Believe it or not, we are in the 4th quarter of 2016 and the time to start your business planning for 2017 is NOW! Ensuring businesses have the proper plan in place heading into the New Year is crucial to their future success. From our experience, businesses that have a documented plan in place are much more successful at realizing their goals than those that do not. So, what should business owners be focusing on as they head into 2017?
Develop Goals for 2017
If a business has goals, they can create a plan to hit and exceed those goals. Goals can be long term (greater than one year) and short term in nature and may depend on the answers to the following questions:
- What is my ultimate exit plan from my business? Do I want to grow and sell the business in 3 to 5 years? Do I want to hold the business over a number of years and transition to an employee or family member? If I sell, how much do I “need” to be satisfied?
- What are revenue and profitability expectations for 2017? How do these expectations impact the cash flows of the business and the ability to pay my employees AND myself?
- Will I be introducing new product lines or services from my business? What is the investment needed to make this successful?
- Will I need to take on debt or equity investors to meet my goals? Do I have an established banking relationship? Will they require audited financial statements?
- Do I have a plan for taxes or the tax implications of the execution of my goals? Do I have an established relationship with a tax advisor that is proactive in tax planning?
- Do I understand the metrics that drive the success of my goals and can I track them?
Ensure Accurate Financials PRIOR to Year End
Ensuring that a business has timely and accurate financial information and accounting reports is crucial to the success of meeting the established goals. Without this information, the business is running blind and not able to track progress against its goals. It is crucial for a business to start the process NOW to update their financial information so that at year end, the business is able to immediately focus on the future goals established.
Budgeting and Forecasting
Businesses that are successful develop an annual budget PRIOR to the start of the year. They then track this budget throughout the year and develop a rolling forecast to provide operational and cash flow visibility at a minimum of two to three months out. Tracking actual performance against a budget will assist business owners in understanding why the business is either exceeding or not meeting the expectations set in place, thus allowing them to make real time decisions to improve business performance.
Develop Trackable Metrics
In order for business owners to hit their goals, they must establish metrics to track, that when improved confirm that the goal is being met. Examples would be understanding and tracking the metrics that drive profitability to the business (margins), metrics that drive cash flow to the business (AR and AP turn, inventory turn, other operational efficiency metrics), metrics to become “bankable” (metrics that the bank will look at to meet established banking guidelines), metrics to drive value to the business (EBITDA percentage, revenue growth). These are just a few examples, and there are many others. It is important that each business identify these metrics immediately to allow them to make the decisions to improve their business.
The appropriate tax planning strategy is another crucial component of Year End planning and success. It is important that business owners meet with their tax advisors PRIOR to year-end at a minimum to discuss opportunities to minimize potential tax liabilities. Thousands can be saved in tax liabilities or current cash flows by developing an appropriate tax planning strategy.
We Can Help
At Signature Analytics, we support and drive this year-end planning process for our clients. This allows them the visibility now and throughout the year to make the right decisions to be successful and to meet their established goals. Contact us to schedule a free consultation and get on track for a successful 2017! Signature Analytics can serve as your financial consulting company or outsourced accounting solutions.