Whether you own a small business or you’re a self-employed professional, it’s natural to start thinking about how to grow your business. But before you make any plans, take stock of your sales and financial situation, says Leanne Hoagland-Smith, author of “Be the Red Jacket in a Sea of Gray Suits” and a Chicago-area business consultant and coach. “You need to look at the numbers to make sure you’re moving forward and not just treading water — or worse, drowning.” She recommends asking (and answering) the following five year-end questions to evaluate how your business is doing.
How Did This Year’s Sales Compare With Sales in the Past 3 to 5 Years?
Rather than just skimming the numbers from last year, focus on figures from the past few years. That is if your business has that long of a history. By tracking business performance over time, you’re able to spot trends in sales and determine what’s required to improve your figures. Knowing how your sales compare over the last couple of years may also help you predict what might happen in the future.
How Did This Year’s Profits Compare With Profits in the Past 3 to 5 Years?
If your business is profitable, the likelihood that it’s sustainable is much greater. Compare the net and gross profits of your company for the last 3 or so years. How do you measure profitability? Add revenues and then subtract the total expenditures. You may use the profit and loss statement to find out the net profits you made in a given period.
Because your goal is to maximize revenue and reduce expenses, reducing costs — even in the smallest increments — helps build profits. With the world going digital in most aspects, you may want to make use of the latest technology to cut business costs. Apps such as QuickBooks Self-Employed (QBSE) help you manage your business on the go. And this saves you from investing in resources to manage your employees, payroll, and payments. You may also increase your market reach and sell more products to increase revenue.
Did the Business Meet Its Goals Last Year?
Did you reach the goals you set in sales and marketing, customers, management, finances, and technology and innovation? If you met the goals, it’s probably time to set new targets. Look for ways to improve in the areas you’ve identified as opportunities. If you haven’t set business goals in the past, it’s never too late to begin. Consider now as a good time to set goals for 2019 and years to come.
Tips to Set Business Goals
When setting business targets, be sure every goal reflects your company’s mission and vision. To set better business goals:
- Determine exactly what you want to accomplish (short-term and long-term).
- Make your goals quantifiable and specific.
- Identify the resources you need to achieve your goals.
- Communicate the goals to your staff.
- Commit to the goals.
- Set a deadline for meeting the goals.
- Reward yourself and the people who played an active role in achieving the goals.
Are Repeat Sales Up, Down, or Flat?
Amassing new customers is expensive and requires a fair amount of time. You may want to persuade your current customers to buy from you again rather than just focusing on new customers. Repeat business increases profitability because you don’t have to spend money to bring in new customers. You only use limited resources on current customers. If your repeat sales are constant or down, maybe it’s time to build up that number. But how can you improve customer retention?
- Make your customers feel special by offering them incentives and special offers.
- Send emails and newsletters to your customers to remind them of your business.
- Make ordering easy and deliver products to their doorsteps or any other convenient place.
- Be sure to make your products unique by improving quality and packaging.
Books such as Fred Reichheld’s “The Ultimate Question” offer ideas on how you can reach out to current customers and build lasting relationships with them.
Is Overall Equity Up, Down, or Constant?
As a small business owner, it’s easy and understandable to overvalue your business, especially when you put in long hours. Taking time to examine your balance statements can give you a more accurate perspective. Consider items such as your property’s worth, sales figures, and your current customer base. Should you decide to sell the company, you have a better idea of its market value. Knowing the overall equity of your company helps you make sure those hours you’re putting in are paying off.
The Bottom Line
If you’re an entrepreneur, evaluating your business performance and checking progress is fundamental to your success. Questions that revolve around sales, profits, business goals, repeat business, and equity show areas you excel in and what needs to change. In addition to these questions, ask yourself whether you achieve the best work/life balance. Dedicate time to your venture, but remember that you have a different life from your business.
Are you a small business owner in search of a program to manage your bills, income and expenses, clients, and inventory. Or do you want to run financial reports anywhere, anytime, and know where your business stands. Using an accounting system, such as QuickBooks Online, you can generate a Profit and Loss statement automatically. Learn how today.