Business owner reviewing documents and taking notes - Time for a Year-End Deep Dive by Mary Guldan Lindstrom

Time for a Year-End Deep Dive

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Business owner reviewing documents and taking notes - Time for a Year-End Deep Dive by Mary Guldan Lindstrom

Many businesses are closing their financial statements for last year to file the taxes. This is the perfect time for business owners to take a deep dive into their financial results and learn more about the business. The numbers provide clues as to what is working and what isn’t.

  • Sales & Customers. Print out a list of annual sales by customer compared to last year. Then sort it by sales dollars. Review annual sales to your top 10 customers.
  • Are these your ideal customers? For maximum impact and price, focus on your ideal customer – the one that your business provides the maximum value to, that values what you do or sell and is willing to pay the maximum value
  • Did your ideal customer sales increase from last year? Are your serving all their needs? It is easier to sell to an existing customer than a new one. By not serving all their needs you are allowing an opportunity for the competition to step in.

Are your customers staying with you? It is less expensive to keep an ideal customer than to find a new one. The business value will increase the stronger the customer relationships are.

Marketing expenses. Obtain a general ledger detail of all your marketing expenses for last year. What’s working? What’s not? Are you getting the results you desire? Make sure your message reaches your ideal customer. To find that message review your customer testimonials. I find that they say what the business does best. How will your ideal customer hear about you? Social media, referrals, newsletter, etc. Test out what works for your business.

Staffing. Get a copy of the W2’s. For each employee consider what they contribute to the business compared to what they were paid. Is it reasonable in your opinion? Are you, as a business owner, being paid a reasonable salary?

Overhead expenses. Print a comparable profit and loss. Review each expense account. Do the differences between this year and last year’s expenses make sense? Is the business in the right physical location? Are you open for the right hours? Are you keeping overhead low and flexible?

Net profit. Print a profit and loss statement. Is the bottom line acceptable to the risk that you are taking? How can the business do better? Basically, there are three ways to improve the bottom line – sell more, increase prices or decrease costs.

Every financial statement tells a story. By understanding your story, you can rewrite the ending. Use your financial statement as a tool to verify what you think is happening and a guideline to improve the results.

By Mary Guldan-Lindstrom, CPA

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