The 180 Day Business Performance Review

By on June 2, 2018

As a small business owner, it can be easy to end up just getting through all of the various responsibilities that you have over the course of the workday. However, if you only focus on the day-to-day operations of your business, you will miss out on some important trends, whether it is catching a problem when it’s still small or a new sales program that you can take advantage of.

At the halfway point in the fiscal year, set some time aside to review the progress of your company. With a few helpful tools, you can give yourself an ample safety net that will help you see problems before they arise and boost your company through the remainder of the year.

4 Tools to Help You Review Your Business Performance Mid Year

Comparison to Last Year(s) Financials

This is the easiest tool to use in your inventory, since you should already be including it in your existing financial statements. Your goal should be to have assets increasing while trimming costs as appropriate.

Most costs are likely to remain fixed, but this is a place where you can track problems before they become an issue. Early detection of these cost changes can save you thousands of dollars. If the cost of your inventory, or just a specific vendor, is increasing, it is always better to catch that early before you are not making a profit.

Regarding sales trends, it is important to either catch or get off the wave before issues occur. If you sell products or services that follow trends, you want to make sure that you are capitalizing on them at the right times. For businesses focused on goods, especially fashion items, make sure that you are up on all current trends and that you are paying attention to what is coming in the next 6 months so that you can have appropriate inventory. Be sure to also slow down on ordering the items that are going out of style or out of season so you do not end up with excess unsellable inventory.

Inventory Turnover

For those businesses that focus on the sale of merchandise instead of a service, one of the best ways to check your sales is to determine your Inventory Turnover Rate. The formula for this is:

COST OF GOODS SOLD divided by INVENTORY ON HAND (in dollars) = RATIO

365 DAYS PER YEAR divided by RATIO = DAYS TO SELL CURRENT INVENTORY

This tool will allow you to see how often you are turning over inventory in your store, and you want that ratio to be high. A higher ratio means that you are selling more, and you should always use industry benchmarks to ensure that your company is doing well in relation to the industry average. If you can’t find those benchmarks, most business counselors can access them for you.

Sales Metrics

Similar to your Inventory Turnover Ratio, you can do similar things for service based businesses. With this, you want to examine your pipeline and conversion. First, examine the number of leads coming in, the number of customers that you present to, and the number of clients that you close a sale with. Use industry benchmarks to determine the success of your pipeline. For most small businesses though, you want as high of a conversion rate as possible to keep yourself profitable.

Additionally, you want to measure both the number of sales and sales dollars that each member of your sales team is bringing in. Look at who is bringing in the top sales for your company and what are the reasons for their successes.

Ishikawa Diagram: Discovering the Root Causes to Problems

The Ishikawa Diagram, also known as the Fishbone Diagram, is a business school tool used to find the root cause to an issue. Essentially, you want to be able to ask “Why did X happen?” until you reach the root cause. Your goal should always be to solve the root of all problems instead of patching the issues and allowing the problem to continue beneath the surface.

BusinessIshikawaDiagram

For example: sales are falling: you want to trace that back and you can slowly figure out that your sales team is not getting enough good leads because your inbound marketing plan is not establishing your subject matter expertise enough because your content creators are not capable of providing quality content. When you get to that root cause, you can then work with your executive team or a business consultant to find either ways to train your content team or to hire an outside service.

Taking the Appropriate Actions

Once you have done your research into how your company is performing and from where the issues arise, it is time to make the appropriate adjustments to your outlook for the next 6, 12, and 18 months. Finishing out this year strong is the best way to start next year.

Your first focus should be on how to take advantage of upcoming positive trends and fixing the problems costing you money. For the longer term, you want to look at what worked and did not work over the past six months. If you were trying to make changes, did they succeed? If changes need to be made, which ones will you focus on for those same six months next year? Also, as a forward focused business owner, you want to see what works for the upcoming period so you can make as-needed adjustments for the following year.

As a small business owner, you want to always be improving yourself and your business. To help you, there are dozens of industry reports that you can use to measure your effectiveness. Reaching out to your small business consultant to help you measure your successes will greatly improve you ability to guide your business on the right path.

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About Harold Goldman

I am the founder of FinancialSafetyNet.org, and a Retirement Planning and Long-Term Care specialist. I am also the President of Emes Insurance Services, Inc., a Murrieta based insurance agency designed to help people with Retirement Planning and funding for College. I believe in educating my clients to become financially competent in an effort to develop plans for guaranteed income, protection against loss and tax-advantaged growth. To contact me Call (844)-376-2265

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