the perfect business performance to be. And then also when things feel really bad, it doesn't necessarily mean that things will always stay that way.
So it's important to get a clear and objective picture of the performance of your business in a baseline growth plan that will allow you to then see where you're heading, what to expect and hopefully what improvements we might be able to make along the way.
If you or someone you know is an entrepreneur and you'd like some help planning for the future, don't hesitate to reach out. Go to forecastonpurpose.com to learn more, and remember: you are not alone and you don't have to just keep blindly guessing about the future. Keep fighting the good fight and forecast on purpose.