When I used to hear the words ‘budget’ and ‘forecast’ my eyes would instantly glaze over. I was never a ‘numbers man’. I had no time for spreadsheets (and still don’t) and I would start getting fidgety after looking at a graph, table or chart for more than a few minutes.
It took me YEARS of running my tour company for the penny to drop and to understand that knowing our numbers was the key to success. When that penny dropped it transformed our business.
So, as our business grew from a small husband and wife team, to a team of 6+ staff and 15+tour guides, here’s a simple method that we used to set financial and sales targets, get our team motivated to hit them…and have some fun while we were doing it.
At the end of every financial year, we would take our end of year financials that showed our income by month, cost of sales, gross profit, business operating expenses and, finally our bottom line – our net profit.
We would look at these financials and then decide as a team what we wanted to achieve in the following year.
Were we planning to ‘go big?’ Were we planning on launching a new division to the business? Or launch a range of new tours? Were we planning on entering a new market? Were we therefore anticipating a 25% or 30% increase in revenue?
Or,
Were we aiming to consolidate this year? To do what we were doing better? To focus on guest experience and on improving the quality of our tours? Were we therefore anticipating a more conservative 10% increase. Were we also planning to invest heavily in new vehicles which would increase our operating expenses a little?
Or, were we planning a company wide ‘plug the leaks’ campaign over the course of the year where we would spend time putting a microscope on every expense that ran through the business and seeing if we could operate smarter and reduce our expenses, which would be seen in our net profit on the bottom line?
Whatever we as a team decided, it went into our budget forecast for the year.
Then at at the end of every month we would all sit down for an hour and look at our budget forecast.
We would go line by line through the income and expenses we had forecast in our budget and we would match the forecast to the actual numbers for the month. Were we on track? Had we hit our target? If we hadn’t, where did we think we had fallen short? Were expenses under budget? If so, great! If they weren’t, what could we do differently?
There was often good reasons that expenses were over budget BUT from time to time we would pick up some beauties and the best part was that when we identified problems we took action right away – not months down the track, leading to huge savings in both time and and money.
It was such a powerful and productive exercise to implement into our business and absolutely essential for us to do with our team.
It gave everyone in our business a sense of ownership, a sense that they were really a part of something and we valued them as equals. It kept them motivated, focused and willing to take action immediately if it was required.
We found that our staff quickly came to love our budget meetings. So how did we make it fun?
We would put some fun incentives in place to hit our budget forecasts – a night away in a country retreat, a day trip to the snow, lunch at a hip new restaurant…whatever it was, we would decide together and post it up somewhere visible in the office on colourful paper for all to see and note our progress as we closed in on the target.
We would mix it up and do our budget meeting on a Friday afternoon at a bar over a beer or a wine or two.
We would make sure that we celebrated and acknowledged every win, no matter how small. If it hadn’t been a great month and we had overall fallen short, although it was very important to critique the losses, we would make sure that we picked out every little win and make it known, so as to put a positive spin on the month.
So I hope this has been helpful and remember – know your numbers!!