25% of your year is behind you, how are you doing?
Business indicators are rarely linear and how you feel about your business varies so how do you combine both a quantitative and qualitative analysis to have a grounded view on the state of your business?
The quantitative (numbers) based analysis is usually the easiest if you have access to good data. There are a lot of numbers you could look at but my suggestion is to at least look at five.
- Gross revenue (all the money you took in from all sources)
- Gross profit (your revenue less cost of sale for your business but not fewer expenses)
- Net profit
- Profit margin (divide net profit by gross profit)
- Number of unit sales (depends on the business)
Look at all of those numbers for Q1. Now, look at the exact same numbers for the same period last year, Q1, 2018 to give you context. That should give you a very clear picture of what is happening in your business. What patterns do you see? Can you explain the movement of the numbers? Do you have these numbers available to you? Pay very close attention to your net profit margin. It’s easy to increase your sales and lose ground on your margin. Sometimes there is a good reason for that, particularly if you’re making some large investments right now – but be mindful of it because a growing business with a decreasing margin isn’t usually sustainable and can catch you by surprise if that margin gets too low.
Now, qualitative. How you look at this will depend a lot on the size of your business. If you’re small, do a gut check on how you are feeling. Energized, burned out? What’s going on? 75% of the year is still ahead of you, do you have enough gas in the tank? If you’re larger and have employees or other stakeholders, do you know how they are feeling? What’s important to them? When was the last time you had a sit down with a key employee and didn’t speak about business objectives the entire time? Are you really in touch or susceptible to a surprise later this year?
And finally, for all businesses, what’s happening with your customers? What is their experience with your organization and how do you know?
The first few weeks of Q2 is the perfect time to do an assessment because you still have time this year to make course corrections and still hit your goals. That’s much more difficult as we get to Q3.