Year End Reflection Time
And into December we go. And as predicted there are always a bunch of memes, blogs and articles telling us to pause, reflect and plan. Some of them good and some not so.
But here is an exercise that could literally change your business and your future. It is so important that we have put together a short video course on the process that we will post over the next few weeks and we ask that you follow along and do the short exercise for each lesson.
Doing is different from just listening and thinking about doing. I want to encourage you to get that paper and pen out and do the work. Just 10 minutes per day over 5 days will see significant changes in your future. Guaranteed.
Are you Planning to Fail?
The old saying: “Failing to plan is planning to fail” is never truer than it is in these busy, fast moving times in the economy.
If you and your business do not have clear-cut plans for at least the next 12 months, the chances of still being in business this time next year are drastically reduced. Your team should all be on the same page with clear objectives and strategies for the near and far future.
Plans bring ideas and people together into a focused laser beam strategy that will coordinate effort and energies into a single destination. This obviously starts with a clear Vision, mission and purpose for the business. Then breaks down into long term goals and short term plans, sprints and accountability.
But remember that setting goals is like a budget: you need to measure your actual against it on a regular basis. Goals need to be timelined with critical paths and actual progress mapped against each activity. This gives you, the manager, a clear understanding of where you are and what may be any issues or obstacles that need managing around. This, when communicated to all team members build momentum and results in forward driven progress.
So, is it not time to sit down and map out a plan for 2017?
Do you manage your business based on your financial information?
Financial management is, for most business owners, something that is never done well or at all. Knowing your numbers has been the take home lesson for a lot of the contestants on the Mnet Shark Tank programme. You can read some of my comments on the various presentations.
There are many business owners, who just do not know their numbers and if they do, do not know how to use them effectively to make management decisions based on their interpretation.
Here is a short check list for you to do a self-assessment:
- Do you know your turn-over figures for the last 6 months?
- Do you know the comparison to last year actual and this year budget figures?
- Do you know your break even points per product category?
- Do you have a budget for the New Year that reflects actual trends and seasonality variations?
- Do you know your; net profit ratio, working capital ratio, stock turnover rate, debtors turnover rate or your cost of sales values?
If any of these are foreign or even vague to you, please add financial management to your personal development plan for 2017 and get in the driving seat of your business. It could just be the thing you and your business needs to survive the next 12 months.
Questions to ask your accountant
As a business owner, how often do you chat to your accountant about the financial management of your business? When you do, what do you chat about? Here are some key questions to ask then at your next meeting. We have split them into two categories for you: Accounting and Financial Management. Spend time with your finance team and accountant discussing these points and keep talking until you fully understand each of them and are able to share the answers with others in your business and take action where action is required.
Questions about accounting
- How much tax should I be setting aside?
- How can I reduce the amount of tax I’m paying?
- Should I pay myself a salary or drawings?
- I want to purchase a vehicle/building/equipment, what is the most tax efficient means of structuring the deal?
- I’m expanding – new venture, product, branch, partner – what is the most efficient business structure?
- Am I compliant with all legal requirements?
Questions about Financial Management
- How can I increase my gross profit?
- How can I increase my net profit (will I make a profit)?
- When am I going to have a cash crunch?
- When are my quiet periods, that I need to plan for?
- What are the annual expenses (and when) so I can set aside money for them?
- How do I manage my debtors?
Show me the Money
We see too often how entrepreneurs and business owners are tripped up in their presentations when asked about the money side of their business. We just do not seem to have a good grip on our business and what makes it work financially.
I love watching the Shark Tank and Dragon’s Den as entrepreneurs pitch their ideas, asking for sums of money in exchange for equity and expertise. Their well-rehearsed pitched go well, with all the technical issues presented and well laid out. But when they offer their request, the valuations are way off and when questioned about GP, NP, ROI and COS, they fall flat. These are the numbers you should know and be able to talk about into others, especially when pitching for funding.
So this week, I want to challenge you to get to know your numbers and begin to understand what it takes to manage your business well from a financial aspect side of things. And if numbers are not your thing, then ensure that your business has a person or persons who do know these things and can advise you accordingly.
On Friday we will give you a list of questions that you should be asking your accountant on a regular basis to keep up to date with what is happening, what will happen and why.