All right. We are on part four of How to Grow Your Agency. We’ve talked about choosing your niche. We’ve talked about developing your ICP and building your TAM. We’ve talked about how to break the different categories of your business into buckets that you treat as percentages of revenue and understand your financial allocation. So you know what you’re spending on and what you’re not spending on.
There’s usually a connection between what you’re good at and what you’re not good at. Now what we’re going to talk about setting goals. So little story time. I think it was 2015. I had my first outsourced accounting firm. I was using basis 365. They’re kind of like a bench.co, but for more, for like professional services. And I was terrified of the forecast because and this is true, by the way, you should be terrified of your current forecast.
And we’ll walk you through some important things on empowering yourself. But being a mature executive, when someone does a forecast, they’re actually basing it off of historical performance. And so due to accuracy’s sake, they essentially, to a certain extent, are lowering the expectations of the firm and they’re lowering the growth of the firm for the sake of accuracy.
And you need that accuracy. But unfortunately, many CEOs take that forecast even. Well, first off, you need a forecast. Okay. So if you don’t have a forecast, you should have a three year at least forecast. Now that three year forecast is based off historical performance and that’s some healthy assumptions. The problem with that forecast is if you use that for your goal setting, you’re and this is what happened to me when I brought on the first CFO, when I brought on the second CFO, when I had that outsourced bookkeeper in 2015, I pushed back like crazy.
And I still do because finance wants to set goals based off historical performance. But if I was happy with the historical performance, why am I working so hard? You see what? I’m going with this. In other words, many of you don’t have a forecast and don’t set goals because you don’t want to limit yourself or you’re just lazy.
That’s a separate issue for me. I didn’t want to limit myself. I felt very restrained by this floor level thinking. So I was like, Come on, team, I want to do things I’ve never done before, right? I don’t want to be limited by my goals. I want to be pulled up to my goals. I want to strive for my goals.
I want to accomplish great things that we haven’t accomplished before. That’s why I show up every day. That’s why I work my butt off. I want to win. And finance is like, Yeah, but we’ve never done that before. And the forecast is based off the past. And so there is a solution. It’s called a baseline forecast and a growth forecast.
And this is what I developed. So I went back to finance. I said, You are right, we need a baseline forecast to accurately predict the future based off the past. I agree. By the way, my background’s economics and I ran all our finance. When we were at 17 million I’m not a shlump with this stuff. But they have a point. We got to be accurate, right? We have cash. We have investments. We have margin targets. You can’t just say, Garrett, that we’re going to be a $22 million company if we’ve never been one before.. Like, Yeah, but look at my track record we have. They’re like, okay, good point. So what’s the balance? The balance is having two forecasts, a growth forecast that you use for goal setting.
So when I work with my executives, I set goals that I think are reasonable, not because I just want to accomplish something. And I we do it together. The executives that I’m working with in every business unit when I set their goals, I don’t do it with every exec I do with my direct reports. Who are the managing execs? So I’ll set goals for the CEO department with the COO or the VP of Ops.
I’m saying then they’ll translate those goals down, but I do that with them in a collaborative environment. And the reason I do so is they have to own their own goals, have to be bought into them. But I need them to accomplish more to hit my growth forecast. So I use the growth forecast with reasonable assumptions. And the way you can craft reasonable assumptions is instead of looking at the previous 12 month period in aggregate, on average, what you do is you look at the best months from the previous year and you ask yourself, what type of investment would I need to give you as a business unit to make your best months, your new
standard, your new normal? So then I then come up with a healthy say, look, we’re not going to close 3 million every month, but we sure as heck can’t close 350K. So I start to look at the averages of their performances and look at their best months, and I start to set a goal for them that I can still reasonably hit my growth forecast with based off things they’ve already attained but not sustained.
Okay, so when you set goals for someone, you need to increase your capital to them. If you’re asking them to do more than they’ve historically done. Bigger goals need more money flat out okay. Don’t be the boss that asks people to do more with less. That boss sucks and those people always quit straight up. What you need to do is ask them what they have attained before and if you gave them x amount of money, could they sustain it into the future and hit these goals?
That is how you do goal set. You can use OKRs, you can use whatever methodology you want. I’m not going to get into the nuance and the meritocracy of every type of goal setting system that exists as OKRs. I think there’s others who know I don’t care that much. I’ve done my own version of OKRs, and that’s a separate video.
What I do care about is how you set the vision for your organization and how you set your future goals and your three year forecast. And if you do it off the past, you’re sandbagging yourself. And if you do it off wild ambition, you’re crushing your team because they can never actually get a win. So what you do instead is you look at what you’ve attained and then you invest the necessary capital so that the previous attainment can be the future sustainment, and that is how you do it.
