New Year's Business Reflections
At the beginning of the year, just like with your personal life, take some time to reflect on your business's accomplishments and challenges from the previous year.
New Year's Business Reflections
The new year can be an unsettling time for founders and business owners. With festivities winding down, and another year done and dusted, looking ahead to the new year can bring on feelings of anxiousness and depression.
A good habit to have is to review your past business year and think about what went right, what went wrong, and identify areas where you can improve.
Here are five areas to look at when reviewing your past business year, and some questions to ask:
1. Financial Performance:
Financial performance is a vital component of a business' success. Cash flow is the lifeblood of any business - when cash runs out, a business can no longer operate. It's important to have up to date financial reports to be able to answer some of these simple questions below. In our experience, it's not sufficient to review financial performance once a year. We recommend monthly accounting to make sure you always know the health of your business.
- Revenue and profits: Did you meet your sales targets? What was your profit margin? Did you have any unexpected expenses?
- Cash flow: Did you have enough cash on hand to cover your expenses? Were there any periods of tight cash flow?
- Balance sheet: What is your financial health? Are your assets growing or declining? Are your current assets more than your current liabilities? Do you have a lot of debt?
2. Operational Efficiency:
Any dips in operational efficiency will affect your financial performance. Receiving negative reviews? Business will likely suffer with less repeat revenue. Conversely, great customer experience will show in your financials as repeat revenue. Make sure you have some way of receiving customer feedback.
- Productivity: Did you meet your production targets? Were there any bottlenecks in your processes?
- Customer service: Were your customers satisfied with your service? Did you receive any complaints? What can be done to improve the experience?
If you feel your finance functions are operating as well as they could be, feel free to reach out to us. We're passionate about implementing cloud solutions to improve operational efficiency. We are a PSG pre-approved vendor which can save you 50% on Xero subscription, set up, training, and migration to get you started with cloud accounting.
3. Marketing and Sales:
Paying close attention to the effectiveness of your marketing can give insights on how much it costs you to acquire new customers. Accurate accounting and tagging of marketing expenses will be important to understand and compute your customer acquisition cost.
- Marketing effectiveness: Did your marketing campaigns reach your target audience? Did they generate leads and sales?
- Sales conversion: How many leads did you convert into customers? What was your sales cycle?
- Customer acquisition cost (CAC): How much did it cost you to acquire a new customer? Is this sustainable?
4. Human Resources:
For service based businesses, many HR problems can actually be pricing issues disguised as capacity problems. Staff may feel burnt out from having too much work. If you expect a certain margin from each staff, you may need to look at increasing pricing to have to same amount of profit, with a lower workload per team member.
- Employee turnover: Did you have a high turnover rate? What were the reasons for employee departures?
- Employee morale: Were your employees engaged and motivated? Did you receive any feedback on employee satisfaction?
- Skills and training: Do your employees have the skills they need to be successful? Are there any training needs that need to be addressed?
5. Competitive Landscape:
One massive trend we saw in 2023, continuing into 2024 was the breakout of AI models in the style of LLM Chat-GPT. The space is moving super fast. As new announcements and features are launched every week, we think businesses that incorporate AI into their processes will move further ahead than those that resist change. What other trends are specific to your industry?
- Industry trends: What were the major trends in your industry last year? How did they impact your business?
- Competitor analysis: Who are your main competitors? What are their strengths and weaknesses? How are you positioned relative to them?
By taking a close look at these five areas, you can gain valuable insights into your business's performance and identify areas for improvement. But it all starts with accurate and reliable data.
If you're unable to easily answer questions about financial performance, customer acquisition costs, pricing, or want to know how to make your accounting go paperless, then why not reach out to us for a chat. We're happy to help!