Question of the Week
A Guide to Your Mid-Year Business Review
Happy Friday and Happy July!
It’s hard to believe the year is officially halfway over. Life has changed since last year. Businesses are opening up, people are walking around without masks, and you might even be planning a vacation. I hope you’re able to take a break and enjoy this summer.
Before you do that, though, why not take the time to do some mid-year business clean-up? I’m a huge proponent of tackling projects in small chunks. But, unfortunately, too many business owners wait until the end of the year to clean up different aspects of their business. By that point, it’s an enormous, overwhelming task.
If you knock off some of these tasks now, you’ll thank yourself down the road. Here’s an actionable checklist to help you.
Remember, progress not perfection
Before we get started, let’s think about the purpose of this review. It’s not to shame or overwhelm you. It’s simply to create some awareness of your business, evaluate its performance, and allow you to take corrective action while there’s still time to change things.
A lot of business success boils small habits repeated over time. You need to focus on the habits that bring you closer to your goals and let go of those habits that no longer serve you. Remember, progress, not perfection.
Get to a quiet place and check in on how you’re feeling
Paradoxically, the first action item is a break in the action. You’ll need to slow down, get to a place you won’t be disturbed, and check in on how you’re feeling about the business. This process shouldn’t be a haphazard, random day. Instead, block off one day, or a few if you can. Go to a quiet place for your review. (Some business owners go offsite for this.)
Once you’re in this quiet place, ask yourself how you’re feeling about your business. For example, are you living up to the company’s purpose and vision? Are you accomplishing your goals? Are you working the number of hours you want to work? Are you feeling overwhelmed or anxious about the future of the business?
The father of Financial Life Planning, George Kinder, of the Kinder Institute of Life Planning, believes emotions alert us to what we want to change and give us the energy to make that change. They can propel us to take action even when logical minds can’t. So don’t fight your emotions. Let them drive you towards a plan for making your life different.
You’ll want to set goals for yourself, but start by thinking about your successes and challenges. Celebrating your success can help you appreciate your progress and may provide insight into what’s working. For example, were you able to get some ideal clients? Did you feel satisfied and fulfilled in the work you’re doing?
When it comes to challenges and areas of improvement, you may find that you’re falling short of some goals that you set out for yourself—working too much? Not enough revenue? Too many clients that aren’t a good fit? Are you not growing as fast as you’d like?
I love the advice of Carl Richards, Certified Financial Planner and creator of the Sketch Guy column in the NY Times: goals are just guesses. You can’t predict and, in many cases, control where you’ll be ten years from now or what the world will look like.
So instead of thinking that things need to be perfect or that you can’t change your mind, pick a direction and take the next right step. What are the current barriers or obstacles getting in your way? What steps can I take to start going in the right direction?
Assess your cash flow
Cash flow is the life-blood of your business. Yet, so many companies act in a way that it will somehow take care of itself as long as you have enough revenue coming in. You may even leave it to your accountant to tell you how you’re doing. And while assessing your revenue and client pipeline is essential, conquering cash flow takes some thought and intentional systems.
The system I like to use for myself and my clients is the Profit First System, developed by Mike Michalowicz. Rather than reading and using profit and loss statements, most entrepreneurs resort to “bank account balancing,” where we check our bank balance and make decisions based on what we see. This system focuses on leveraging that habit rather than trying to change it.
The system works by allocating money into five different buckets:
- Owner’s Comp
- Operating Expenses
All business income goes into the income account. And then, on the 10th and 25th of each month, you allocate that income into preset percentages based on your real business revenue. Allocating your money in this way ensures that your business is profitable (because you give yourself a bonus every quarter). You also pay yourself and reasonable wage and have money to pay your tax bill every quarter. Additionally, it helps you become more efficient with your operating expenses because you can use a fixed amount.
Using this system allows you to continually monitor how close you are to your targets for revenue and profits and lets you know in real-time when there is a problem. This system empowers business owners to take control of their cash and become more intentional about it, and it’s easy to incorporate because it accentuates behavior that we already employ. You can read more about the system here or listen to my recent interview with him.
Quote of the Week
“Sometimes the smallest step in the right direction ends up being the biggest step of your life. Tiptoe if you must, but take a step.”- Naeem Callaway
Task of the Week
Before you take off for your holiday, make a plan for when and how you’ll conduct your mid-year review. I’d love to hear how it goes. You can contact me at the links below.