Do you have an item whose price and/or supply fluctuates? Of course you do, because we all do. Every business has seasons. Supply goes up and down as does demand for a certain product. I was talking to my mechanic recently and he said that he can count on the fact that at the start of the school year and while the fair is in town, business will be slow. Why those times? He doesn't know, but it happens like clock work every year. These are predictable occurrences, but what about the unpredictable occurrences like the US getting hit by multiple major hurricanes? That's why it's good to have systems in place for both the expected and unexpected. Not just a disaster recovery plan, but a plan for the case when, while demand stays the same, supply is dramatically reduced.
Does you current accounting system or the team behind it help to handle these issues?
The economy in many areas of the country is doing pretty good these days. A lot of distributors tell us sales and profits are up year over year. When I hear that, it reminds me of something someone told me years ago, “It's easy to make money when the economy is doing well. It's much more difficult to make money when things are not doing so well.” While business is going well is the perfect time to be examining those critical areas of our businesses that are key to success. One key area is gross profits.
It's easy to look at an Income Statement and see what profits are, but determining why profits are up or down is another story. When profits are not where we want them to be, then we have to ask questions like:
- Do I have a pricing problem?
- Do I have a costing problem?
- Are my sales people discounting too much?
Where do you go to find this detailed information?
There are many things to think about when planning for the year. What will be the financial strategy? Will marketing look different? Is there new equipment that needs to be purchased? Obviously, running a business can get stressful, but if there's one thing we know it's that, while there is a lot of risk in business, there are great frameworks that can help to make things operate and function a little smoother. A couple of things included in those frameworks are:
- Guesses need to be educated and risk needs to be calculated.
- How you build can matter just as much as what you build.
- Make sure that your marketing brings in revenue not just attention.
- Worry less about timing, things get re-invented all the time.
This is by no means an all inclusive list, but will hopefully spark some ideas. Frameworks have been developed for many things, so keep in mind that you don't always have to re-invent the wheel.