085 - How to Write a 5 Year Business Plan
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Show Notes:
Writing a five year business plan can feel daunting and overwhelming, especially if you don't even know where you want to be in five years, which is probably most of us.
Today, I'm going to break it down. I'm going to break it down for you in a way that is actually attainable. You'll be able to wrap your mind around it. And quite frankly, for me, it's really exciting to have that kind of a vision.
Let's take a few minutes to dream about life and work and lay out a game plan for the next five years.
For the full episode, hit play above or read through it below!
What are you going to be doing five years from now? The fact is, you don't know.
I don't know. No one actually knows what life is going to look like five years from now. And if 2020 has taught us anything, it's that plans get canceled. But today I want to encourage you, think about it this way.
Where will you be five years from now if you don't make a plan? You definitely don't know the answer to that one.
I hold my hands open with my work and my family and my faith and my life. I trust God to lead me. And I hope that you do too. But I also know that He has provided tools and knowledge and wisdom for creating a sustainable business and a fulfilling life. And one thing God talks a lot about in scripture is vision, planning, wisdom.
Proverbs 29:18 says, "Where there is no vision, the people perish."
And the flip side of that verse that we can extrapolate ourselves means, having a vision gives us life. Most of what I'm going to share about today is related to work specifically, business specifically, but you can take these principles, you can apply them to your home.
I love doing that. I love taking business principles and applying them to my home life, but I'm specifically going to be speaking to work in business today. And a lot of these ideas, I get it from the book, Traction. If you have followed me for a while or listening to this podcast faithfully, you know I love this book. You know that I run my business and all my work on the entrepreneur operating system, which is this book called, Traction, by Gino Wickman. And a lot of what I'm going to say today is based on that.
You can hear an overview of how the entire Entrepreneurial Operating System works by listening to Episode 026 of the podcast, which is my favorite business book ever. And I go through all of that in detail in a broad overview. But when we talk about the five year plan or the five-year business plan, I want to break it down and focus specifically on this two page document that they lay out in this book called Traction. And basically this two page document, it's incredible, on two pages you can fit just about everything that you need to know about your business.
They call it the Vision Traction Organizer: on the front page is the Vision, and on the second page is the Traction piece.
So, I'm going to give you a quick overview of what's all on these pages, and then I'm going to specifically break it down to where you can grasp a five-year plan.
VTO: Vision Section
So, on the vision page of the Vision Traction Organizer, and I'll leave a link to an example of this where you can download one here and take a look at it. But at the top of the vision page is:
your organization's name
your core values
your core focus
your 10 year target (I'm taking liberty here and changing it to a five-year target)
You can absolutely do a ten-year target, but I found that ten-year targets are better for more established companies than they are for smaller companies/businesses like myself with young kids. I feel like there's more variables in five-year, it's a little more attainable.
And then you've got the marketing strategy, which breaks down into:
your target market
the things that are unique about you
And then the three-year picture, which I'll get to that in a minute, as well.
And that's all on the vision side. So you can see, you've got the name core values, core focus, your five-year target marketing strategy and three-year picture.
VTO: traction section
Now, on the back is your traction side. And this is devoted all to the next year.
It's your one year plan. And you set different goals for your one year plan, and then you have your rocks for the quarter—the next quarter, just the next three months. And then you have a list of issues.
So that is a Vision Traction Organizer, and it was probably hard to understand in a podcast format. That's why I really encourage you to just download it and look at it. Because really, by having your work outlined on this one sheet of paper front and back, you have like a very clear vision of where you're headed. It's pretty incredible.
The first time I actually filled one out, which by the way took me several months, because I had to do a lot of the other work, like creating core values and creating my core purpose and all of that first. But once I created it, I can't even tell you the clarity that it gave me, the hope that it gave me—to have something that we are running toward.
Five Year Target
So, let's talk about the five-year target. Okay? The five year target is your five year business plan, and it's not this 12 page document that outlines everything that you're going to do. It is really just a sentence. I mean, that's it. Your five-year business plan needs to be very simple. And that allows you to have a lot of moving parts between now and five years from now.
So, for your five-year target, you're going to simply list your revenue goal.
What is the one big number revenue goal that you want to be bringing in your work, in your business, and list any of the giant metrics that are associated with that revenue goal. And that is it.
That is your five-year business plan. There you go. Just like two sentences, that's it.
You want to keep it high level and simple. You want to keep in mind what you're trying to achieve with this revenue.
Like what kind of work, what kind of work-life balance do you want to have?
Do you want to have more play in your life?
Do you want to be making more money?
Do you want more flexibility?
Do you want to hire a team?
You have to keep all those things in mind as you write this down. And you want it to be realistic, but you also want to shoot for the moon. You're going to say, "Okay, five years from now, what is the biggest and best thing that I can do?" Okay.
So I want to break this down for you in a way that's a little bit easier to understand. When I had Nancy Ray Photography, we had a five-year target, and we broke it down.
And when I wrote the number, the revenue that I wanted to hit, it scared me so bad. I thought, there's no way I could ever bring in that revenue, but then we broke it down. And once we did that, I thought, oh my goodness, I think we can do this. So the revenue for our five-year target was $750,000. And when you broke it down into two parts, one part was Nancy Ray Photography, which is where we could earn $400,000 through weddings and families because I had a team of photographers with me that looked like 60 weddings in a year and about 25 families in a year.
And those are family sessions, plus two days of mini sessions, and that's $400,000.
Then this other component of the business was the Nancy Ray Shop, the educational side where I sold courses and sold online products in how to teaching business. And that could potentially bring in $350,000 if we learned how to launch courses and do all that.
So, 400 plus 350 is 750,000.
And I was like, oh my goodness, that's incredible. I would have never said that I could earn that much money in revenue in my business if I hadn't sat down and done that exercise. Now, don't start comparing and thinking about your business versus my business, that is not the point of this at all.
The point is, if you step back and take a look at the things that you could do and the possible revenue that you could bring in five years from now, it's important to stay realistic and have your numbers and your metrics match that while also feeling a little bit like, oh my goodness, can I actually do this? But that's the exciting part of the vision.
It's like, if you don't shoot for that, if you don't put something out there, then you definitely won't reach it. Right? But if you could put something out there and just go for that, and try to get that, obtain that, you are way more likely to reach that number. Okay.
So, five-year target, things for you to remember is that you want it to be your revenue goal along with any of the big metrics associated with it. That's it. That's your five-year business plan.
Now, I want to break it down further so that you know how to get from where you are now to that place.
Three Year Picture
The next part of the vision traction organizer is the three year picture. Now, with the three-year picture, what you want to do is choose, three years from now, but you don't want it to be today's date, you want it to be the very last day of that year.
So, if you're listening to this episode at the time it comes out, then you would choose the date December 31st, 2023. That's three years from now.
You're going to choose a revenue number for that point, which is just about the halfway point to the five years. So, you're going to want to track that growth, how much profit you're trying to achieve in that time, and then the measureables.
So, whether that's 25 weddings booked, 250 units sold, 10 coaching clients—whatever it is for you and your business, you want a bullet pointed list of no more than, I don't know, 10 things for you to really outline what three years from now looks like. You want to get a really clear three year picture in your head, the future date, the revenue, the profit, the measureables, what does it look like? And then you're going to move to the one year plan.
One Year Plan
That's like this year, come on, let's make a plan for 2021 since we're approaching the end of this year, we're looking forward to next year.
So, for your one year plan, the future date to see whether or not you made your goals is 12/31/2021, the very last day of next year. And you're going to want to go ahead and choose a revenue number that you're trying to hit for next year, and profit, whether that's a percentage or a dollar amount, the measurables to get you there, and your goals for the year.
You don't want a list of 30 goals.
No, you want anywhere between three and seven major goals for your year. So as you're making goals for next year, no more than seven. And you want it to be the most important things that move your business forward.
Q1 Rocks
Then you're going to break that down even further and create rocks for the first quarter of 2021.
And rocks is just another way of saying the most important things to move your business forward. It's like goals. And again, no more than seven.
And then you need to assign those rocks to people. If you're the only person that's great. If you want to assign them to someone on your team, that's great. But somebody needs to take that rock and own it for themselves.
So, do you see how writing a five-year business plan really isn't as hard or complex as you might think? It's setting a realistic goal that absolutely stretches you, but gives you a vision for what you can do.
Now, I want to pause and take a moment to go a bit beyond this Vision Traction Organizer, and the five-year picture, and the three-year picture, and the one-year plan. All that. I want to ask you some questions.
Why?
Why do you want to grow and make that money?
Why is that your goal?
Just think about it. I mean, get honest with yourself and the Lord, and then ask Him to lead you and guide you every step of the way. Make the plan, invite Him into it, ask Him to lead you in it and give it completely over to Him.
I took Nancy Ray Photography further than I ever believed it could go because of my quarterly and yearly rocks and my five-year business plan.
Did I ever hit that five-year number? No, I didn't. That business was the Lord's, and He asked me to close it before I ever got to that. And I am totally at peace and okay with that. It was a joy to work towards it, to see it. And it really helped me and my team get on the same page as we were working together. It was clarifying, attainable and motivating versus being foggy and nebulous and we didn't know where we were headed. It honestly made work fun.
I also had a very clear vision of why I wanted to grow my business. I wanted to be more hands-off. I mean, the point of making that, growing my team, was so that I could shoot less weddings to bring more money home for my family and to be more free. So I can be with my kids more. And along the way, I did all of those things which was such a joy. And while I made the plan, I've lived in surrender all the time. And when God brought that business to a close before I hit that five-year mark, because we closed it down at the end of last year, which is the four year mark. I was not a failure. I was victorious because God was in the middle of all of that. Success to me is obedience to Him.
He took it further with that vision and plan and he ended it right on time. So I want to encourage you making a five-year business plan, it brings clarity to your work, it shows you what's possible. It aligns everyone on your team, if you have one, to be working toward a common goal. And you might be just fine not making one, and just flying by the seat of your pants, but you'll also likely end up somewhere that you weren't planning because you weren't planning. And that's okay. If that's what you choose to do, that's okay.
But I hope this challenges you and encourages you just to take some time to think about where you want to be five years from now, specifically in your work and how you'd like to get there.
All right. That's it for the five-year business plan.
Work and Play cornerstore
Now, it's time for the Work and Play Cornerstore, which is where I share a book I'm loving and a thing I'm loving. I'll get a small commission for anything bought through these links, which help me to continue to bring this podcast to you every week. But the price is normal for you, so it's a win-win.
Today, I'll be adding Rocket Fuel for my book, as well as my Vitamix.
All right, Rocket Fuel is actually a really deep dive into understanding the entrepreneurial operating system. It's like a book that goes along with traction. So if you're kind of a business nerd like me, or if you've read Traction and want a greater understanding of it, Rocket Fuel is a story about a business who has a visionary and an integrator. And it's really, really interesting. And I mean, I geek out over this stuff. I love listening to it. It's really helpful to understand Traction and how to implement it into your business.
And the second thing, listen, I love my Vitamix. It is this heavy duty blende—if you don't know what a Vitamix is, you've been living under a rock, but it's fine. I'll forgive you. It's amazing blender, I use it for smoothies, soups, I did baby food in it. I mean, you can do anything, but literally I use it every week for smoothies and I love it.
I don't think my son would eat vegetables if we didn't have this thing, he's so picky. But I make this amazing spinach smoothie every week and he loves it. I love it. Yes. It's a pricier item. We have had ours since we got married, I think, for about 10 years, and it still works like a charm. So, definitely put that on your list for black Friday or maybe Christmas if you don't have one. I just think it's so worth it. And it really helps me to eat better food.
Just a reminder, if you're still drowning in photos on your phone, and you have tens of thousands of photos on your phone and you don't know what to do with them, feel free to head to nancyray.com/clearmyphone and I will give you a quick five-step process where you can get all of those photos off of your phone today!
All right, I'm going to close with words from Gino Wickman who says,
“Clarify your vision and you will make better decisions about people, processes, finances, strategies and customers."
Thanks for listening, and I'll see you next time.
