Christmas is on its way and, while the retail sector gears up for its busiest period, other businesses are slowly beginning to wind down.
This period of relative calm is a valuable opportunity to take stock of the year nearly passed, and think about ways you can make 2011 even more successful.
Check your vital statistics
You can glean an excellent overview of the health of your business by looking at a range of key performance indicators (KPIs).
KPIs help you to keep track of some of the most important aspects of your organisation. The KPIs you choose to measure will depend on the nature of your business, but some of the most frequently observed include:
- Invoice ageing. The length of time that elapses between you raising and invoice and that invoice being paid is a vital consideration, and one that will have a significant impact on the stability of your cashflow situation.
- Profit by transaction. This is an important metric that helps you keep track of variations in your profit margins. Broadly speaking, if this number is going down, something is wrong.
- Customer attrition. This figure represents the proportion of your customer base that you lose over a given period. This can help you to determine how best to engage with existing customers.
- Other KPIs. Finally, you should remember that every organisation has its own KPIs. You should be measuring whichever factors are important to your business – even if they are not numerical.
Is the patient improving?
You should also consider your current performance in relation to your past results. Have this year’s results lived up to your projections? If not, what went wrong? If so, how can you improve even further?
Running a business is a constant process of learning and evolution. During this period of relative downtime, you should consider ways that you can build on this year’s results. Does your cashflow situation need to improve? Do you need to work harder on customer retention? Have your profit margins slipped? By addressing the problems you identified in your KPIs, you can help to maximise your chances of growing your business in 2011.
Are your recordings in order?
Record-keeping is a vital legal obligation for every business owner and self-employed individual. You will certainly be required to keep items like invoices and receipts but, depending on the nature of your business, you might also need to hold onto health and safety documents, licenses and so on.
But simply keeping the documents is not enough. The old shoebox technique doesn’t quite cut it. Instead, you need to invest some time in developing an effective filing method. You should also consider investing in bookkeeping software. Although this might seem like an unjustifiable expense, you will be grateful for a well-ordered financial history when you come to complete your tax return in January.
Are you prepared for all eventualities?
Finally, it is important to remember that situations can change with remarkable speed. Trading conditions are likely to remain tough in 2011, and you should be prepared for a difficult ride.
Wherever possible, you should make sure that you have a contingency fund set aside. The size of this fund will obviously depend on the nature of your business. At the very least, you should try to ensure that your finance facilities are flexible enough to allow you to cope in the event of an emergency.
Keeping track of the health of your business is a hugely important task. You can use the lead-up to Christmas to help you judge your performance during 2010, and plan your improvements for 2011.