We’ve made it through the holidays but now, the fun of the New Year begins. There is excitement for all those resolutions-to eat better, eat less, exercise more, etc., but how many business owners have taken the time to evaluate the past and plan for the future?
After six years as business owners and helping clients with bookkeeping, budgeting, cash flow analysis and more than 30 years combined experience, we are going to share with you the top 3 Things You Should Do to Kick Off 2019 the right way! These tips only apply, however, if you want to maximize your chances of a bigger bottom line this year!
Tip #1. Identify Sales Trends
Anyone else besides us love to track their sales? Identifying sales trends is crucial to making the right decisions for the economic conditions likely to exist in the coming year. (Hint, higher interest rates are going to impact greatly many businesses and customers.)
Sales trends are important because short-term results can often cause you to stress unnecessarily or think you are doing better than you are. (For example, when the hurricanes hit in 2017, many people lost power, which resulted in revenue losses. If we only looked at that month’s sales, a business owner could easily reach the wrong conclusions.) But, if a business looked at sales over the past 36-months, breaking them down by month, and by year, it gets a better perspective. On an annual basis, you can see how much sales have grown or declined year over year. The monthly basis helps you see that some months are traditionally better than or worse than others and allows you to determine why, if you don’t already know.
If you sell a product, it is a good time to review your margins to ensure you are offering a profitable product mix.
If you provide services, review your sales by service category to confirm you are focusing on the products that generate more sales revenue. You may find that you are better off offering limited services or that you are at a point where you should hire additional staff.
Tip #2. Review Expenses
Sales are excellent, but if you can’t manage your expenses, you may not see your efforts reflected positively on that bottom line.
If you sell products, you should look at the cost of goods sold by SKU to see if costs have risen and determine if your current vendor will be the best choice moving forward. You might even be able to negotiate better terms or start a conversation with a different vendor.
You should also look at your profit and loss statements with percentage of sales by month to see if you had significant expense increases over the period. For example, did you notice a spike in telephone expenses or office expenses? If so, why?
Finally, analyze how many new customers you gained and how many existing customers you lost over the year. Were these gains/losses in line with the trends you have noticed? Also ask where those new customers came from so you can determine the right marketing balance for the year to come. You don’t want to spend marketing dollars on marketing channels that aren’t producing returns for your business. (If you are wondering how much you should budget for marketing, on average, a company that is seeking to grow revenue, usually allocates between 10-15% of targeted revenue to marketing, according to small business marketing expert, Brad A. Swezey, President of JustSmallBiz Marketing.)
Tip #3. Develop a Budget for the Year
While many business owners know how revenue shapes up over the year, they may not have the specifics against what they expected because they didn’t create a budget. So, rather than anticipating peaks and valleys that happen regularly in their business, they stress!
Creating a monthly budget for sales and expenses helps you alleviate the anxiety of the unknown. Because
You know those months with that extra payroll or the month when the annual insurance is due that throw you for a loop? The budget will help you project a monthly cash-flow, so you know when cash outlays are going to hit, BEFORE they do!
Do you have a business that peaks during a season? Having a monthly budget will allow you to assess when you will need the additional staff so that you have time to hire rather than hiring someone quickly because you are short-staffed, which can lead to you to possibly hiring the wrong employee, which may be as costly as having no one to fill the position.
We hope sharing our top three tips 1. Identify sales trends; 2. Review expenses; 3. Create a budget, helps you start 2019 the right way!
I know this stuff makes us giddy and excited BUT there’s a small chance you don’t share our enthusiasm. If any of this overwhelms you or causes your eyes to roll with boredom, don’t worry. We are here to help implement one, two or all three of these tips so you can focus on the business you love.
Give us a call at 407-598-0654 or email us at email@example.com with your questions.
Happy New Year!