BUSINESS MANAGEMENT USING OPERATING RESULTS
OK, now it’s time for your report card – your business operating report card, that is.
Not only have you planned, you’ve acted on your plan and calculated how you would cover the cost of these plans by creating a budget that included: Directly and Indirectly Related Expenses, Overhead, Timing and Projected Return on Investment (ROI).
Now that you’ve taken the actions that were on your calendar and you’ve budgeted for them accordingly, you’ll be able to see how well these actions produced the desired results.
The intent is that everything will come together as planned. In the real world, we know that doesn’t always happen – sometimes not even often. Your challenge is to see if you can determine why things didn’t go as planned and to come up with a way to do better next time. By continuing to improve your planning and budgeting skills, your chances of achieving the desired results go up accordingly. That’s when you’re truly LEADING your business. You can say this is where I want the business to go, how much profit I want and have a strategy and plan to make it happen.
As you begin to monitor and manage your business operating results you’ll probably see a change in your perception of yourself and your role as business owner/leader as well. You’ll be amazed at the confidence gained in being able to make sound business decisions.
Here’s what I suggest you do.
1 – Take an in-depth look at your business report card – your financial statements. We’re operating on the assumption that you have a system in place that will provide you with accurate, timely financial reports. I recommend a monthly review, a quarterly review and an annual review. You have to do the quarterly review for tax purposes anyway, so it’s a great time to consider the quarter as one-fourth of your operating year. What has happened in this period will likely set the framework for future quarters. Make adjustments to your plan as needed based on results achieved.
2 – When doing your monthly review, check back over your calendar for the past month. How much of your plans were actually accomplished? Is there a need to make budget changes because plans fell behind? Why did that happen? What impact will it have on revenues and costs? Question each finding that is different than expected.
3 – Compare each line item with previous months as well as next month’s projections. Look at increases and decreases. Three months in a row of increases or decreases may indicate a trend. Be sure you know why this is happening. If it’s not what you want, create a plan and take action to alter the trend.
4 – Adjust next month’s plans after determining how much of the old plans should be brought forward. Make any budget changes and transfer your first two week’s plans to your weekly calendar. Then each week break the plans down into specific actions by day. Actually give a time slot (can be an hour or a whole day) to actions that will require time. How can you expect to get things done if you don’t schedule for them?
5 – It’s this monthly review, planning and action that allows you to stay on your toes and nimble enough to make changes before negative trends become hard to reverse. It’s how you know what’s going on in your business and it’s a solid foundation for daily and periodic decision-making .
6 – Transfer each Quarterly Budget to an Operating Summary Spreadsheet. Many accounting packages can provide this for you or you can create something yourself. You want to compare three months’ results with corresponding monthly projections. You’ll be able to see right away where you were off and can zoom in to look for what happened.
7 – Compare Quarterly Reports and then look at all of them sequentially for the past year. This gives you a lot of valuable information for creating next year’s strategy, plans, actions and budgets. Having accurate documentation in this fashion not only helps you make better business decisions it shows any outsider (investor or lender) that you are in fiscal control of your business. It goes a long way toward building your credibility and the confidence of the outside party.
8 – It can be very helpful to have someone who’s knowledgeable walk you through it the first few times until you become familiar with what is included in each item and report. That’s a great role for your business coach to play. Having a mentor through some of the details can make a big difference in how quickly it falls into place for you. The important thing is that you become comfortable with what your numbers are telling you.
It’s wonderful to watch clients’ reaction when they finally “get it”. They’re much more confident in their decisions and actually look forward to their monthly financial statements to see the results of the decisions they’ve made. The bottom line is the ultimate report card and that’s what we’re all trying to improve.
Once you’ve changed your involvement in your business from being reactive to being proactive you are truly a BUSINESS LEADER. And you’re now in a great position to enjoy the rewards!!