A Plan for Implementing Business Growth ... - financial budgeting

Posted in Uncategorized. Written by admin on August 30th, 2011

Over the last few weeks I have written several business growth strategies-centric blogs titled ?What A CEO Does? And Larry Ellison? and ?What A CEO?And His Management Team Also Need To Do?.

This week I wanted to write about what a founder and or CEO should be doing right now if they want to have a successful 2011 and construct a solid company foundation that will allow for a successful exit for the management teams and everyone else involved.

Whether or not you are bootstrapping the business through organic growth, looking to raise an initial round of venture capital?as an early stage company or raising additional growth capital because you have hit the expansion stage as a software company ? this advice will apply to all.

If your fiscal year coincided with the current calendar year, the management team must take action now and start budgeting and planning for 2011. What you plan during this stage will determine how you allocate your precious resources, capital and people to take the next big step as a company.

In order to be successful, you should use your KPIs from the last 3 quarters and build an economic model for the business. These KPIs are the financial foundation of the company.

For example, based on the last 3 quarters data??

• Your average cost per lead is $25.00
• 25% of your leads convert to qualified leads at a cost of 100.00 per qualified lead
  
• Your average sales rep converts 25% of their qualified leads to close
  
• 500.00 is your average bookings ASP per month or 6,000.00 12 month contract value
  
• Your average rep closes 8 deals per month for a 12 month contract value of 48,000
  
• Your goal for the year for bookings is 12 million

Then do the math to determine what you have to spend in marketing to generate the leads and the number of sales reps to convert the leads to bookings to meet the goal.

12mm in bookings means you need 2000 deals for the year at an ASP of 6,000.00 per year(500.00 per month). That is 167 deals per month, which would mean that you should be spending $66,667 in marketing costs per month and have at least 21 reps who are 100% productive from the beginning of the year with no turnover.

The reason I say at least 21 reps is because you should adjust the model for the sales learning curve based on your experience of the amount of time it takes after you hire a sales rep until they are hitting their monthly quota. You also need to factor in turnover. This means you will have to actually build in some extra capacity to lower the risk of the model since nothing ever goes perfectly.

The same plan of attack would also apply to:

• Finance (example would be DSO for cash flow and what factors impact lowering DSO)
• Customer Service (example would be the number of calls needed to close out a tier 1 client issue against the number of calls client service reps can handle per month, against the average number of calls per customer
• Development (how many developers you need based on historical development data around stories per development sprint if you use Agile/Scrum as your development methodology).

In addition to using the historical economic drivers for the business, you should also plan to experience an incremental improvement in these areas to create more leverage and improve upon the processes in each operational area ? from sales and marketing through finance, customer service, product management, development and consulting. Your goal should always be to drive process improvements and cycle time reductions if you want to build a great business that beats the competition through operational execution.

For example

• If you can improve upon the quality of the lead flow, you lower your cost per leads and spend less in marketing.
• If you can make your sales reps 10% more productive, you need 2 less headcount to achieve your bookings goal.?

That is the beauty of an economic model. Once you build it, you look for ways to tune it for improved execution. But none of this can happen if you don?t build your economic model based on you historical KPIs. This is where it all begins? without an economic model you essentially have nothing.

Source: http://www.budget-mt.com/?p=2096

pierre de fermat pierre de fermat bf3 desktop backgrounds salma hayek hal newsday