How to set a growth target for your business

Thomas Taylor - Sunday, March 25, 2018

 

We all know that we need goals, and unless you measure something it won’t improve, but don’t get too stressed out about picking the right growth number. To some degree, you often have to suck it and see. All businesses have to try new things just to keep up, and there’s no associated punishment for getting it wrong as long as you are sensible about committing to any associated costs. The most important thing is to be very disciplined about measuring results the right way so you can make adjustments quickly if you need to.
 
So when it comes to growth, be ambitious. Don't plan for failure. Write down a percentage number on a piece of paper, stick it in a drawer and get moving. If you can’t decide, pick 20%. It doesn’t matter if you haven’t grown at all in years, just write it down. You don’t have to commit resources to support that number until you’ve got a better feel for the possible growth. Committing resources will be part of your Quarterly Operational Work Plan (QOWP).
 
Once you pick a number you can see how to get there by calculating the productive capacity of the firm. In my experience, most firms can usually hit an ambitious growth target with the resources they already have. And I believe you should always be slightly resource constrained.
 
The rest of the numbers for your firm should fall from the top line number. The high-level numbers of a services business are pretty simple once you get your head around them. Regardless of how you bill, start by assuming that you have a simple, charge by the hour, business to get a stake in the ground to measure from.
 
To calculate your productive capacity, multiply the number of people in your business by the hours they are available for work (usually 220 days a year times eight hours), at the average hourly rate they’re billed at, them by 80% (utilization). There is a good chance that the answer is higher than your current sales.
 
You’ll note that this is based on old-fashioned time-based billing only: that’s ok, it’s just a tool to estimate one type of capacity. You can also do it by estimating the time spent on tasks, and you should definitely do that as part of your resources planning, but for this high-level stuff let's just think of it as a rule of thumb.
 
It’s imperative that you know this number, it's like a stake in the ground you can use to measure the effectiveness of your bundled product offerings.

 

 

Photo by Amanda Flavell on Unsplash


 

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