Would You Cut $500,000 in Revenue?

This is where I would spend more time than I would filling out a traditional business-plan template.

Give AI the financial history and some context about the business. Then start asking questions. What changed this year? Where did we actually improve? Where did we get less efficient? Did our margins move? Are payroll and other major expenses growing faster than revenue? Is there anything in these numbers that should change how we think about next year?

Those questions can lead you somewhere very different from “I'd like to grow 10 percent next year.”

We worked with one business that had a product line generating nearly $500,000 a year in revenue. It was easy to advertise and brought in plenty of work, so from the outside it looked like something you'd want to grow.

The problem showed up when we actually separated out the numbers.

After payroll and cost of goods, the net profit on that line was around 4%. Worse, it was time intensive. More sales meant more employees, more vehicles, more fuel, more tools, and more headaches managing all of it.

Meanwhile, another part of the business was running around a 65% gross margin and 30% net margin.

Once we could see those two lines side by side, the plan changed.

Instead of figuring out how to sell more of the $500,000 product line, the better question became: What happens if we stop selling it and put those marketing dollars, staff time, and management attention toward the much more profitable part of the business?

The first projection hurt.

Revenue dropped substantially because we were intentionally removing nearly half a million dollars of sales. Nobody likes building a plan that shows a smaller top line.

But the projected bottom line improved, the staffing headaches decreased, and the business became simpler to operate.

Then the projection became reality.

They cut the line, focused their effort on the more profitable work, and haven't looked back.

That's the kind of thing an operating plan should help you uncover. The goal isn't automatically more revenue. It's deciding what kind of business you actually want to operate and understanding which parts of the business are helping you build it.

You don't need to spend a weekend writing this. Give AI the raw materials and let it help you work through them.

Start with something like this:

"I'm building a simple operating plan for my business for the next twelve months. I don't need a formal business plan. I need something useful for making decisions.

I'm going to give you financial information from the past two years along with some context about what changed in the business this year and what I'm considering for next year.

First, help me understand what happened. Look for meaningful changes in revenue, margins, payroll, expenses and seasonality. If possible, help me compare the profitability of different products, services, or parts of the business rather than looking only at total revenue. Point out anything I may be overlooking, and ask me questions where the numbers need context.

Then help me think through what those findings should mean for the next twelve months. Don't make decisions for me or assume that more revenue is always the goal. Help me identify the choices I need to make and the tradeoffs involved."

That's an important distinction.

AI isn't going to know that a particular service is a scheduling nightmare or that you're tired of trying to find employees to deliver it. Your financials might not show how much of your own time it consumes either.

But AI can notice that revenue increased while margins fell. It can help compare product lines. It can ask why payroll jumped 14%. It can help model what happens if you stop doing something, raise prices, add an employee, or shift marketing dollars somewhere else.

You provide the context. The numbers provide the evidence. AI helps you connect the two.

That's a much better starting point for next year's plan.

Once you've worked through what happened and what you want to do about it, the last step is easy.

Ask:

"Now turn everything we've discussed into a concise one-year operating plan. Include where the business stands today, the biggest lessons from the past year, our priorities for the next twelve months, the specific changes we're planning to make, the financial assumptions behind those changes, and the key numbers we should watch each month to know whether the plan is working."

Then use the same conversation to build your twelve-month projections.

And don't panic if the revenue number goes down.

Sometimes the smartest plan for next year isn't to make the business bigger. It's to make the business better.

The projection is where you find out whether those are actually the same thing.