To borrow a phrase from Stephen Covey, “It’s easy to end up so busy cutting the timber that you don’t get around to sharpening the saw”.
Working with the wrong focus can certainly lead to problems in the forest! It will increase frustration when your results fail to match your expectations.
One way to ‘sharpen your saw’ is by running regular business performance reviews. This allows you to check that your resources are being used effectively…
3 tips for running business performance reviews
1. Analyse your budget
Make sure your business priorities and targets for the year are clearly documented in a budget that you fully understand and can easily access.
You will need to know how to compare ‘actual’ business activity with ‘forecast’ business activity, as summarised in your budget.
2. Set aside time and stick to it
Decide on the frequency of your business performance reviews and formally set aside time to examine outcomes. Add them to a diary or online calendar.
Share what you find (the good and not-so-good) with your team. Think of these review times as non-negotiable.
3. Involve the right people in the reviews
In addition to your financial team, invite relevant others to offer their insights during the business performance review.
This may include members of your sales or operations team, trusted advisors (including your accountant), or an objective mentor if you are a sole trader.
Staying close to the numbers
The most successful business owners ‘stay close to the numbers’ and take a ‘stop-and-look’ approach. Regularly reviewing business performance in this way enables them to make better decisions and progress towards their goals.
Documenting your business goals in an annual budget and reflecting on progress 12 months later can mean that valuable opportunities are missed throughout the year. More regular business performance reviews allow you to evaluate performance and reset priorities, especially around unexpected opportunities or problems.
Change is inevitable. It’s unlikely that the business conditions under which you set your goals for the year will remain the same from one month to the next. Regular reviews provide the dexterity you need to achieve goals and to react appropriately to current conditions, while gaining valuable insights for emerging conditions in your future business environment.
3 great reasons to ‘stop and look’
1. The ‘stop-and-look’ review approach provides accountability by flagging notable events: green flags when you achieve or surpass your targets and red flags that identify matters requiring attention.
2. Comparing your actual figures with those you have forecast in your budget will allow you to clearly evaluate whether or not you are on track for achieving your goals.
3. Reviews also enable you to identify trends as and when they appear. You will be able to take steps to capitalise on opportunities and mitigate problems to avoid unpleasant surprises: these might include lost revenue, reduced productivity or tax issues. It may be easy to recognise a trend in hindsight but it’s very difficult to take remedial action retrospectively and very likely impossible to recapture a missed opportunity.
Learn more about the value of regular business performance reviews and how to go about them. Please contact me on (07) 3171 4255 or email: grant@q4financial.com.au.
The information contained in this article is general and is not intended to serve as advice. No warranty is given in relation to the accuracy or reliability of any information. Users should not act or fail to act on the basis of information contained herein. Users are encouraged to contact q4 financial professional advisers for advice concerning specific matters before making any decision.
