Leadership teams that are on track to reach their potential to perform and grow have:
- A written, board-approved financial plan that shows revenue, direct costs, gross margin, indirect costs by function (e.g., marketing, sales, HR, R&D, etc.), and operating profit (i.e., EBITDA), by month and quarter for the year. Approved financial plans tend to have the following characteristics:
- Smooth (or otherwise rational) ramp-up (or down) of revenue and costs from the prior year closing month and quarter.
- Generally upward-trending scale (i.e., ever bigger and better).
- A 75% chance of being achieved by the in-place team with roughly 2/3 of planned revenue either booked or highly-probable (B&HP) and a highly-qualified pipeline of prospective, current year, revenue equal to three times the gap between B&HP and Plan (and not all in the last quarter or two!).
- Identified upside-downside potential with mitigation strategies on the downside and what will be done to take full advantage of any upside.
- Assumptions and triggers that explain what has to happen for planned results to occur and for planned expenses to be made.