For most business we have just closed a year and started on a new one. Now that the books are closed and the financial records will be as accurate as they can be, it is a great time to evaluate your progress.
For me it is too easy to keep doing what I have always done. Sometimes it takes a push to move forward. Personally, I don’t want a push. I am not a fan of coaches, mentors, teachers, etc. I feel we learn best when we struggle to find our way. I have found asking questions is the best way to find my answers and to clarify options that will work for me. Questions such as – Where am I now? Where is the business at? What type of sales or type of customer is currently funding my business? How much are they contributing? What is the potential? How strong is my team? Are we doing the right things?
As I work with clients to uncover the answers to those questions, I created a list of steps that will clarify the financial results. I always like numbers matching the story.
Step 1
Identify each type of sale, along with the direct costs associated with that sale. We want to know gross margin on each type of sale, from each customer or each division of the business.
- Breakdown your sales by type for the last month, last year. This will be unique for each business.
- Consider type of customer – retail, business, wholesale
- Type of sale – service, product, warranty, availability
- By resources needed – special talent, your strengths, software, products, etc.
- Identify the direct costs to deliver that sale. Consider the following:
- Costs of tools needed,
- independent contractors,
- software needed,
- your time, staff time and knowledge needed.
- Calculate the gross margin by $ and %. Sales – direct costs = gross margin
Step 2
Identify how much gross margin the business needs to attain breakeven and to achieve financial success for you. Review overhead, all other expenses to maintain the business. Calculate the monthly amount. Next calculate the monthly profit that you desire.
Step 3. Prepare a SWOT analysis
- Strengths
- What type of sale is contributing the most?
- What sale is the easiest & high profit for your business?
- Where are you providing the most value for customers?
- Weaknesses
- Where are you giving away the ship? Key customer, type of service? Do you Need to define scope?
- Not cost effective? Can you lower cost? Or quit selling that type of service or product
- Opportunities
- What sale has the greatest potential to scale?
- What can you upsell to increase the sales ticket?
- Can innovation or enhanced customer experience increase customer value?
- Can it solve future issues that your key customers will have?
- Threats
- Industry changes? Market changes? Global changes?
- Staffing issues?
- Technology replacements?
- Cash needed to scale?
The next step is the most important. From the financial information and your discussion of the situation, review your results and answer the following questions.
- How far are you from your desired financial goal?
- What is the easiest way to meet or exceed your goal?
- Where do you focus your marketing efforts?
- Where to improve efficiencies?
- Where to add innovation?
Now take that information and create an action plan. Identify steps can you take to improve your situation.
Reach out if you need assistance or want to add a different perspective.
Mary Guldan’-Lindstrom, CPA
