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:
- Income
- Profit
- Owner’s Comp
- Tax
- 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 Michalowicz.
Review your tax payments
You’d probably rather not think about taxes right now, but it’s a good time to review your situation. By now, you should already have made two tax payments in (4/15 and 6/15). Even if you’re using the Profit first system, mid-year is an excellent point to check in with your accountant and see if you’re on track with mid-year tax projections. He/she/they should be able to look at your revenue, make a yearly projection, and help you estimate how much tax you should owe (or this could be a different person if your accountant and tax preparer are other people)
Don’t have an accountant? That’s okay. You probably have some sort of bookkeeping system in place, like QuickBooks, Wave, or Gusto. Then, you can print out your profit and loss through the end of June, double the income, and use an online tax calculator to estimate what you owe.
If you find that you’re behind on estimated tax payments, you still have half a year to catch up. Just calculate how much you’re short, divide it by the six remaining months, and add that amount to your tax bucket every month.
Conduct an expenses analysis
While you’re reviewing your buckets and your profit and loss, it can also be a good time to do an expenses analysis. If you find yourself in a cash-flow bind, you have two ways of remedying that: increasing sales and cutting expenses. And of those two, cutting costs is usually quicker.
Michalowicz finds that most businesses can cut 10 to 20 percent of expense overnight, “such as frivolous costs like unused recurring membership fees, office space that impresses no one, or that expensive car that is ‘justified” because it is an expense.”
To complete the expense review, print out two things:
- Your expenses for the last six months
- Any recurring expenses: rent, subscriptions, internet access, training, classes, magazines, etc.
Add up all the costs and then multiply that number by 10 percent. And then cut that cost by that number. To do this, you’ll likely have to cancel whatever your business doesn’t need to run efficiently and keep your customers happy or negotiating any remaining expenses.
Write down what’s next
Going through the process itself should be very enlightening and get you to be more intentional about changes you want or need to make. It’s essential to write these changes down and develop actions steps that you want to take to help accomplish the new goals.
I suggest limiting the changes you want to make to two or three and writing the actions steps as:
- What is it I can do about the obstacle I’m facing?
- How am I going to do it?
- When am I going to do it?
- Who can keep me accountable?
- How do I feel about it?
After going through the assessment, make sure to give yourself some downtime to recharge for the second half of the year.
"Review" - Google News
July 03, 2021 at 01:40AM
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A Guide To Your Mid-Year Business Review - Forbes
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