Taking Care of Your Everyday Business

Any savvy business owner sits down on a regular basis to review and evaluate the performance of their business. The purpose is continued improvement and increased profitability. While many believe (correctly) that this is simply an ongoing daily part of owning a business it is of great enough importance to dedicate a certain amount of time to each month without interruption or distraction. The following is an outline of areas that should receive regular attention.

What Needs Your Attention?

In short- everything. That does not imply you should be doing everything yourself or even micro-managing the work of others. It does mean that ultimately you have the most to lose or gain by everything that happens in your company so it is all important to you. The basics are

• Financials
• Employees
• Areas of Growth and Problems to be Addressed

Covering these three basic areas each month will keep you on top of what is going on in your company and allow you to allocate time and resources more effectively in the following month.

Financials

Clearly this is the most fundamental of areas to be evaluated. The basics are self-explanatory. Review all sources of revenue and all expenses. Ensuring revenue and profit is exceeding expenses is really only the start however. Take a much more in depth look at both. Compare current expenses with the same for last month, quarter, and year. Is there a trend of going up? If so why and is there a corresponding increase in revenue? There is a tendency of expenses simply going up through lack of attention.

In the profit and revenue area look both to the high profit items and the underperforming on a line by line basis. Compare both directly to associated expenses. Are the well performing items actually more profitable or simple generating more revenue? If they are high expense items as well they may appear on first glance to be “best products” but in fact be where you should look to cut. On the opposite end small revenue producers that have exceptionally low cost/expense often are overlooked when they are the best choice for more emphasis.

Employees

Take a look at labour costs each month. If labour costs have increased and profits have not then that is the first are of concern. Similarly, if employee compensation has remained constant but work product and profits have gone down then it needs to be addressed. This can even be applied if you are simply an individual working for yourself. Compare hours being actually worked with the bottom line and to determine if it is your work habits or another area that needs attention.

When looking at employees focus should be on expected need for the next month. If you have signed a contract for a new project do you have manpower to fulfil it? If a job is ending and nothing else is lined up what is the earliest you can cut employee expenses?

Areas of Growth and Problems to be addressed

The final step of any evaluation is a written plan of action. This plan will identify areas of potential growth that need to be further developed or invested in as well as any weaknesses or ongoing concerns that need attention.

Using the information from the financials select specific areas where you believe greater revenue and profit is possible. This may be by expanding on something that is already working or a developing idea for an entirely new product or service. Set a list of tasks you can do or assign to be done to push forward in these areas with specific steps to gauge progress.

In the problems to be addressed would be unexplained expenses and a point by point plan to reduce them as well as customer/client issues and employee issues. Once again specifics tasks to be accomplished or assigned is best as opposed to a simple “take care of this”. The acceptable resolution should be included in this. As with anything, it may need adjusting as the problem is dealt with but it is a starting point to ensure action is taken.

This is a basic method of evaluating performance. For a comprehensive checklist of key performance indicators and methods to use the information for greater profitability you may want to look at the KPI dashboard. It will go into great detail in numerous areas.