Hello Entrepreneurs, Welcome to a new year better late than never said besides it’s just half of Quarter 1.
As we start the year, it is important to note that your business is also starting a new year so everything you do personally as a human to be a better person or to live a different life in the new year applies to your business as well.
As a matter of fact, a business is regarded as a person in a law that accounts for one of the reasons why entrepreneurs are always advised to register their businesses. A registered business is treated separately from its owners in lawsuit cases and other circumstances that do not personally affect you as an entrepreneur.
So if you are setting goals as a human being, your business needs one too, you are making resolutions? Your business absolutely needs one too.
The Importance of Evaluating Your Business
To enhance better performance, it is important to review and evaluate your business’ performance in the past period. Evaluation can be done around the major KPIs of your business and an appraisal comparing results against an ideal standard. Performance appraisal yields better and more informative results when standards are set.
Standard by be set around company goals and objectives, they can also be set against well known industry average of the business or particularly against a particular company’s results in the industry. Most companies have a unifying set of KPIs often used in measuring the overall performance of their business in a specific period.
- Sales growth, Increase/decrease in expenses compared over periods,
- Return on capital invested in terms of profit,
- gross & net, staff turnover,
- customer service most frequent complaint,
- customer retention in terms of increase/decrease in returning customers.
You could adopt some of this as a budding entrepreneur in appraising the efficiency of your business. As a budding business owner, you should more attention to your:
Convert your sales in each month to percentage and take note of the fluctuations, take a deeper dive to point out factors that might have driven the changes.
You might not fuss much about this especially if you did a robust business plan before setting out. It is important to highlight the position of your business, and as a starter, gross profit could be your starting target. You might need to go back to your drawing table if your sales price becomes greater than cost price. Cost price being the direct cost of getting the products ready for sales.
Also interwoven with your customer service, are your customers satisfied? Do they make recommendations? Do you have repeat customers?
Other reviews you can do as a business owner is the evaluations of your controls. I am assuming you have put some controls in place to protect the company finances and also mitigate the risk of theft, personal drawings etc. To make this effective, review your internal controls and add reinforcements especially if you have had breeches in the previous period.
Other year end activities include:
Reconciliation of bank statements and accounting schedules
Appropriate filing of finance books as required by regulations
Investors report as applicable
You could also hire an external auditor to conduct an investigation and audit of your books.
Tax filing as applicable.
Tidying up books and updating transactions.
The list is exhaustive and sometimes peculiar to each different line.
Thank you for your audience as usual, catch you next time! Stay building!