Regular reviews allow you to check that your resources are being used effectively. Working with the wrong focus can reduce profitability and increase frustration when your results fail to match your expectations. To borrow from author Stephen Covey, “It’s easy to end up so busy cutting the timber that you don’t get around to sharpening the saw”. One way to ‘sharpen the saw’ is to regularly review your business. Here are three practical tips that will help:
1. Use 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
Decide on the frequency of your business performance reviews and formally set aside time – using a diary or online calendar – to examine outcomes. 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 addition to your financial team, invite relevant others to offer their insights during the review. These people may include members of your sales or operations team, trusted advisors including your accountant, or an objective mentor if you are a sole trader.
The most successful business owners ‘stay close to the numbers’ and take a ‘stop-and-look’ approach. This enables them to make better decisions and real progress towards achieving their goals.
Many business owners document their business goals in an annual budget and reflect on progress after 12 months. The problem with this approach is that valuable opportunities are often missed throughout the year. Regular reviews allow you to evaluate your 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, to react appropriately to current conditions while gaining valuable insights for emerging conditions in your future business environment.
The ‘stop-and-look’ review I’m advocating provides accountability by sending up flags: green flags when you achieve or surpass your targets, and red flags that identify matters needing your attention.
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.
Reviews 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 that 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.
If you would like to learn more about the benefits of regularly reviews of your business and how to go about it, please contact me by phoning (07) 3171 4255 or emailing Grant Titman at firstname.lastname@example.org
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.