Lock down your revenue target
In the video below I provide a quick tip on how to test your budget using the Revenue Per Head Model:
When setting your revenue target, you could use this Revenue Per Head calculation to guide you; then sharpen your pencils, get more precise and ensure that you have built a profit-guaranteed budget with the following in mind:
- Use your prior year results: percentage of revenue split between fee income, IP licensing and concept fee income, and markup earnings to help agree expected targets.
- Add in obligations from your balance sheet, such as loans, tax payment plans.
- Profit target – in addition to looking back at past achievements: calculate your optimum capacity and productivity levels, to help confirm and set your profit target.
- Factor in tax payable on your target profit (and set up a savings plan to provide for tax payable).
- Know your ‘break-even’, ‘expected’ revenue target, and consider a bonused ‘stretch’ revenue target.
- Mentor your managers to track and report actual results against their share of the revenue target, to #ownit at regular monthly management meetings.
- Develop an incentive/bonus scheme to reward your team when they achieve stretch targets.
Keep the faith by keeping your team informed – mentoring with encouragement and reinforcing goals, with visual dashboards and trackers, at regular monthly meetings to measure and report progress against targets – is the best way to focus and align the team, and keep the momentum going..