Being your own boss is one of the great perks of running your business. However it does come with its own unique set of challenges; not the least of which is finding ways to hold yourself accountable.
Don’t get me wrong, external market forces play a significant part in providing you feedback on how well your business is perceived in the marketplace. But that’s only one part of many others required to sustain a successful business.
While January 1st may be the time for gym memberships and life goal planning, a new financial year is a tangible reset button for your business and it offers a chance to check-in with how you’re doing and/or reorient yourself if necessary.
Sometimes what’s most needed is an objective line in the sand to kick off the process. And there’s nothing more objective than financial year end results – hard core, irrefutable numbers to tell you where you stand and how you went.
Start with two basic questions
- What was good about last financial year? Ie: what goals did you reach?
- What could have been better? Where can improvements be made?
Crunch some numbers
Typically, you might aim for a list of six or seven points – don’t stress if it falls short of or exceeds that number. Short form dot points will do. But in order to keep it objective and have something to hold yourself accountable with, make sure you’re looking at your numbers, not just going with your ‘gut’.
It will keep what’s on your lists specific and there’s less wiggle room when you’re faced with the facts.
Look at your turnover, your gross margin, your profit, your customer numbers, average sale per customer and their payment times.
It’s interesting what your numbers can tell you. Take payment times for example. Sure they can vary (or be policy driven – especially with government or larger businesses), but they’re often a great dipstick as to how your customers view your product/service. Those who love what you do, often pay on time or early and those customers you might be danger of losing, might pay late, require chasing, etc. It’s not always true, but it’s something to consider.
Next review your inventory statistics (if you’re a product business) or if you’re a service business, which services sold best. Sometimes it can be surprising when you look at the hard evidence. What you thought you sold best or who your best customer was, might not be. Plus the information gives you an idea of who’s buying what, what they liked and what worked well in the business.
Next look at your costs. Look for the things that stand out. It might be that your fixed costs are getting higher than you thought. Maybe it’s time to renegotiate some things (especially phone/internet providers, bank rates, etc). Find where you ‘splurged’ a little more on some things that maybe affected your profitability – that you might reconsider. I say might, because maybe having flowers (or something else) in your office makes your spectacularly happy and it’s a legitimate office expense. Of course, you’ll want to seek professional advice as to whether the ‘thing’ you’re claiming is a legitimate and claimable expense.
But if you don’t review, how can you pin-down your most (and least) effective efforts for the year. Adjusting from real, measurable factors will help keep you or get you back on track and put things in perspective.
Set your next set of goals
Now that you’ve got some objective numbers to work with. What are you going to aim for this financial year FY18/19? Better profitability? More customers? Higher average customer sale? Lower costs?
Write* those down and pin them on your wall, in your diary, have them as a screen saver on your phone, computer, etc – whatever works for you. Just make sure it’s somewhere you’re going to see it on a regular basis.
What you take-away from your lists is very likely differ from business to business – so there’s no fixed number to be aiming for in terms of whether or not your business is successful. And it’s often not helpful to compare your’s with someone else’s business. For example – they might be doing well on the outside with more than a million turnover. But they’ve only a 1% profit margin. As opposed to a small sole trader that’s turning over $100K but 80% of that’s profit.
Of course, all of this relies on having a well set up accounting system in your business – like Xero, MYOB or Quickbooks – that will make finding all the information mentioned above a breeze – not to mention making getting paid, doing your BAS and understanding how you’re doing throughout the year quicker and easier.
If you’d like help turning you ‘cons’ into ‘pros’ by next financial year or having all that financial information at your fingertips, we’d be delighted to talk you. You can give us a call on 02 6023 1700 or drop us a note via the form below.
* There is considerable scientific literature on goal setting and how it relates to success, and one underestimated aspect of this is the physical action of writing your goals down by hand and the effect this has on your brain.
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If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.