Ready Your Business for 2005
Column by Marty McGhie
This is the time of year we naturally find ourselves focusing on selfimprovement "?heading off to the gym early in the morning, staying away from the chocolate-chip cookies, resolving to study every article of The Big Picture this year. This, of course, is good. It's even better if we are still doing these same things later in the year"?say, April or May.
I wonder, however, how often we go through the same process for our businesses. Let's review a few things that may help us set up a better roadmap for our businesses to follow in 2005.
Evaluating last year
The first step involves a critical review of last year's performance. Be tough on yourself, but be fair. What things did you do right? What went wrong? If you did establish goals and budgets, how did you perform? Be specific in documenting your successes as well as your failures. Without exception, every business during the course of each year suffers some dose of failure while also enjoying some measures of success; the trick is to experience more of the latter than the former.
The process of gathering this information will assist you greatly in planning for 2005. If your company is like mine, holding a comprehensive review of the prior year will provide, for better or for worse, some amazing revelations about yourself and your company. Make sure you formally document all of this information"?you should use it as a starting point in your plan for the new year.
If you're a sole proprietor, you may be tempted to go through this process yourself. But make certain you don't"?you need to involve others in the process. It may be your most trusted employee or perhaps a group of managers. It may be a spouse or partner"?as long as they are involved in the business, understand what you are trying to accomplish, and can provide an objective view. If you are using some of your employees, make sure the lines of communication are wide open and no one feels threatened by any repercussions from being honest.
Setting goals for '05
Now it's time to get to work on this year's plan. The blueprint you are now building should flow from the information gathered from your discussion of the past year. Build on the successes and figure out a way to avoid the failures.
While every business has different methods of setting goals and measuring subsequent success, I've listed below some questions to ask yourself while setting your 2005 business goals.
Marketing, capital expenditures, HR, and cash flow:
- What are my sales goals for the year, and what are my plans to get there?
- Where do I find myself in the marketplace with regards to my primary competitors?
- Is my market expanding or contracting?
- Do I need to diversify into new areas?
- Conversely, am I involved in so many product offerings that I'm unable to focus my efforts in my most profitable products?
Capital expenditures and your physical plant:
- What kind of capital expenditures do I need to budget for to accomplish my marketing goals?
- Is my machinery and equipment still technologically capable to allow me to compete aggressively?
- Do I need to make changes to my physical facilities?
- Do I have the sales force to accomplish my sales goals?
- Am I understaffed or overstaffed?
- Am I too heavily staffed in administration? How does my ratio of "administrative-to-production personnel" compare to prior years?
- How do my "net sales/employee" compare with other years?
- Do I have the proper personnel in management positions?
- Am I so involved in the daily affairs of the business that I miss the larger picture (which I should be focusing on)?
- Conversely, am I am involved enough?
Cash-flow and profitability concerns:
- What changes should I make to better manage my cash flow?
- Has my "average days outstanding" on my accounts receivable gone up or down?
- How are my relationships with my suppliers?
- What are my expectations for profitability this year?
- What expenditures can I cut to become more profitable?
- Have I budgeted for capital expenditures during the coming year, and how will I pay for them?
While the preceding list of questions is by no means comprehensive, it should help you to get the juices flowing as you plan for 2005.
Marty McGhie (firstname.lastname@example.org) is VP finance/ operations of Ferrari Color, a digital imaging center with Salt Lake City, San Francisco, and Sacramento locations.