An annual revenue plan on four pages

It is the first week of the year. A number is written on the whiteboard, last year's figure plus a fifth, and nobody in the room can say which customer will pay for the extra fifth. That is a target, not a plan. A plan answers four questions on four sheets. How much, and how did you get there? Which customers or channels supply each rupee? Can you make and deliver it? What could knock it over?

What goes on each sheet?

Print four sheets and put one block on each. This is the whole template.

SHEET 1  TARGET
  Last year, by customer group
  Already in hand (contracts, standing orders, repeat buyers)
  Still to find (target minus in hand)
  Orders or jobs this implies, at your usual order size

SHEET 2  SOURCES
  One line per source: last year | this year |
  the one thing that must be true | who chases it, by when

SHEET 3  CAPACITY
  The unit you run out of (machine hours, technician days, cash in stock)
  Needed each month by the plan | available each month
  First month it breaks, and what you will do

SHEET 4  RISKS (five at most)
  What happens | first visible sign | who watches | what you do if it happens

Sheet 3 is the one owners often leave blank. It is also the one that decides whether a good year feels good.

What does a filled plan look like?

Here is an invented case. A turmeric processor in Sangli boils, dries and polishes turmeric and sells whole and ground turmeric to wholesalers in Pune and Mumbai, to a few masala makers, and in small packs through local shops. All figures here are illustrative.

Sheet 1. Last year came to ₹1.5 crore. The owner wants ₹1.8 crore. Standing orders from the masala makers and the two wholesalers who always reorder come to ₹1.1 crore, so ₹70 lakh is still to find. At an average order of ₹1.5 lakh, that is about forty-seven orders, nearly one a week for a year.

Sheet 2. Wholesalers: ₹80 lakh last year, ₹90 lakh this year. A third Pune wholesaler must place a first order by June, and the Mumbai buyer who slowed down must be visited. Masala makers: ₹40 lakh stays flat. Small packs: ₹30 lakh to ₹40 lakh, provided two Sangli shop chains stock them. Direct to restaurants: ₹0 to ₹10 lakh, one experiment, funded and named as one.

Look at the last clause of each line. "A third Pune wholesaler orders" can be chased by a person on a date. "Wholesale growth" cannot. A source with no such clause is a wish.

Sheet 3. The owner first wrote that the plant "has room". Then the owner counted. Boiling and drying run flat out from the harvest weeks, when most raw material arrives, and ease off in the rains. The extra ₹30 lakh of pack and wholesale sales mostly lands just when the dryers are full. In those weeks the extra volume cannot be polished and packed, and raw turmeric cannot be held for later without tying up cash the firm does not have.

What changed on the sheet: the year stopped being twelve equal months. The two big wholesalers were asked to book their extra volume for the weeks after the harvest rush, and drying space was rented for the peak, though one wholesaler declined the later slot. The small-pack line was cut to ₹32 lakh unless that space was confirmed by a named date. The total dropped to ₹1.72 crore, and everyone could see why.

Sheet 4. The Mumbai wholesaler is ₹35 lakh of the ₹90 lakh. First sign: the gap between that buyer's orders stretches. Watcher: the owner, who rings the buyer. A price rise in raw turmeric is another, with a rule written now: reprice the list when the supplier's rate changes, not at the next order. A third risk is the loading supervisor leaving, with the sign being dispatches that exist only in the supervisor's memory.

Which three tests should it pass?

Run them before you sign it off.

The first is arithmetic. Add the sources and compare with the target. Any balance labelled "market growth" is a hole.

The second is the one-third test. Imagine your largest source comes in a third short. Write down the cost you would defer, the price you would hold, or the cheaper way of reaching existing buyers. Do it now, while nothing hurts.

The third is names. Every source has one person's name and one date. A line owned by "the team" is owned by nobody.

How do you fill the sheets in practice?

Do it in two sittings. In the first, fill sheets 1 and 2 from your invoices and order book, alone or with whoever sells. Leave the number you want out of it until the sources are down. In the second, a few days later, bring in whoever runs delivery and fill sheet 3 together, because they will see a bottleneck you cannot. Only then write the target on sheet 1. If the sources fall short of what you wanted, write the gap in plain figures and decide which of three things closes it: a new source, a higher price, or a lower target.

When is four sheets the wrong size?

Skip it for a business under a year old. Last year's figure means nothing there, so plan one quarter and learn from it. Use one sheet if a single customer is most of your revenue, because the only real question is how to keep that customer and add a second.

And a plan alone does not move anything. If the owner is the only salesperson, the sheets mainly tell you how little of the year you can personally cover.

Reading the plan against the year

Put sheet 2 on the table at each sales review and compare actual with expected, source by source. When a source clearly moves, change that line and keep the original beside it, so you can see which assumption failed. Do not rewrite the target each time a quarter disappoints. Our post on what to ask in a sales review gives the questions that go with it.

Start this week with sheet 1 and last year's invoices by customer group. If you want help with the other three sheets, tell us what you need; yearly planning sits within sales.