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Business Planning: Make New Month’s Resolutions, Instead of New Year’s Resolutions
Posted By Rohit Arora On January 5, 2012 @ 11:30 am In Small Business Operations | 1 Comment
The Weight Watchers and Jenny Craig commercials are already on the air, and so are the ads for gym memberships. The start of a new year motivates people to assess their lives and try to improve. Weight loss company sign-ups peak in January and fitness centers are always full at the start of the year. This usually lasts until mid February when people lose focus on their self-improvements or get depressed when changes don’t seem to come fast enough.
The problem with New Year’s Resolutions is that people are not always realistic when they set them. You cannot expect to run in the New York City Marathon if you have never even attempted a 5K race. When people do not establish realistic goals, they inevitably set themselves up for failure and frustration. Any trainer will tell you that it is important to set achievable goals and build off initial successes.
The same principles apply when setting business goals. A 20 percent increase in revenue is rarely possible without creating a viable plan for achieving that type of growth, and it usually comes repeatedly in smaller increments.
January is always a good time to stop and reevaluate your business’s successes and disappointments during the previous twelve months.
• How many new customers did we get?
• Was our marketing successful? What could we have done better?
• Did we have cash on hand to weather the slow periods?
• Are we poised for growth next year?
Now is the time to set your goals for growth in 2012. My advice is to make new month’s resolutions instead of New Year’s resolutions. Establish short-term goals and see if you can reach those targets. It is much more effective to build incremental growth. Instead of saying ‘I want to increase my business by 10% this year, shoot for a one percent increase each month. There is no need to be intimidated by your own numbers. Run a monthly P&L statement to take the pulse of your business.
If you have expansion plans, make sure you are properly funded to achieve them. The old adage, “‘It takes money to make money” still applies in 2012. Can you service an increase in business without increasing your manufacturing and storage facilities or expanding office space and hiring new employees? You have to invest in new employees before they prove profitable. In order to increase staff, you have to be able to pay them even before the generate revenue.
The news has been brighter of late for small businesses seeking credit. There are an increasing number of options — credit unions, non-profit lenders, government programs — for budding entrepreneurs. Even the big banks seem to be loosening the spigots. If you are looking to borrow money in order to grow your business in 2012, keep these things in mind.
Increase Your Credit Scores
Anyone who has applied for a business loan in the past year will tell you that lenders are now more diligent in their background checks. If you are looking for financing, it is important to know that lenders make decisions on small business loans based on a combination of your personal and business credit history. So if you have personal credit card debt, pay it down. Likewise, if you are sitting on invoices that are 90 or 120 days past due, pay them as soon as possible to get those blemishes off your books.
Improve Your Record Keeping
Having accurate financial records is not only a good practice, it is a requirement if you want expansion funding. Sales revenues, tax statements and other proof of the soundness of your business are crucial to securing capital. Financial institutions base their decisions on such data. Keeping accurate records also helps you to better forecast the firm’s position in the future.
Pay Your Estimated Quarterly Taxes on Time and Do Not Procrastinate on Annual Returns
Getting hit with a large bill on April 15th causes unnecessary strain on a business and cuts into your cash on hand for daily operations. If you have been paying your quarterly estimated taxes all along, you are less likely of having to scramble to pay the IRS when your 2011 filings are due. So make a resolution to pay the proper amount of taxes on a quarterly basis so that you avoid a big bill at the end of the year.
Cut Your Cost of Capital
You may be paying too much for your current working capital. Lenders may be charging lower interest rates now than they were when you borrowed money previously. You can either refinance with your current bank or shop around to find someone who will give you a lower rate. Biz2Credit has helped a number of companies such as Iselin, NJ-based Silicon Alley Group, lower their cost of capital, which ultimately frees money up for business expansion and new job creation.
Take the time now to assess your business and plan for the year ahead. But do not wait until next December — when it will be too late to make changes for 2012 — to do it again. Review your financial statements monthly and try to forecast the future revenues and expenses. This will help you to achieve your monthly resolutions to grow your business incrementally all year long.
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