121: Year End Planning for HR, Marketing and Finances for your Design Firm
121: Year End Planning for HR, Marketing and Finances for your Design Firm
with Michele Williams
This is the third episode I am dedicating to going through a year-end review. I believe this process is instrumental in creating a business plan that we desire and doing it with intention. Today we will focus on some of the review process necessary in the areas of human resources, marketing, and financials.
Topics Mentioned:
Human Resources
Marketing
Financials
Listen to the Episode
We have been talking about year-end reviews over the last couple of solo podcasts starting in early November. I really do begin this process in the last quarter of the year. While I know everyone doesn’t, to have a plan to just execute on January 1 is freeing for me. So, yes, this is a busy time of year, but that almost makes me even more clear on what I want going forward and what I don’t want.
We have looked at the pre-planning process and then how to start with the overall business by doing a SWOTT Analysis, goal setting, energy review, and creating updates to our offerings and processes. Now let’s jump into the heavier pieces – HR, marketing, and finances.
My AIM with Intent™ methodology focuses on three levers with intention. People – Process – and Profits. All three of these are tied into everything we do. AIM stands for Align Your Team, Ignite Your Processes, and Manage Your Money - all with intention. Meaning, we are not just taking what comes, we are filtering what comes through the lens of what we want and what our business is structured to accomplish with ease and excellence. If we don’t have this lens, we tend to take on projects or clients that are not a great fit for us to really shine and to meet their expectations. I have heard many during this season say that the phone is ringing, and the emails are coming in like crazy. And while that can be exciting and give us a rush – let’s be honest, it also can make us feel overwhelmed and anxious.
Imagine having a 3-4-point system that you could rank each request, and with ease, be able to respond that you want to go further into exploring the project or that it is not a good fit. And then to do this without guilt or second-guessing yourself. This is exactly what I guide my clients to do. Focusing on these three areas of HR, marketing and finance is part of that exercise.
Ok, so let’s jump in.
Human Resources
When we consider the human aspect of business, we need to be really dialed in. When considering your team, ask yourself this question: “Would I hire each of these people again for the role they currently have?” Then consider your response. When I do a review of the people I work with, internally and externally, I want to know if we are both supporting each other in moving forward. If we are, what can we do to enhance this, and if we are not, what can we do to correct it.
For some, this is a time of year to consider bonuses and more formal reviews. Use this time to determine how and what your employees and team members need to further grow in their career. Use this as input into the financial work you will be doing later. What courses, conferences, or technology needs can be identified? Really make certain that the company and the employee are both benefiting from the opportunities being considered.
A useful approach to really connect with your team is to hold a state of the union meeting for the company. In this meeting share again the mission, vision, why, values, and goals for the new year while also reviewing the goals accomplished this year. Get buy-in from each person on the direction and help them see how they fit in. Ask for input and really listen.
When your team members know and fully understand how their choices impact company profitability and the bottom line, they can be more aware of the choices they are making. Give them the best information to be able to do this. Your team will feel like they matter, and your bottom line will thank you.
2. Marketing
One of the interesting things about marketing is that we are not only marketing for our next client, but for our next hire. When we are clear on our messaging and how we work, we draw in those who want to be around us as clients, vendors, subcontractors, and employees.
Spend time reviewing your marketing. Here is something I do. I look back over the list of people who have reached out to me in some capacity over the prior year. Based on our interactions I analyze what drew them in, what made them call or email, and was it what I wanted to be known for. My messaging has changed over the years as my products and service offerings have shifted. Keeping this all aligned takes time, energy, and effort.
I also review the marketing channels that I am using and determine if they are still good to find and connect with my ideal client. Sometimes I remove a channel, sometimes I add more energy to working with one over another, and sometimes I just add an entirely new way to connect. Keeping my finger on the pulse of where my people are hanging out and connecting is really important as I look at my marketing dollars and how they are best spent.
Another area in marketing I review is the amount it is costing my business or looked at another way, the investment I am making. Not just in ad spend, but in all the prep that goes into it. This could be the cost of creating and maintaining my website, creating social media content, sharing that content, following up with potential leads, free offerings, creating lead magnets, all the things.
I consider the time spent and money spent compared with the return on that spend. Am I getting the results I am looking for? It is also important to look at marketing and advertising as a percentage of my gross profit, which is the money used to run my company. You can also compare it to total sales – just be careful that you know the number you are comparing it to.
Marketing budgets can range from 6-8% of income to as much as 15-20% based on the goals you are trying to attain. What is most important to me is that I am talking to my ideal client and that they are responding the way I need them to.
3. Finances
Ok, I saved the best for last. Finances. Take a deep breath- hang with me – and let’s dig in. When I start to do a financial review and plan, the first thing I do is choose the best time for me and that is usually morning. I pull up my QuickBooks and run a P and L, cash basis, for the year to see what really came in. I then compare it to the last 2 years to see the trend.
When I begin to consider the financial goals, I have for the next year, I go back through my SWOTT, HR and Marketing plans and see where the budget might be impacted. I look at my overall goals and establish any increase in expenses that might need to occur, and I plan for them. I also look at the lifestyle congruence that I need – meaning – how much do I need to make in my business to afford me the lifestyle I want or need to live. This is part of my backwards financials. You can listen to this on episode 11 of Profit Is A Choice.
This exercise also spurs me to look at my pricing and the time it takes to get the job done. I go through the same exercises that I teach in my course, Pricing Without Emotion® so that I feel confident in the number that is associated with my pricing, but also in the value that I provide my clients.
Once I have my pricing determined and how much I am going to work – and I know how much I need to make, I can look at the other factors such as how much I want to save for retirement, pay in taxes and spend on business growth. Knowing all of this allows me to put together a plan for income and expenses. I use the educational information that I teach in Master Your Profit® to create profit first strategy that fits my company and the goals that I have.
I could spend a week going through the financial review and planning with you. It takes time. When you are looking at your financials, check them out from top to bottom and then bottom to top. When we go from top to bottom, we are focusing on what came in then what went out with COGS leaving us with a gross profit. It is interesting when we look at profit and then look at COGS on our way up to total income, we see the money going out a bit differently. For most of you, I would love to see your COGS be between 40-60%. For all of you who are consult or service only, your COGS will be really low, like 20% or less. If your COGS are 60% or higher, you are going to have to work harder and more to make money. Be very careful here.
Moving down the P and L, look at expenses. What can you get rid of? How can you reduce them, if at all? Whatever we pay out in expenses is not being paid out to us. Look closely at your net profit. Is it enough to cover taxes, your retirement, your salary, profit in the company, and a healthy savings? If so, that is awesome. If not, go back through and see what tweaks you can make.
When I have a solid plan, I use this info to create a yearly budget and then a cash flow document that follows. Every month I manage to these documents to ensure I am spending within the plan I made. It is a good idea to write down any assumptions you make regarding your planning so that you can also check your assumptions at each check-in period. If something changes that forces you to also change an assumption and thereby a number, you need to know that. It can be so frustrating to look at a number or a plan months later and ask yourself, “what was I thinking?” Take a few minutes and write it down while you are thinking it. If you don’t know how to create a budget or cash flow document or read and P and L statement or balance sheet, check out my Understanding Your Financials™ course online. Financial literacy is just a click away!
Planning for a year can be intimidating if you let it. But it can also be very freeing. Some of you may try to do it all in one sitting, and some overtime. I like to do both. Take time to let the new ideas marinate, then sit down and document it all. Whatever you do and however you do it will be better than not doing it at all. My hope and goal for you is to be present in your business planning. To own the decisions and choices you make and then to own the outcome. What we own we can change.
The three financial courses I have written all go together. The first is Pricing Without Emotion® which I have been teaching around the country for 10 years. It is life-changing to know – really know – how each number in your pricing is derived and to have the confidence to stand up for it and to know how to tweak it without hurting your business. Understanding Your Financials™ is the course that assists you in seeing how the money flows through your company. You will learn how to read the documents that you need to run the company financially, know the percentages to look for to keep it healthy, and how to make a plan for income and spending. In the Master Your Profit® course we focus on good money management. This is the profit first strategy for your business. Maybe you have read the book and then thought, “wow, sounds simple but it is not easy.” If so, you are correct. We have very detailed and nuanced businesses and we are heavy in the bookkeeping and accounting areas. Implementing Profit First has been a game changer for me and my company and my clients.
Give yourself the gift this year of good financial practices. I would love to help you either by leading you through this learning in one of these three courses or by assisting as your coach to growing and scaling your business. The information about all of this can be found on my website, www.scarletthreadconsulting.com. Check it out and reach out. Choose to be profitable and to do the hard work, because profit doesn’t happen by accident.
Key Thoughts:
I do a review of the people I work with. Michele (04:58)
Now let’s talk about finances. Michele (11:29)
Own the decisions and the choices that you make. Michele (17:49)
Contact Michele:
Facebook: Scarlet Thread Consulting
Instagram: @ScarletThreadATL
References and Resources:
The Designers' Inner Circle - Become a Member Today
Backwards Financials for the Win - Episode 11 with Tracie Taylor
6 Pre-Planning Tips for Your New Design Year - Episode 116 with Michele Williams
4 Year-End Steps to Prepare Your Interior Design Business - Episode 118 with Michele Williams