Strategy · Growing to Scaling
Three-year objectives
You put the numbers next to your 3HAG, for the same year, and you've checked that they add up.
Worth reading first: 3HAG: your company in three years
Does this sound familiar?
- You've been saying for years that you want to grow, but nobody in the company knows how far.
- A bank asks for a multi-year forecast, and you make up the numbers in the car on the way there.
- You want to double revenue and triple the team, and you've never worked out what that does to revenue per person.
- Your plan has said '50 people in three years' for three years now. The number has never changed, and neither has the year.
Who it's for, and when
For founders who know what their company should look like in three years, but not which numbers go with it. It matters in Growing and Scaling, when your team, your bank or your shareholders want to know what you're working towards. In Searching and Proving it's too early: revenue three years out is a guess at that stage. Set objectives for this year only.
The model
On Harnish's One-Page Strategic Plan, one column looks three to five years ahead: a date and a few numbers. On the canvas, that's this box, with a KPI name, a target value and a unit on each line. Revenue, EBITDA, FTE and profit per X are already there. In the lesson 3HAG: your company in three years, you describe the company on that date in words. Here you set the numbers that go with that picture, for the same year. If your 3HAG moves forward a year, these numbers move with it.
Work back from the picture, not forward from today. If you add ten percent to this year's revenue three times, you're writing down what would happen anyway. The question is: what do the numbers have to be in that year if the picture is right?
The numbers have to add up. Revenue divided by FTE, EBITDA divided by revenue: those ratios are fixed the moment you write the numbers down, even if you never work them out. If a ratio has to get much better than you've ever managed, that's the real job for the next three years. Write down in one sentence what will make it happen.
Verne Harnish, Scaling Up (2014). His One-Page Strategic Plan has a column called Targets (3-5 yrs.): a date at the top, then revenue, profit and market cap or cash. Shannon Susko (The 3HAG Way, 2018) starts a 3HAG with the same date and numbers.
The KPI name
What are you measuring? Revenue, EBITDA, number of FTE, profit per X, number of active customers. A handful, each with a name everyone in the company understands the same way.
The target value and the year
The number that has to be there at the end of your 3HAG year. One number, not a range. Put the year in the KPI name ('Revenue 2029'): 'in three years' without a year shifts by a year every year.
The unit
Euros a year, percent, FTE, customers. Without a unit, '5 million' could be revenue or the value of the company.
Adding up
Put the numbers side by side: revenue per FTE, EBITDA as a share of revenue. Compare them with today and with your best year ever. If there's a jump you can't explain, you want to see it before you write it down.
Pitfalls
A number that stays put
Revenue goes from €5m to €8m and you leave EBITDA at €500,000. That's a choice too: the margin drops from 10% to just over 6%, and every extra euro of revenue earns you nothing. Sometimes that's right, but then you want to know it.
Watch and read
A 3HAG in five steps. The first two are this box: a date three years ahead, and the numbers for revenue and cash in the bank. The description that follows is the lesson 3HAG: your company in three years.
Watch on YouTubeIn one minute: how the three-year goal is broken down into twelve quarters, milestone by milestone. That's how the numbers in this box come back in your year and your quarter.
Watch on YouTubeRead
Scaling Up: How a Few Companies Make It...and Why the Rest Don't
Verne Harnish · 2014 · ISBN 9780986019593
The source of the One-Page Strategic Plan, with the column Targets (3-5 yrs.): a date, revenue, profit and market cap or cash. Published in Dutch as Scaling up: de groeiformule (Business Contact, 2016, ISBN 9789047008682).
View the bookApply it
- 1
Which year is in your 3HAG?
Use the same year, for example the end of 2029. If you don't have a 3HAG yet, do that lesson first: the numbers belong to a picture.
- 2
Which handful of numbers tell you whether the picture is right?
Start with the four that are already there: revenue, EBITDA, FTE and profit per X. Drop one if it says nothing about your company, and add one if the picture mentions something you can count, such as the number of long-term contracts.
- 3
What does each number have to be in that year?
Work back from the picture. For each KPI, a target value and a unit: euros a year, percent, FTE.
- 4
Do they add up?
Fill in the worksheet alongside. If a ratio has to get a lot better than it is now, write down in one sentence what will make it happen.
- 5
Who has to believe them?
Talk the numbers through with your leadership team before you lock them in. Then your objectives for this year follow from them.
Examples
The worksheet
Year (same as your 3HAG): end of ... Revenue: now € ... / then € ... EBITDA: now € ... / then € ... FTE: now ... / then ... Revenue per FTE: now € ... / then € ... / best year ever € ... EBITDA as % of revenue: now ...% / then ...% / best year ever ...% What has to change to hit those ratios: ...
A manufacturer
Today: €6m revenue, €400,000 EBITDA and 35 FTE. For the end of 2029: revenue €10m, EBITDA €1m, 50 FTE. Revenue per FTE goes from €171,000 to €200,000, and the margin from just under 7% to 10%. That only works with fewer small production runs, and that's the conversation they're having now. A year later they left the numbers as they were, checked they still held, and added a line for 2030.
An IT services firm
For the end of 2029: revenue €7m, 40 FTE, profit per consultant €35,000. Today it's €28,000. When they checked the sums, they found the new office in Eindhoven would cost them profit per consultant for the first two years, so they wrote down how they'd still get there in 2029: long-term managed services contracts instead of one-off projects.
Do this in your own business
Everything up to here is free. What you fill in for your own business, you keep in Boldcaster.
- You write the Doelstellingen over drie jaar section of your strategy, and it stays on your strategy page.
- You assign the lesson to your team and see who has done it.
- The quiz counts towards your progress, and you see which lesson comes next.
Four weeks free. You'll land straight in this lesson.
Quiz
6 situations. You need 5 of 6 right. You can try again at any time.
1.You take this year's revenue, add ten percent a year for three years and put that number on the canvas. What's wrong with that?
2.Today: €4m revenue with 32 FTE. Your objectives for the end of 2029: €9m revenue with 60 FTE. What stands out?
3.Your 3HAG says 'two permanent crews per region'. Your objectives only list revenue and EBITDA. What's missing?
4.Your targets: revenue from €4m to €8m, team from 20 to 60 people, EBITDA from 8 to 15 percent. What stands out?
5.Last year you wrote '50 people in three years'. It still says '50 people in three years'. What would have helped?
6.The canvas has Profit/X ready under the three-year objectives. You've already chosen your X: profit per project. What do you put here?
Nothing is saved here. In the app, the quiz counts towards your progress.
Read next
- Objectives for this year · You set two or three numbers for this year, each from where you are now to a target, and each comes back as a KPI on your scoreboard and as a rock in your quarter.
Not sure where to start? Take the growth scan