Instead of making a long list of New Year’s resolutions, here are five things business owners can do to prepare for 2011. Each one should only take about 30 minutes, and all you’ll need is last year’s financials, pen and paper, and some yellow stickies. Or your shiny new iPad if Santa was kind to you!
1. Rough out a sales forecast
If you don’t already have a sales forecast for the new year, now’s the time to make one. You need it to understand where the business is going and to prepare a budget (more about that later).
The first step is to review last year’s sales. Many businesses have a small number of large customers and many small customers. Determine who your largest customers are, and quickly make a plus/minus judgement call on each. Do you expect more, flat, or less sales from these customers? Guestimate a multiplier for each major customer (plus 10%, less 25%) and add it up. If you’re having trouble making these estimates, you may not have kept in close enough touch with these customers — perhaps something to work on in 2011.
Then group all the rest of your customers together and make an estimate for the entire group. Remember that you’ll probably lose some of these customers and gain some new ones. You may find that that sales from this group stays about the same, or grows at a similar rate from year to year.
Add the two together and you have a first — and very rough — draft of your sales forecast that gives you an indication of where sales are headed. You’ll need to work on it further, but at least you’ll have a good start. You’re also be better prepared for a review with the sales team, something you should do ASAP.
2. See if you can improve your marketing cost-effectiveness by exploiting seasonality
Were sales more-or-less flat throughout the year, or were there peaks and valleys? Are your peaks caused by seasonal factors? If seasonal, think about what you can do to take better advantage of these inherent spikes in demand -– such as advertising campaigns, event marketing, special offers, etc. Task your sales and marketing folks with planning a handful of specific projects you could do at these times of year. Although it’s probably more productive to focus on making the peaks higher, spend a little time to see if you can boost up the valleys as well.
3. Brainstorm new opportunities
Get a pad of yellow stickies and start brainstorming ideas for new opportunities. Write one on each sticky and — without evaluating it — immediately go on the next idea. After a while you’ll run out of ideas. Put the stickies on a wall and move them around to group ideas into related themes: new products or services, new markets, customers groups, promotions, etc. Then spend a few minutes considering what each could be worth and what it would require to do, and how it fits in with your existing work. Prioritize them and take your list of new opportunities to work on the first day back so you can get started right away. And here’s your first sticky -– if you’re not already using it, “get started with social media”.
4. Update your budget — or not!
If you don’t yet have a budget yet for 2011, shame on you, but you may be able to buy some time. Compare your rough sales forecast to last year’s expenses. If you’re happy with the difference (meaning a healthy profit!) and you’re not planning any major new expenditures, you can delay making your budget for a few weeks. Maybe a little risky, but it gives you time to refine your sales forecast and get started on those new opportunities. But don’t wait too long; get it done well in advance of your February monthly business review, or at absolute latest for your first quarter business review (if you use quarterly instead of monthly reviews).
And here’s one resolution you should really make: get your budget done earlier next year! Some businesses fit their strategic planning and budgeting into one of those seasonal valleys when it isn’t so busy.
5. Make friends with your balance sheet
Small business owners typically manage by cash flow and are pretty familiar with their income statements. But make this the year to think about long-term value, and learn the in’s and out’s of a balance sheet. Most small businesses don’t have a lot of economic value, since their inventory, used fittings, office furniture, and laptops don’t have much salvage value. So consider how you can build up some long-term value in your business. The quick answer for many is real estate; a small business’s major asset is often their land and building. Sole proprietors can invest in paying off their home mortgage or perhaps buying a small commercial building. We suggest making an appointment with your accountant or financial planner to discuss ways you can build up value in your business. After all, you may want to retire some day.