When you’ve got all of your financial information in front of you, it can feel overwhelming. Especially when it comes to business finances. If you followed our last guide ‘Doing the Math’ you should now have a much clearer overview of your financial performance in the previous year and roughly why it performed this way. The next stage is to look for patterns within the numbers that can serve as clues for planning.

Start with the Customer

A good place to start is by sorting all of the orders by the customer. If you sell fast-moving items such as food or fashion, it will be better to approach this slightly differently. For fast-moving items look at the largest order values or total repeat orders for the top percentile, middle percentile, and bottom percentile. If you have customers who use your business as an ongoing service, or something that fits this category closely, sort customers from largest to smallest.
It doesn’t really matter how you do this, the end goal is the same. You want to figure out who your biggest customers are; whether that’s another company for a B2B or the biggest category of individuals customers for a B2C organization.

When you carry out this task, be mindful that things might not always be as they seem. Large customers might have been in a position to negotiate additional discounts. Small customers might actually contribute more to the bottom line. This is why it’s so important to carry out a financial assessment rather than make assumptions.

The Pareto Principle

You might find the ‘pareto principle’ to be true in your own stats. This is when roughly 80% of your sales are generated by just 20% of your customers. The higher that percentage (80%) the riskier it becomes for your business. You know the phrase ‘don’t put all your eggs in one basket’; this couldn’t be truer when it comes to customers/clients. Of course, there are some industries where this can’t be avoided due to a small number of prospective customers. However, in cases where this is not true, try and nurture smaller customers and find new ones to reduce your overall reliance on the ‘whales’.

Answer these questions:

• Are specific customers or industries (B2B) more responsive to your business compared to others?
• Does this offer you any clues on where to find future customers?

We can now drill down further and turn our attention to look at specific orders. So rather than focusing on the customers now, it’s time to look at the products or services that were ordered the most and the least.

Answer these questions:

• What is the average order size?
• Which is the most popular and least popular item/service to be ordered?
• Is there anything you can do to increase the average order size? Can you increase your upselling efforts?
• Why are certain products selling better than others?
• Can you make any changes to improve the appeal of the least popular items?

If you’ve successfully carried out part one, part two and now the third part explained in this article, you should have a solid foundation for a plan to move forward. In the next installment, we will show you how to look for new opportunities for growth.

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If you read our first installment of strategic planning for business owners, by now you have hopefully carried out the first step; reviewing and asking ‘why’ things happened the way they did. Now it’s time to focus on really understanding the operations of the company. This is the next logical step after we’ve taken the time to reflect on the root cause behind wins and losses.

One powerful way to this is to look at the numbers. When it comes to handling and analyzing the business finances most of us run in the opposite direction! Looking at the numbers means focusing on the math, and even for business people, math can feel unfamiliar or even intimidating. The good news is, the math required for this is very simple. So don’t panic! We’re not suggesting any crazy algebra here. The best approach is to use simple formulas on a spreadsheet, like Microsoft Excel or Google Sheets. We promise you, taking the time to do this step will make all the difference.

Start With Sales

At this point, we’re still looking back on historical data and assessing the performance of the previous year. We need that sound foundation of understanding in order to build a stronger strategy for the year ahead. Start by looking at the sales from the previous year. How did you do? How did it compare to the years before that? If you do this exercise consistently every year, you start to build up a picture of how your strategy and implementation had a direct impact on sales. Or where the strategy fell down, where you faced obstacles. Just answer these questions:

• Are the number up, down or about the same?
• Can you see any high-level trends developing over time?
• Is there a clear upward growth, or do you need to intervene somewhere and correct the path?

Correction is different from improvement. If things are going well, improvement is necessary just to take things up another level. Correction is needed if the figures are down or you noticed a negative trend occurs.

Break It Down

Break this down further and start to look at the sales on a monthly or even weekly basis. Only move on to this stage after you’ve looked at the yearly figures. There’s little point overwhelming yourself with lots of data straight-away. If you don’t understand something, really try to figure it out before moving on. Answer these questions:

Are there specific times in the year when you receive more orders?
If yes, is this due to overall industry trends or is it associated with specific promotional campaigns you ran?

If you notice drops in sales over certain times of the year and these are due to the industry you’re in, this will have implications for cash flow. Answer these questions:

• Do you need to plan for slower times and set aside money to manage cash flow?
• Are there special promotions you can run to boost demand during those slack periods?
• Can you replicate successful campaigns from last year?

At the very least, just understanding the seasonal flow of our business, can help us be better prepared. In the next series of strategic planning tips, we will look at the patterns within the numbers and how to complete the financial assessment before moving on.

Zairmail (www.zairmail.com) is the fastest and easiest way to send (real) postal mail. Give us a call anytime at 888.898.0066, we would be happy to help with your direct mail needs.

The start of a new year is an ideal time to reflect on the previous year’s performance and devise a plan for achieving success over the next 365 days. Without a healthy measure of planning and strategic thinking, the only way to achieve success is through sheer luck! Let’s be honest, as business owners, who is really okay with leaving their future to luck?

Day-to-day tasks can seem never-ending and it’s all too easy to get sucked in and spend days on end doing nothing to grow the business, only dealing with the current tasks. As the owner of a business, it’s great to get involved and steer the ship, but it’s crucial to take the time and focus on growth. Delegate as many of the day-to-day tasks as you can, so that you can focus on strategic development and growth. The survival of your business depends on this.

Step One: Reviewing the Previous Year

Over the next few weeks, our blog posts are going to focus on strategic management and this is your first installment. Step one is to carry out a fair assessment of the previous year. Ask yourself which areas were successful, which projects yielded the best results? Start by focusing on the successes, it’s important to celebrate these with your wider team. If you don’t already, consider holding an end-of-year awards event with your team to share the good moments and highlight those employees who went the extra mile. You can’t do this alone and your employees are your biggest asset.

The next step is to look at what you could have done better. It’s time to get brutally honest with yourself about what went wrong last year. Where did you miss the boat and which areas could have been improved on? Thomas Edison was the inventor of the incandescent lightbulb and founded Edison Electric which later became General Electric Corporation. The lightbulb was created based on 1,000’s of trial and error experiments in the lab. When asked later how it felt to “fail” so many times, Thomas Edison replied “I have not failed. I’ve just found 10,000 ways that won’t work”. The point is, it’s often in the failures that we learn the most. If we win every time we don’t learn how to problem solve and we, therefore, don’t learn resilience.

Rather than doing this exercise in your head, write down everything as you go. Use mind-maps, brainstorm ideas on a white-board or type up notes as you think. The process of writing things down re-confirms things in your mind. It spurs new ideas and it serves as a reminder each time you come back to your strategic planning. There is something more impactful about the process of formally capturing and evaluating each item.

Ask Why?

For every item, you list, whether a success or a failure you need to ask yourself why? Why was Project X so successful? Why did you lose that big deal? Why was employee retention lower last year? etc. For each ‘why’ you need to break it down further. Don’t simply write the obvious, but start to form a bigger picture of what caused the outcome. Usually, it’s a collection of several smaller actions/events that lead to a larger outcome.

This is a process that will take a little time. Now, time is something you probably don’t have a lot of. As a business owner that’s understandable and very normal! Simply try to commit a couple of hours to this task, to begin with, and break the process down. Follow this series of articles as they are published and use them a guide. Keep an eye out for new articles via our social media channels on Twitter, Linkedin & Facebook.

Zairmail (www.zairmail.com) is the fastest and easiest way to send (real) postal mail. Give us a call anytime at 888.898.0066, we would be happy to help with your direct mail needs.