With just a month left until the end of the year, many business owners will be pondering how 2014 has been for their company. But gut instinct alone isn’t enough to tell you if things have gone well or not. It takes proper analysis to assess how an enterprise has fared against competitors, how healthy the firm’s finances are in reality, the team’s performance, and how well you’ve been performing as the boss. These are all valuable questions to ask at least once every 12 months. And, the answers could alter how you operate your enterprise in the year to come.
Discover what the numbers really say
Of course, a business review should start with a close look at the company finances. This may be the moment to enlist the help of your accountant who will be able to identify issues of potential concern, possible improvement, as well as the areas of genuine success in the business. He or she should also know about any tax liabilities or new legislation coming into effect in the year ahead that could have an impact on the enterprise.
- Scrutinise the firm’s balance sheet, analysing cashflow, and profit and loss. This should indicate if the company’s in profit, and by how much or, indeed, where and how it’s losing money. The process may also reveal you haven’t been maintaining proper records of income and expenditure, in which case make a resolution to keep detailed notes of all transactions from now on, and not to lump costs together. It may seem time-consuming, but having this level of detail will avoid misleading results.
- Outline all of the business’s costs, both those which are direct – wages, rent for premises, or raw materials – and those which are indirect – marketing, advertising, and professional services, including accounting and payroll. This may help you to see where you may improve margins, make savings, and cut overheads.
- Once you know the company’s real financial position, attempt to make a sales forecast for the year ahead. Take into account unit sales, look at several months of past sales data to assess recent performance, and factor in any new products or services in the pipeline. Don’t ignore the expenses involved if you want to get a realistic projection of your gross profit margin. These calculations are an educated guess, but they’ll help you to plan ahead, and to estimate what reserves you have should any unexpected expenses or hiccups emerge in the months ahead.
- Knowing the genuine state of your firm’s finances also means you can calculate how you might reasonably reward yourself and your team in terms of dividends or bonuses.
Compare yourself with the competition
How often do you benchmark your business against your competitors? It’s a worthwhile exercise, and one that too few business owners ever undertake. The former Labour Government devised a Benchmark Index, now run by a private company, that outlined key areas that SMEs might weigh up to determine their success relative to their industry peers. Businesses are encouraged to consider particular aspects of their operation, including:
- Financial revenue and costs, including turnover, profit, wages, and research and development costs.
- Financial capital, such as assets, stock, savings, and loans.
- Customer satisfaction, taking into account the number of customers, orders, and any complaints.
- Innovation, including turnover from new products, markets, and customers.
- Suppliers – the number of suppliers, and the value of supplies delivered, and those rejected.
- People management looks at the number of managers, company structure, how many new recruits you’ve hired, and training.
- People satisfaction measures the number of people leaving the business, as well as levels of absenteeism.
- Business excellence relates to often less tangible areas such as leadership and management, strategy, business processes, the impact of the company on society more broadly, and fundamental business results.
Much of this detail should be routinely collected for tax and accounting purposes, and, once you’ve gathered it together, compare the results to industry rivals of a similar size, with an equivalent turnover or number of employees. Obviously, you won’t have the same level of detail about your competitors, but you should get an idea where your business is excelling in comparison with others, and, perhaps, where it’s falling short.
Talk to the team – and outsiders
Your staff aren’t just the people who work for you – they’re the blood and bone of your business, so make sure you have a sense of how they feel the operation is doing, and possible areas of improvement. You also want to ensure there isn’t dissatisfaction brewing in the ranks, so canvas workers’ opinions. If they see you care what they think, and you put their suggestions into practice, you’re likely to diffuse discontent, and create a greater level of employee engagement.
- To get an honest response you’ll need to guarantee a degree of anonymity when gathering opinions. This may mean hiring an external interviewer to conduct informal chats one-to-one, possibly off-site, or the use of an online tool, such as SurveyMonkey, to poll staff on relevant issues.
- Employees should know the business’s aims, what it’s trying to achieve, and its plans for the future. Relaying this important information via the intranet or even through old-fashioned posters on the workplace wall will make staff feel more integral to the company, and, one hopes, aligned with the future strategy for its running.
- Don’t forget your customers. Talk to them to understand their experience and impression of your business. Keeping them happy is vital to the enterprise’s success, so hear what they have to say, even if it isn’t always positive.
- How have you been performing? Just because you’re the boss, it doesn’t mean that you shouldn’t be under review, too. Ask your staff, customers, and business advisers, such as your accountant, about your own efforts of the past year. It may not be a comfortable thing to do, but the best leaders listen to their critics – and recognise they don’t always get things right.
Conducting a regular business review means shining a light in the darkest corners to ensure you know what’s really going on in your company. Only then can you make an informed decision about where to change and improve things. With the correct information at your fingertips, you’re in a strong position to set ambitious – and realistic – goals for the months and years ahead.
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