Getting Ready for 2011
Every year I make a couple of New Year’s Resolutions and I’m lucky to make it to the end of February before breaking them and going back to normal life. However, I can’t do that with my business. Every year there are changes in the economy, finances, new products or services, personnel issues, taxes and regulations just to name a few. Over the Christmas holidays, I sit down and review what happened last year and try to make an educated guess at what will happen in the coming year.
What did you do well in 2010?
Just as a doctor checks your vital signs during a physical, you need to check the vital signs of your business. Give your business a physical. Is it healthy or is life support in the ICU needed? Has it gotten lean and mean or fat and stupid?
A financial review will usually give you an accurate snapshot of where you’re headed. The first thing you want to look for is waste. It’s easier to cut waste 2% than to raise sales by five percent. Look at your average sale; did it go up or down from the previous year? Look at your margins. Are they higher or lower than last year? Is your pricing updated to reflect cost of goods sold, expenses, and inflation? How do your products and services match up with current customer needs? Are you still selling rolls of film when everyone got a digital camera for Christmas? Is there a reasonable expectation that 2010 products and services will perform as well or better in 2011? Where are the market trends in your industry heading?
What did you not do so well in 2010?
This is hard question for many business owners to face. It’s tough to admit that you made some poor decisions. The “Pet Log” was not nearly as successful as the “Pet Rock.” Who knew? Now, you’re sitting on a warehouse full of them. However, the buck stops with you.
Most businesses fail due to capitalization; or usually lack of it. Some contributing factors are carrying too much or the wrong inventory, outdated pricing that reduces profit margin, too many non-productive employees, poor policies and procedures, marketing and advertising to the wrong target market, poor management of cash flow and accounts receivable.
Reducing debt is one of the best ways to improve cash flow. If I were advising you in personal debt reduction, I would tell you to work on the biggest one first then the next biggest and so on. However, in business, it’s just the opposite. The more money you can bring in immediately can be used to reduce other debt, add to inventory, reduce payroll costs, or any other worthwhile expense that helps keep the doors open.
How will you improve in 2011?
Looking back at 2010, you know what it took to be successful during the past year. So, how are you going to improve in 2011? First, access your finances. What programs or promotions provided the largest return on investment? Were those one time promotions or could they be ongoing profit centers? Can you build on what worked in 2010 and learn from things that were not successful?
What innovations are on the horizon?
Are there advances in your industry that are going to affect you in the coming year? Do you need to take a closer look at what products you will be carrying and what you will be discontinuing? Will these innovations increase advertising and marketing costs as you reeducate your customers about changes? Will additional training of employees be required? Will supply satisfy demand?
Did your competition increase in 2010? How did you handle that?
Due to the economy, there is a good chance you have less competition, not more. However, some businesses are successful in recessions or hard economic times. What effect did competitors have on your bottom line? Did you do better than expected? Worse? About the same? Did you lose any of your best customers to competitors? If so, do you have any idea why they changed? Can you successfully target your competitors customers in the coming months? What would convince them to change and do business with you?
What stands in the way of your success in 2011?
Stand back and take a good look at your business. Look at it objectively as your customers do. What can you immediately improve at minimal cost? Is your advertising working? Are you marketing and advertising the right products and services to the right target market? How are your margins? Pricing? Products and services?
No matter what the economy does, every minute of every day someone, somewhere needs your products and services and is more than willing to pay for them. The question is… can they find you?
Check out Tom’s Radio Show, “Open for Business,” on http://kmmsam.com – Saturdays 11 – 2 PM Mountain Time. Click on Listen Live.” Make friends with Tom on Twitter http://www.twitter.com/smalltownmarket and Facebook at http://bit.ly/bXrOwG