Like that biannual visit to the dentist, small business owners should be checking the health of their operations at least twice a year to scrape away the plaque and make changes to prevent future buildup. By mid-year, you can gauge whether financial projections and other strategic goals made at the beginning of the year have been met and which need to be re-assessed due to unforeseen operational or industry changes. While a business’s goals vary depending on its stage of growth and the market it serves, every small business should be looking at its financials, staff, and marketing, as well as competition and market trends, and adjusting targets based on what’s working and what’s not. Your business’ ability to adapt to such changes will help ensure its financial health for the next six months and beyond.
Gayle Lantz, founder and president of Birmingham, Alabama-based WorkMatters and author of Take the Bull by the Horns: A Busy Leaders Guide to Growing Your Business, encourages her clients to look at “internal” factors, such as financial metrics and team performance, and “external factors” like how they’re serving the needs of their market and community. “Every business should be assessing what’s changed, where are the opportunities, and what strengths can be leveraged to take advantage of those opportunities,” notes Lantz. “Rather than trying to perfect something that’s not working, build upon those areas where you’ve had success.”
In her work as a leadership consultant over the last 13 years, Lantz has found businesses often don’t have clear idea of where they’re going. “Progress should be measured in the context of the overall vision for the business,” she says. “Without a clear understanding of that vision, it’s impossible to know what kinds of short-term goals should be set to meet those larger goals.” Small business owners can often lose sight of the big picture because they’re so wrapped up in day-to-day operations or fail to clarify their vision to employees, causing confusion about responsibilities. Knowing which direction to take your business over the long term will help you prioritize goals for the next six months.
“We encourage our clients to find the critical metrics that relate to their particular focus,” notes Alex Glassey, managing partner of GlasseyStrategy, a business advisory firm in Victoria, British Columbia, Canada, and developer of the Stratpad, an iPad app that helps small to mid-sized businesses identify and track key metrics. And, Glassey notes those particular metrics will vary by stage of growth. “A startup should be looking at cost of customer acquisition and return on investment (ROI), as well as experimenting with marketing,” says Glassey. “Whereas the focus of an expanding company would be on gross margins, ROI, and revenue per staff.” No matter the age of your business, you can’t escape taxes. So it’s also important to meet with your accountant at mid-year to review last year’s returns, if you have them, and budget for next year’s.
An extra set of eyes always helps
Mandy Arnold, who launched Gavin Advertising, based in York, Pennsylvania, 10 months ago, is focused on when money is coming in and going out and making sure she has enough of a cash flow cushion to cover payroll, overhead, and taxes. Part of this strategy involves regularly meeting with her bookkeeper, who handles the day-to-day financials, to measure projections against results. “We’ve managed our business from day one to control overhead,” says Arnold. “As a service company, our biggest investments are in technology and people.” Arnold made sure she had business in the pipeline before she brought in staff. Now, she has six employees.
Mid-year is also a good time to look at vendor agreements to see if better terms can be negotiated. “Sometimes it’s worth working with one vendor over another depending on the terms of payment,” says Arnold. “If services are equal, we may choose the vendor with more flexible terms who will pay us in a more timely manner.” To help assess these opportunities, Arnold keeps on retainer a lawyer, who advises her on employee and vendor agreements and client contracts.
Don’t forget to look at the intangibles
While it’s important to look at financials over the last six months to see where your business may have fallen short, they’re not necessarily a predictor of future results. “By looking at leading indicators, like customer complaints, a business can take steps to prevent them from turning into returns and poor sales numbers a few months down the line,” says Glassey.
Halfway through the year is also a good time to assess how your staff has performed against those strategic goals. “We’re always asking ourselves, as well as our clients, whether the right people are in place to take us in the right direction,” notes Kathy Elster, co-owner of K Squared Enterprises who also co-wrote the book Working with You is Killing Me. When it first ventured into social media, K Squared, a New York City-based executive coaching and business strategy firm, hired an outside consultant to handle the work, but soon realized they needed someone full time to meet growing demand. However, Elster understands the learning curve and cost constraints of bringing in new employees and encourages clients to train the appropriate existing staff in these new technologies. “If someone in-house is a good fit, it’s better to get them the education and support they need to take on these new responsibilities, as they already understand the culture,” she adds.
Is your message aligned with your goals?
While more difficult to measure, marketing campaigns should also be re-evaluated every six months. “It’s very important to look at where the industry is going because change is so rapid these days,” Elster points out. “There’s always a more agile business coming up behind you.” Esther believes it’s critical for any small business to stay cutting edge to compete in this economy. “Whether a new or mature business, those clients that got into social media early on as part of their online strategy are doing really well.”
Don’t wait to make a change
While it’s important to take a closer look at each area of your business every six months, you should be weighing performance against results more frequently. “Businesses usually find they’ve missed opportunities or warning signals if looking at financials and trends for the first time in six months,” warns Glassey. “We encourage clients to monitor those key metrics weekly, if possible, but at least monthly.” Just as flossing the day before that visit to the dentist will not make up for the last 179 days you didn’t, failing to track the ongoing health of your business will make that six-month review much more painful.