Half way through the year is a good time to reflect on your business performance to date and reset goals for the remainder of the year. Small business owners should consider these strategies gauge mid-year performance.
It’s easy to get so wrapped up in the daily grind of running a company that you skip business performance reviews. But the goals you set for your business at the start of the year won’t do much good if you don’t check whether you’re meeting them.
The year’s midpoint is an ideal time to take stock of your company’s performance. Six months should offer ample data to assess whether your business bets for 2019 have paid off and your financial forecasts were accurate. If your numbers fall short, you still have enough time left in the year to correct course.
Following are six best practices for gauging business performance:
Monitor finances vigilantly
Cash flow problems are one of the biggest reasons small companies fail.
Levar Haffoney, a small business advisor based in New York City, advises staying in constant contact with your accountant and checking your financial reports, profit and loss statements, balance sheets, and cash flow statements as often as you can.
Reviewing your numbers two to four times a year is not enough. “You want to make sure that you’re measuring your progress at the very least on a monthly basis,” Haffoney says. That way, you won’t get blindsided by downward trends and can work to increase earnings as soon as possible.
Analyze year-to-year performance carefully
Bringing in more revenue this year than last year doesn’t necessarily mean your business is performing better now. “Small businesses grow and shrink quickly,” says Drew Lyon, founder and managing partner of Focused Energy, a Denver-based business consultancy.
“When looking at midyear performance against a prior year’s performance, it is easy to be misled into thinking that the business is doing better or worse that it really is.”
Consider, Lyon explains, a service-based company that earned much higher revenues last year but only had two clients, putting the business at risk of losing all its income if neither client renewed its contract. Although this same hypothetical business is making less money this year, it’s amassed a larger roster of steady clients. Now, Lyon says, “the business is much more stable and poised for growth.”
Focus on new sales
Your business’ bank statements don’t tell the whole story. New sales from new customers are the most important metric, says business coach and strategist Martha Krejci. If new sales are growing, keep doing what you’re doing. If not, you need to figure out why and fix the problem immediately, she says.
“When we don’t focus on that new business number, there can be a lot of ‘smooth sailing’ that happens, followed by plowing into a brick wall when the company realizes they have just been coasting on old business,” Krejci explains.
Watch industry benchmarks
Aside from keeping an eye on industry trends, many business advisors tell entrepreneurs not to obsess too heavily about how their competition fares throughout the year. That said, you absolutely should pay attention to industry benchmarks, Haffoney says.
A high-end women’s clothing designer, for instance, should familiarize themselves with industrywide profit margins. Knowing whether you’re overperforming or underperforming industry averages will help determine whether your business is on track or whether you need to make some adjustments, Haffoney explains.
Poll your customers
Customers can offer a wealth of data about the health of your company. Yet many small businesses neglect to collect any customer feedback. This is a lost opportunity, Lyon says. “By understanding what customers are saying, companies can begin to understand some of the underlying reasons why their performance may be good or bad,” he explains.
Haffoney recommends setting up an online survey to solicit customer opinions. Doing so can yield invaluable details about product frustrations and flaws, packaging and shipping mishaps, and customer service shortcomings—all issues that could hamper your business performance.
Talk to your employees
Staff who work directly with customers and vendors hold a treasure trove of information about how well your business is functioning. “Employees are going to give you possibly the best intelligence you’re going to receive,” Haffoney says. For example, he says, front line workers may be the first to identify process improvements that could save the company time and money.
Krejci agrees, noting that businesses need to encourage workers to share such feedback. “We have to listen to our employees,” she says. “An empowered staff will work the business as though it is their own.” Besides having insight into unmet customer desires, employees also will have a unique perspective on how well the leadership team is functioning.
It’s not enough to chart a course for where you want your business to go. You need to set realistic performance metrics and assess whether your business meets them throughout the year. Your numbers, employees and customers contain a goldmine of data on your company’s vitality. Be sure to put that information to good use.
Readers should consult their own attorneys or other advisors regarding any financial or business strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.
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