Here is the second part of the Annual Review monthly challenge.
I hope you didn’t find last week’s actions too challenging, and you have been able to make a start on collecting your data.
Don’t worry if you haven’t, you have got the rest of the month to complete the full challenge and get ready to set the new year on fire!
Remember to pop over to the new Facebook group to join like-minded people who will help, support and offer accountability to help keep you on track. I will also share prompts and discussions on each month’s challenge.
Now let’s get to it …
Last week we gathered all of the information we need to make decisions on your business goals.
I’m going to assume at this point that your main goal will be to increase revenue, so that is what I will concentrate on in the following actions for you to try out. Obviously, you can use the same concept to build your goals around other areas of the business.
I’ll also assume you only have one income stream. Again, if you have more, then you need to work out the proportion of where you get your income and then follow the actions for each stream, taking into account the proportion of sales you make from each stream.
At this point, I am going to walk you through a process for looking at your numbers and forecasting for the next quarter. You can do this for the whole year but I would recommend re-doing the process each quarter. This way you can re-evaluate your plans using the latest data to address any issues or boosts that you may have.
Action 1: Define your sales/revenue goal for the next quarterUsing our free forecasting spreadsheet input all of your data for this year and last year’s quarters ( you should’ve collected it all in last week’s tasks!
- Decide on how much money you would like in your pocket over the course of the next quarter. And fill that into cell C25
- Finally, decide if you need to keep some money in your bank account to cover emergencies. Fill that in C26.
This gives you your Net Income Goal for the quarter in cell C28 (shown in screenshot below).
Action 2: Choose your statistical values to work out your forecasting
From all of the data you collected, the spreadsheet has worked out your Profit margin, Average Order Value and Conversion Rate.
- Take a look at each of these values for either the corresponding quarter in the previous year or from the averages for the year and pick values that you feel comfortable with. Adjusting for any anomalies that you know occurred.
- Populate your chosen values in the corresponding cells
This gives you your Sales Goal, Expense Goal and the Number of orders you need to sell to make the goal you defined in Action 1.
Action 3: Decide whether the Number of Orders is achievable
Now you know the number of orders you need to sell, can you really make that number of products in that time frame?
If the answer is No, you can’t physically make that many products, you need to consider the options you have available to you and decide what path to take:
- Should you reduce your Take home pay Goal for the Quarter, in cell C25?
- Can you reduce your expenses to increase your profit margin?
- Should you increase your prices to increase your Average Order Value?
- Can you bundle products together to get more revenue from one sale, i.e increase your Average Order Value?
- Is it possible to speed up your product manufacturer so you can create more products?
- Can you adjust something with your products to either make them more profitable or to sell more of your more profitable products?
- Maybe you can outsource some of the work? Bear in mind that this will increase your expenses so make sure you take this into account.
Really consider your options and decide on a way forward as there is no point starting off the year with a completely unrealistic goal and then change nothing.
Write down the actions you can take to meet your goal or make your goal more achievable.
If the answer is Yes, you can make that many products, or once you have worked out what steps you are going to take to reach your goal, then move onto the next action.
Action 4: Find out how many visits you need to get the Number of Orders to meet your goal
You should now be happy with the number of orders you need to reach your income goal.
This is now the point where you need to try and work out what you can do differently to get those orders and grow your business.
From last week’s data gathering session you should now know your traffic sources and the traffic numbers that they bring. The spreadsheet only covers one aspect and that is visits (in total) to your Etsy shop.
If this is your only income stream then any traffic that you generate should generate a visit to your shop when a sale is made. Etsy stats (or Google Analytics) are also really useful in telling you where your traffic came from, so if you want to drill down deeper into your figures then please feel free.
Entering your quarterly visits into the spreadsheet calculated your conversion rate. Using this conversion rate ( the one you have specified in cell C34), the number of visits you need to make your target Number of Orders is calculated in cell C50.
What this number means is that if you continue to convert visitors to sales at the same rate as you currently are, you will need to have X number of visitors to provide you with the required number of orders.
This is something tangible you can work with to take that finger in the air guess of what you would like your income goal to be and start making changes to make it happen.
You’ve done the hard work.
You know the numbers that generated your current revenue over the last 12 months. You can you see what is working and what isn’t? Now is the time to take that information and work out what actions you are going to take to reach your goal. These will become your business objectives – sounds fancy doesn’t it!
Start thinking about what you can do to increase the number of visits to your shop? This is all you need to focus on. By increasing these numbers the rest will follow. Hopefully, this makes sense.
Consider things like:
- Can you increase the number of traffic sources you have?
- Can you improve the traffic from some of your existing sources?
- Do you have a mailing list? If not how about starting one. If you do already have one, what can you do to increase the subscribers?
- Could you start a blog or a youtube channel?
Write down all of the actions that you can make to try and drive this additional traffic to your business.
Action 5: Create your SMART goals (business objectives)
At this point, your goal is to generate X income over the following quarter (action 1).
You also have a list of actions you want to take to attract more visitors to your shop (action 4), you may also have a list of actions you can take to improve your product line and make your products more profitable/saleable (action 3).
Armed with all of this information we are ready to take the next step.
I’ve talked about creating SMART goals here. The S.M.A.R.T method helps make goals achievable by breaking the goal down — they describe who will do what, by when.
Just to clarify S.M.A.R.T goals are specific, measurable, achievable, relevant and timely.
For example, if a person has a goal for increasing their revenue without having to outsource any work. Having the goal of ‘increasing their revenue’ is a bit vague. But they could use a S.M.A.R.T. goal to outline their key objectives towards a goal like this:
- Specific: I want to generate more income without creating more handmade knitting work so I will broaden my current product line by adding DIY knitting kits.
- Measurable: I want to increase my income by 20% over the year using the DIY kits, so I will add one new kit to my shop each month whilst maintaining my current knitting output.
- Achievable: A 20% increase in revenue will mean selling 5 kits a month.
- Relevant: Adding DIY kits will make my business more scalable without having to increase my expenses.
- Timely: I will increase my revenue by 5% each quarter until I achieve 20% by the end of the year.
So you can see that the actual goal is broken down into individual objectives that are clear and actionable.
Take the rest of the month to work out what you want to enhance, build on, make changes to, and so on, and define your SMART goals for the next quarter.
A quick word of warning: don’t try and do too much too soon, the key here is to make the goal Attainable. The key here is to take small steps to see what works and then build on that. There is little point doing all of this work and then creating goals that you simply cannot achieve, especially if those orders start flooding in!
Remember, doing something new often takes more time to complete than you initially thought, simply because you have never done it before.