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.
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..
If you would like to add some industry expertise, and external objectivity to your budget process, revenue target and reporting routines: email me or phone me – and let’s get this show on the road!