A Quick Guide to Business Planning

Planning for profits in 2025

As I'm prepping for the end of the year and starting to write my annual letter, it's reminding me this is hands-down the best thing you could do for your business today — write out a plan for 2025.

When I hear the phrase "business plan," my mind jumps to a lengthy document written in overly formal language and zero practical use. Instead, try this simple planning formula:

1. Revenue plan (growth)
2. Evaluate team (personnel)
3. Set targets (profit and margin)
4. Know your cash position (runway)

Let's take a closer look at each of these

1) Revenue plan (growth)

It's hard to plan for anything else without a clear picture of what’s coming in the door. Start with two basic questions: 1) what's your current growth rate; and 2) if not yet profitable or at target profit, what do you need to sell to get there.

Other considerations for your growth plan:

• Is your sales problem finding leads or converting leads?
• Current level of profitability (at or above breakeven)
• Current growth rate (and industry growth rate)
• One-time large projects or revenue streams
• Backlog or pipeline of work
• Product launches
• Pricing changes

Your growth plan will set the stage for everything else you're doing in the business from staffing to margins, etc.

2) Evaluate the team (personnel)

Sales doesn’t happen in a vacuum, it’s delivered by your team (across all functions like sales, marketing, ops, and back office). Sketch out a visual overview of your org chart with all the roles necessary to run your business and the person that sits in each role.

Ask yourself:

• Do I have the right number of people to handle the work I’m projecting?
• Is everyone in the right seat (role that matches their skills and abilities)?
• Do they have the tools and training they need to deliver efficiently?

It's easy to skip this step; the status quo is the path of least resistance and taking an honest assessment of your personnel can be uncomfortable. But the effort is worth it... a well-tuned team can handle more work, reduce costs, and even boost morale (happier employees = better product/service).

To get a quick financial benchmark on staffing, take a look at your sales per employee over the past few years and note the trend.

3) Set targets for profit and margins

Don't set arbitrary targets and make sure you're specific with what you want. "More than last year" is a terrible goal.

Profit targets should start with breakeven first and a good set of industry benchmarks second. Once you've cleared breakeven, your industry profit levels are the next milestone. From there, we all want to be best-in-class operators and set the highwater mark for profitability.

Considerations here:

• Gross margin and contribution margin
• Fixed cost structure
• Planned growth investments

4) Know your cash position (runway)

We have a picture of the business coming together now. But do you have the resources to make it a reality?

Considerations here:

• How much do you have in the bank right now?
• Are you burning cash monthly (i.e. your runway)
• Can you weather unexpected sales slowdowns?
• Are there big expenses coming up that will drain your cash?
• What's the state of your working capital position (A/R, inventory, etc.)?

5) 90-day review

No financial plan is set-it-and-forget-it. Revisit this plan a few times during the next year. Every 90 days is a good cadence if you already have a "quarterly review" habit.

Your homework — Grab a pen and write down your plans for 2025. As Jeff Bezos said in a recent interview: "we're in multiple golden ages." It's a great time to get what you want out of your business. If you want some inspiration, send us a message with a summary of 2024 and we'll share some ideas for your 2025 plan.