As the end of the year approaches, many business owners find themselves thinking about goals for 2023. While it can be exciting and invigorating to start dreaming and planning for 2023 success, you need to reflect on 2022 first. Taking time to conduct a year-end business review will give you a clear picture of what worked and what didn’t and allows you to look at the following year with a clear vision and data to back up your plans.
Today we want to share an easy guide to conducting a year-end review. If you follow these steps, you will have a great starting point for 2023 goal setting!
Unsurprisingly, we want you to start your year-end business review with a financial analysis. You can do everything right in your business, but if your finances are a mess or you are not profitable, you cannot sustain long term.
There are three key documents to review in your financial analysis:
- Profit and Loss Statement
- Account Balance Statements
- Statement of Cash Flows
It is essential to review these documents at regular intervals. We work with our clients to stay on top of these numbers monthly and quarterly. You can read more about important numbers on your financial statements, which we cover here.
The next area of your business you want to look at is sales. Some companies might have entire sales teams, and some may rely on the solopreneur to sign all the new clients. No matter the size of your sales team, there are some common questions to review your sales functions:
- Which sales systems are working? Which ones aren’t?
- Which products and services sold better than expected?
- Which products and services sold worse than expected?
- Which sales channels generated the most revenue?
Analyzing your sales process and the sales results of your products and services allow you to decide whether to continue with your offerings or if you need to make adjustments to meet the market’s needs. If you are unsure how your products and services are performing in the market, you could be expending energy and resources on the wrong offers.
If you have a team, you should spend time each year evaluating their performance and determining where you need to make improvements. Start by listing all your employees and contractors within your business. Then, calculate the total annual cost of having that person on your team. This number includes salary, bonuses, and benefits.
Next, list the results each person produced for your business. This exercise aims to decide if the person’s contribution to your company was worth their total cost. Use this analysis to determine the following:
- Who to fire or move to a new position
- Who needs training or to be put on a performance review plan
- Where you need to hire more people
I highly recommend that business owners apply this process to all employees, contractors, and service providers, not just those on your payroll.
The next area to review is company projects. Think about all of the projects you attempted in an effort to grow or improve your business this year. Make a list of all the projects, their financial cost, and the time it took to complete them. As the following questions:
- Did these projects help or hurt your business?
- Did the projects bring in revenue? If so, how much?
You should evaluate special projects quarterly to ensure they yield results. Often, business owners will complete a project without analyzing the results, which does not allow you to learn if they were effective or not. Always measure your ROI!
Investments and Marketing
You need to evaluate results if you are investing money anywhere in your business. Investments include marketing, research and development, and new equipment. When it comes to investments, it is crucial to analyze your return on investment. If you are not analyzing results, you might be putting money into something that is not working or not investing enough in areas that could yield significant results.
Marketing is one specific area that you want to measure results very carefully. You can spend money on marketing in many places, but you want to ensure your marketing efforts are yielding results. In marketing, you can waste a lot of money on the wrong things while not spending enough money on the channels that would deliver significant results. So, ensure you have a way to measure success before investing in any new marketing activity.
Another important area to analyze is the debt your business carries. Make a list of all of your debts, the interest rates, and payments, and ask the following questions:
- How much outstanding debt do you have tied to your business?
- How much is it costing you to service this debt?
You want to be aware of the amount of debt you have and the cost of carrying that debt. If the interest is high, it may impact your profitability. For more information about business debt, check out these articles we compiled about using debt in your business and dealing with pandemic debt.
Contract Review and Pricing
Finally, the last area to review is your contracts with other vendors and how much you pay. Are there
services you hardly use and could cut costs? Business owners often pay for subscriptions or services they don’t even use, so you could save money by getting rid of contracts you no longer need. Check out this post about areas where your business may be wasting money for some ideas of where to cut costs.
A year-end review allows you to determine what has worked in your business and what needs to be changed. We recommend conducting an annual review before setting any goals for the upcoming year. If you need help with your financial assessment, get in touch! We can help!