Morning Minute 12/31/24:
“How To Make YOUR 2025 Projections!”
Here are two (2) methods to make your yearly projections.
First, there is the SWAG method. Someone reviews last year’s numbers. Using those numbers, that person projects your 2025 key performance indicators (KPIs). Using this method, those KPIs will be annual numbers. Then, you are left to figure out your action plans for how to achieve “their projection.” (A SWAG is a Scientific-Wild-Ass-Guess!)
Then there is the method I teach…the Average Month Method. This takes more time, but it creates more realistic and achievable yearly projections. Here are the steps:
1st: Using your year-to-date operating statement (either for October or November) divide each year-to-date line item by the number of months represented on the statement. For instance, if your November statement shows year-to-date sales are $11,000,000, then divide that sales number by the months represented on the statement. That is $11,000,000 / 11 months = $1,000,000 in average monthly sales.
2nd: Complete this process for each line item on your statement. Divide each line item by the number of months represented on the statement. Once again, using a November statement, divide each line item by 11. This will compute an average month’s performance for each line item on your statement.
3rd: Get an understanding of what accounts are represented by each line item. If necessary get your controller or accountant to explain how each line is tabulated. This will provide you with the information you need to make your 2025 projections.
4TH: Using those average month’s numbers, now you can project both income and expenses for each line item. For instance, if you project a 10% increase in sales, you will multiply the $1,000,000 in average monthly sales by 110%. Thus, your average monthly sales projection will be $1,100,000. Complete this process for each line item. When you are done, you will have your average monthly projection for 2025. These will be the numbers against which you will compare your actual monthly performance.
5th: This step will take 7 – 10 days to complete. Using the 4 Ps, decide and document what changes are required to achieve your goals. The 4 Ps are People, Processes, Products, and Promotion. Engage your people to help you decide what needs to change to achieve your goals. Their engagement will provide you with their necessary buy-in in order to make the changes required for success in 2025.
Now you have a specific, measurable, realistic, and timely projection for 2025. And, because you enlisted your team’s help in deciding what changes are needed, your team will help you succeed in achieving your 2025 projections.
(P.S.) Sometimes, numbers are difficult to follow without seeing them, or asking questions. Contact me. I will be delighted to assist you.
“How To Make YOUR 2025 Projections!”
That is today’s Morning Minute.
