It doesn't matter if you are planning out what you plan to sell for the upcoming holiday season, for next month, next quarter or next year.
When you look at the numbers from your profit and loss statement from prior months and years to plan for your upcoming months and quarters, you can see where you succeeded.
You can see when there were dips in your products and services.
You can see when your products and services sold more.
You can see where there were trends.
Planning Ahead Avoids the Cash Crunch
I have spent years observing all kinds of online businesses. And the one thing that 99% of them had in common was that they never planned ahead what they were going to sell in their business and when they were going to sell it.
I always knew when they were in a cash crunch in their business just by watching their process.
But you can take their experience and make it work for you in your business.
When you analyze your profit and loss statement while you are planning for the next month or the next quarter or the next year, you already have a record of what works. You know what you need to do to make money for your business and what sells and what doesn't sell.
And you can avoid the cash crunch and rushing to make enough money to pay the rent or put food on the table.
Build an effective profit plan in your business that will not only help you meet your income goals, but surpass them too.
This workshop gives you the tools and know-how to build an effective profit plan in your business.
Refresh my Memory: What's a profit and loss statement?
If you are doing your bookkeeping on a regular basis, then you can run a profit and loss statement, which is also known as an income statement and the P&L.
On this statement, you see a snapshot of how much money you made in a certain period (usually we look at a month at a time), and how much money you have spent in your business.
This snapshot of time allows you to see the big picture of what has been happening in your business.
I know, I know, but you don't really like to look at the past. And that's just too bad, you are going to have to learn to enjoy it as a business owner.
This P&L statement is going to show you how well (or bad!) your business has been doing and to be able to continue to move forward, you need to regularly read and analyze your profit and loss statements.
Also check out: How to Master Your Business Finances Like an Accountant
Planning for the Holiday Sales
How does my P&L help me prepare for the holiday sales?
Oh, I'm so glad you asked that question!
When you look at your P&L for the 4th quarter of last year, or at October, November and December, you'll begin to know exactly what I'm talking about.
Did you run out of inventory last year?
Did you make a lot of money on a specific item that you sold?
Did you run any specials that made a lot of money?
Do your customers buy during any specific time period? Are they early shoppers or last minute shoppers?
Did you need to hire extra help during the holiday season last year to get everything done?
These are all questions that can help you prepare for the holiday season this year.
When you know how your customers buy from you, then you'll know how to plan what to sell more of. You'll know if you have to stock up on certain inventory items or creating specific items for your online shop for customers.
Most small businesses make 20-40% of their income during the holiday season. Black Friday was actually named that because it was the day of the year that most businesses would finally go from being in the red, to being in on the black on their financial statements.
Yes, it took almost 11 full months for businesses to actually make money, way back when Black Friday was created!
Is the holiday season when you make more of your money in your business?
Do you run any specials in your business for the holiday season?
When you use your P&L to look at what happened last year during these 3 months, you'll see where the trends are in your business. And you can then plan accordingly.
Planning for a Specific Launch
What if you are launching a new service or course or product in your business? How can you use your P&L statements to plan for this launch?
Sometimes when you are launching something new, there is a new tech that is involved. Or there is a new system that may be involved. Or maybe you pay a photographer to take pictures for you. Or a videographer to help you record the videos. Or maybe you spend a lot of money on ads to get more people to learn about you and what you are offering.
These are expenses that you wouldn't normally have throughout the rest of year, so it's not something can always plan for ahead of time with your budget and profit planning.
But you can use your prior P&L statements to plan for a launch of something new.
When you launched something last in your business, how different is that P&L different from the rest of the months that you have around it?
You can use this data to help you plan for your upcoming launch.
When you do this, you'll be able to create a plan for how much you are going to spend to do this new launch because you have the past details to look at.
By having in front of you what you spent on your last big launch, you'll have more of an idea of what to spend on this launch.
And since you are going to spend more money on a launch than you normally do throughout the rest of the year, you'll be able to plan in advance that you need to make more money to cover these expenses leading up to the new launch.
Planning for a Heavy Cash Spend Month
Maybe you are the type of business owner who tends to sign up for yearly subscriptions for your business instead of month to month subscriptions.
How can planning with your past numbers and your P&L statement actually help you?
Well, first of all, when you use your P&L statement to plan, you'll notice which months have more cash spend than others because of yearly subscriptions being paid.
And since you are noticing this ahead of time, you know exactly when you need to generate the cash in your business so that you have the money to pay the bills before they are due. You can prevent the scrambling to make sure you have enough money to pay everything when it's due.
It's not fun getting an email from one of the companies that you pay yearly saying they are going to charge you a couple hundred dollars in 3 days.
Or better yet, not even getting the reminder email at all. But you look at your bank account and have the money going out for a service you completely forgot about! And this took money you were allocating to something else.
By using your P&L to plan out and actually make a profit plan for your business, you are able to really know when something like this is going to pop up and take your available cash.
What if I Don't have a Lot of Business P&L's to Look At?
So maybe you haven't been in business very long and you don't have a year's worth of P&L statements to look at.
That doesn't matter. Just use the last few months.
Unless you decide to do crazy things in your business, not much is going to change month to month in your business financials in the first year of your business. You are still working to get your name out there and get known for what you do.
Last month's P&L will still help you plan for the next several months.
Plus if you are planning to need a cash injection in your business over the next couple of months, you'll already have your profit plan in place so you can put some extra money aside to pay those extra bills that will pop up.
Use Last Year's Numbers to Plan for This Year
Looking back at the past of what has happened in your business will give you a lot of lessons as a business owner.
You'll see what has made your business more money.
You'll see what time of year makes your business more money.
You'll see where you spend more money.
And ultimately, you'll be able to create a better plan for moving forward and creating a profit plan in your business.