The Non-Computer Year End

David McMahon, Senior Business Consultant
Published in November e-Communicator

The end of a year really has no meaning in itself when applied to business. It is just a point in time on a calendar that signifies that we have made yet another lap around the sun in 365 and a quarter days. It can really be at any time in the year.

This is what year end really means in business:

It is about reflection on the past 12 months.

It is about awareness of the present.

It is about preparing for the future.

Reflection. There is really only one use for the past when it comes to business. It's there to learn from. People and businesses learn from success and failure. In fact many say that success is built upon failure. The end of the year presents a time whereby you can stop and reflect. You can tally up what worked over the past year and what did not. Here is a exercise that we often go through with our consulting clients.

List your top 10 vendors in terms of inventory investment
List the top 5 in terms of GMROI (gross margin return on investment)
List the bottom 5 in terms of GMROI
Do the same thing with categories
Ask, "What made the best work? And how can we make the worst better?"
Rank all salespeople by sales volume
Then look at average sale, number of ups, and close rate
Ask, "What made our best people work and how can we help the other team members improve?"

The Present. This is a gift you should give to yourself. You can learn from the past but present time is where the seeds of success are sown. I advise my clients to focus on where they are now with respect to these top business success drivers:

Break even sales volume
Gross margin
Inventory mix - both level and type
Profitability
Cashflow

You have two options here: know where you are currently in all the above drivers - good, fair, or bad, at all times. Or, be ignorant of the present and leave your money on the table. The gift of the present is a vital part of your future. Embrace your numbers.

The Future. Do you think anyone arrives at their destination if they don't really have a destination? How can they arrive if they don't know the way to get there?

Year end is a great excuse to organize your plan for the upcoming year. This plan needs to be quantitative. You should consider the core business indicators and then document the plan in the form of a budget. These are key elements that we consider while financial planning with our consulting clients:

Sales levels, average sale, close rates, and traffic
Gross margin
Administrative expenses
Occupancy expenses
Marketing investment
Selling expenses
Warehouse and delivery income and expenses
Finance income and expenses
Profitability
Variable and fixed expenses
Break even
Inventory levels and purchasing
Asset purchases
Loans
Payable levels
Cash flow projections

After we discuss each area, we ask, "Where do you want to be? What is realistic?" Then the steps to get there are set. The path is laid out.

If this sounds like a lot to do on your own - we can help you. Our business consultants at PROFITsystems provide a CFO service that can be your guide.

This year, try doing a non-computer year end as well.

Don't wait for another lap around the sun.