The five numbers
- Revenue target for the year
- Customers (or orders) needed to hit it
- Average sale value
- Fixed costs per month
- Variable costs as a percent of revenue (or per order)
From those five you can answer most of the useful financial questions a small business owner has: roughly what gross profit will be, roughly how many sales need to land each month, roughly when the year breaks even, roughly how much the next pound of marketing spend can afford to cost.
Worked example: the consultancy
Revenue target 240,000 pounds. Customers needed 20 projects. Average sale 12,000. Fixed costs 6,000 a month (so 72,000 a year). Variable costs 1,500 per project (so 30,000 across 20). Gross profit 138,000, before owner pay. The maths fits in the corner of the page. It tells the owner that they need an average of 1.7 projects to land each month, and that any month with no project landed needs a clear reason - a holiday, a slow pipeline, or a problem to fix before next month.
Worked example: the plumbing firm
Revenue target 480,000 pounds. Customers: 90 maintenance contracts at 1,800 each, plus 1,500 emergency call-outs at 220 each. Average sale: blended around 200. Fixed costs 18,000 a month - vans, insurance, two engineers, an office. Variable costs around 28 percent of revenue. Gross profit before owner pay around 160,000. The maths shows that the maintenance contracts are the load-bearing part - lose them and the variable call-outs can't carry the fixed costs alone.
The three assumptions worth writing down
Every plan rests on a small number of assumptions. The honest version names them on the page. For the consultancy: "We assume two referral partners stay active. We assume LinkedIn continues to send at least 60 monthly profile views from the right kind of business. We assume the average project lands in 30 days from first call." For the plumber: "We assume 80 percent of maintenance contracts renew. We assume the partnerships with the two letting agents stay. We assume fuel costs hold within 10 percent of last year."
Naming the assumptions does two things. It tells you what to watch for, and it explains - in advance - why the plan might miss.
The gentle stress test
Two questions, asked every quarter. What if revenue lands 20 percent below target - what's the plan? What if revenue lands 20 percent above target - what's the plan? Most owners think about the first. Few think about the second. The second is just as important. Growth that arrives without a plan tends to break the same business it's meant to help - costs balloon, the team gets stretched, the offer wobbles.
What to do this week
Fill in the five numbers for your business. Use round figures. Write the three assumptions underneath. Add the two stress-test answers. The whole thing should fit in the bottom half of one A4 page. Honest, not precise, is the standard.
The recurring principle this chapter sits on is review results and improve the system. Numbers without review are decoration. The next chapter, Turning the Plan Into Action, gives you the rhythm that makes review actually happen.
