Business Resolutions in This Series:
- Resolution #1 - Network More Aggressively
- Resolution #2 - Update Your Business Plan
- Resolution #3 - Assess Your Business to Avoid or Solve Problems
How to Assess Your Business to Keep it Strong and Optimize GrowthOne of the keys to running a successful business is knowing where you are and where you are headed. Projections and budget forecasts should never be based on guesswork, they should be done by analyzing financial and other data.
Before you run into problems or make any big changes in your business, take time to assess where it is now. This is especially true if you are already struggling financially. Making rash decisions in “crisis mode” will only hurt your business more. You need to know where your business is and where it is heading on a monthly basis (in some cases, even more frequently).
The most important rule when assessing your business is to completely separate the business from yourself. A business assessment should look at the strengths and weaknesses of your business – not your own or that of your partners and employees (those assessments should done be done independent of a business assessment).
Using WIB’s business assessment chart method, you can list positives, negatives, and develop specific strategies to target problems.
Use Budgets and Variance Reports to Assess Financial HealthEven if your business seems to be doing well, it is important that you assess where you are heading. If you are not preparing monthly variance reports (how much your actual expenses and income differ from what you projected) you should.
Variance reports are an important tool to forecast potential financial problems before they become critical. Budgets can, and should be adjusted to meet the needs and expectations of the business. If you get a new large contract – or lose one - your budget picture changes.
You should also be running quarterly financial reports and quarterly variance reports.
Monthly reports are great for timely information and can serve as early warnings but quarterly reports are better at showing trends. A monthly report only shows recent information and while it does show if you had a good or bad month what you need to be more concerned (or excited) about are trends.