We are now at mid-year. If you haven't done so already,
now is the time to review your business goals for 2012
to see if you are on target to achieve the success you
planned. Planning is a wonderful tool. It makes us think
about where we are going, when and how we are going to
get there. For a plan to be effective, however, we need
to measure progress and then make changes as necessary
to make sure we get there on time. Yes, I said make
changes as necessary.
The first thing we need to look at is our financial
picture, particularly our Profit and Loss Statement and
a few key ratios - - - not because I love financials but
because they tell us where to focus our attention.
Let's start at the top, Sales. Did you bring in as much
sales revenue as you planned? Look at your cost of sales
or cost of goods sold. Are you making the margins you
projected? (COGS/Sales). I see many businesses with
sales up but the costs of sales as a percentage up even
higher. Why? Typically deep discounts were given in
order to win the sales or too much was paid for labor,
material or even expediting costs. The question that
needs to be asked: was it worth it? Did we have to give
away the farm to reach the sales goals. Would we have
been more profitable with less sales and a better
margin?
We can dig deeper into sales to see what is selling and
what is not. In my business, I may have planned on a
certain mix of consulting, training and bookkeeping. In
reality, that mix may not have materialized. If the
market for one service doesn't seem to be there, I may
be wise to focus my efforts more on the market where
there is a demand rather than one where there isn't.
Have our customers buying habits changed? Have our
customer's payment habits changed? Have we adjusted our
business to them?
What has happened in the world around us that has/can
have an impact on our business? This may include, world,
economic, community or other situations.
What has happened, good or bad, in our own life that has
impacted the business?
What have we learned in the last 6 months that we can
apply to improving the business?
The idea is a simple one. If we want our business to
succeed and be the success we know it can be, we need
to, not only plan, but evaluate and adjust our plans to
allow us to reach our overall goals. Remember, denying a
problem or sticking our head in the sand won't make a
problem go away. It is like baseball, we can't hit a
home run when we take your eye off of the ball. Many
home runs have been hit when the string is out. The
batter has learned from the previous pitches and made
that critical adjustment.
