Annual Planning for 2024: Setting Your Agency's 3 Year Goal

As an agency owner, it's never too early to start planning for the future. In fact, you should have already started planning your annual goals for 2024. One of the most important steps in this process is to set your aspirational goal, 3-year goal, 2-year goal, and 2024 goal. However, before even setting these goals, it's crucial to have a half or full-day offsite with your team to determine your overall vision for the company. It's important to get everyone onboard and to make sure everyone is aligned with the company's values and direction. In this edition, we'll go through the steps you should take to set your 3-year goal and create the necessary milestones to achieve your 2024 goal.

Identify Your Revenue Target

The first step in creating your 3-year goal is to set a revenue target. Your revenue target should be greater than your 2024 goal but less than your aspirational goal. It should be a stepping stone towards reaching your overall vision. It's important to find a balance between setting an ambitious yet achievable goal, so we generally recommend not setting a 3-year goal that is greater than 20% year over year revenue growth. This is because setting unrealistic revenue targets can lead to burnout, demotivation, and, worst of all, could give you reason to increase expenses.

Determine Your EBITDA

The second step is to determine your EBITDA. EBITDA is a financial metric that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. In this scenario, we typically recommend setting your EBITDA at around 20% of your revenue. This number may vary based on your company's current financial state, but the goal here is to ensure that your agency has healthy margins to grow and improve its services.

Calculate Your Cash Goal

The third component to creating your 3-year goal is to calculate what we call "cash." To calculate this, you'll need to know your monthly overhead and multiply it by 2 at a minimum. This means that your cash goal should be enough to cover at least two months of operations. Having enough cash buffer can help you manage unforeseen expenses and provide you with additional working capital to invest in new growth opportunities.?

To determine your cash target, subtract your profit target from your revenue. For instance, if your goal is to reach $5 million and you aim for $1 million in profit, your total expenditure for the year would amount to $4 million. This calculation provides a valuable measure of your annual overhead. Next, divide this annual cost to obtain your monthly overhead. In this specific case, the monthly overhead would be $4 million divided by 12, which equals $333,333. Once you have determined your monthly overhead, multiply it by 2 to derive your cash target. Using the previous example, the cash target would be 2 times $333,333, resulting in $666,666.

Set Your Infrastructure Goal

The final goal in creating your 3-year plan is what we call infrastructure. This is where you envision your company in 3 years and what steps you need to take to get there. For example, you might set a goal to be awarded the "Best Place to Work" award or to have hired your leadership team for each key role by your third year.? The goal here is to ensure that your company continues to improve and better itself each year, bringing you one step closer to reaching your overall vision.

To achieve our infrastructure goal, each member of the leadership team attending the offsite should review the aspirational goal and jot down five personal goals they would like to accomplish. Once everyone has written down their goals, one person will share their goals first. The next person will then share theirs, checking for any duplicates from the previous person before adding any new goals. This process will continue until every leader has shared their goals, resulting in a comprehensive list of desired achievements.

Next, the aim is to narrow down this list to a maximum of four infrastructure goals. To accomplish this, we will review each item on the list and assess if it qualifies as a top four goal. If it does, it will be marked with a check. If it doesn't meet the criteria, it will be crossed out, and we will move on to the next item. This process will continue until we reach the fourth goal. Once we have identified our initial four goals, we will evaluate any remaining items on the list. In this case, we will assess each item to determine if it should replace one of the previously listed top four goals. This evaluation will continue until all items on the list have been considered.? By following these steps, we will refine our goals and create a focused and purposeful list of infrastructure objectives.

After you have completed your list of four goals to achieve by the three year mark the next step is to turn them into S.M.A.R.T. goals.? S.M.A.R.T. is an acronym for specific, measurable, achievable, measurable and time bound.? This will require the group to write a very specific definition for each of the four goals.? My experience is that this is substantially more time consuming than expected so make sure you allocate a decent amount of time to accomplish this.?

In conclusion, setting your agency goals is an essential step in planning for the future. It's never too early to start planning your annual goals for 2024 and beyond. To create your 3-year goal, you'll need to set a revenue target, determine your EBITDA, calculate your cash goal, and set your infrastructure goal. Once you've achieved your 3-year goal, you'll be one step closer to reaching your aspirational goal and creating the agency you've always dreamed of. Remember to involve your team in the planning process, find a balance between being ambitious and achievable, and stay focused on your overall vision.