We are almost to the end of the year. This is a good time for reflection of how the current year has gone and to make plans for the future. Your business may have had unprecedented growth in the last year. Or it may have struggled along like it has the last several years and you are wondering whether the business will ever make the money to support your family like you dreamed that it would. A growing and sustainable business does not happen by accident. It requires a good business model and strong leadership.
Below are 7 actions that you can take in the last few weeks of this year that will give you a greater opportunity for success in the upcoming year.
- Be prepared
Your greatest asset is your ability to earn a living. For business owners, their business is how they do that. You can build your business to be a job or a true business. If the business is completely dependent on the work of the business owner, then it is a job. It is not much different than the job that the owner may have left, except that there might not be a steady paycheck. A true business is one that is not completely dependent on the owner. The owner focuses on a couple of core functions and delegates other duties to employees and contractors. If an owner’s time is worth $200 per hour it makes sense to hire an employee that would do administrative duties at $20 per hour.
Your business is your means of providing for your family. You want to make sure that you have adequate insurance coverage. This includes life, disability, health, liability, home and auto. Are you saving for retirement? If you have children, are you saving for college? Take care of your health.
One of my friends recently died after a brief illness. A few weeks ago he and his family were doing well. Now, in the blink of an eye, their world is turned upside down. We must prepare to live for a long time, but plan in case something happens. You want your family to be taken care of.
- Make sure that your books are up-to date
All businesses should know where they stand financially at all times. There is no reason that a business should not be able to instantly look at financial reports and see how much cash they have and what their sales and net income are for the month. Cloud-based technology has made it simple for a business to have real-time financial data and for their accountant to also have access so that they can be advised regularly on how to grow the business.
- Evaluate the current year
Once your financials are up to date you can see where you stand for the year. There are just a few weeks left in the year so you should have a good idea how you will finish. How do your sales and net income compare to the prior year or the last three years? Is the business growing, declining, or staying about the same? Did you reach your goals for 2016? Did you even have goals for 2016 or have you been drifting along year after year?
You may need to reevaluate your business model. If it is not working, then you need to change it. If you keep going the same way that you always have, then you will stay the same and eventually decline. The world is rapidly changing and you need to be looking forward, rather than looking back and doing it the same way that you always have.
- Do year-end tax planning
The end of the year is a good time to consult with your accountant or financial adviser to do some year-end tax planning. There may be some things that you can do to reduce your tax bill. As a result of the Republicans winning the Presidency and control of Congress in the election, income tax rates in future years are likely to go down. It may be advantageous for you to defer income into 2017 where it will likely be taxed at a lower rate. You would want to go ahead and take any expenses that you could before the end of 2016. The exact scope of the tax plan will not be known until sometime in 2017. When the plan is signed into law, I will discuss it in a future post.
- Pull an accounts receivable report and work on collecting
The accounts receivable report is a report that you should be looking at regularly. It shows the customers that owe you money at a point in time. You may have not looked at it in a while. After 30 days it becomes harder to collect and after 90 days it becomes very difficult to collect. You should contact your customers to get them to pay. They may want to go ahead and pay expenses before the end of the year. You also need to make sure that you have invoiced everyone that you have done work for. Some industries have traditionally billed once a month. Consider billing more frequently or billing as soon as you do the work.
One thing you might do to reduce your accounts receivable is to not have it in the first place. Review your billing policies. You may look at a fixed-fee model where customers pay some or all upfront. When you have accounts receivable you are loaning money to your customers. You have your own bills to pay. Cash in the bank is better than accounts receivable.
- Create your goals for the upcoming year
The end of the year is a great time to plan for the upcoming year. Many businesses slow down as people start to focus on the holidays. If possible, get away from the business for a day and spend that time planning the upcoming year.
Make a budget for the upcoming year. Start with a revenue goal and build from there. What will it take to reach that goal? If your goal for revenue is $500,000 next year and your average sale is $2,000, then you will need to make 250 sales in the year. To make it simple, we will say that you work 50 weeks and take two weeks of vacation. That means that you would need to make five sales a week or average one per day. What would you need to do to reach those sales goals? You may need to contact five leads in order to make one sale. What marketing will you need to do to reach those goals? What new staff will you need to hire to reach those goals?
- Enjoy the holidays
Enjoy the next few weeks with your family. Make memories that you will carry with you the rest of your life. Take a few days off and recharge so that you will be ready to make 2017 your best year ever.
Please contact me at email@example.com if you would like to have a free strategy session to discuss your business so that we can see how it could grow and reach your goals. I wish everyone Happy Holidays!