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Always remember to ask key question: Why?

December 23, 2012

Now is the time to look back on your business’s performance in 2012 and take notice of the lessons to be learned. What went well? What could have gone better? James Leavelle tells us how to assess 2012 before we jump into 2013.

SAN ANGELO, Texas — For many businesses, Dec. 31 is not only the end of the calendar year, but it is also the end of their fiscal year.

They realize it is time to begin gathering all manner of financial information for the completion of their annual tax return. Rarely is this task looked upon with much zeal.

Hopefully, each business (small and large) will be able to say 2012 was a profitable year. How will businesses be able to do that? By completing a financial analysis of the year, businesses can learn whether they were successful. Completing a financial analysis of a business is more than looking at the balance sheet to see that it balances and the profit and loss sheet to see if there was a profit.

There is one question that a business owner should ask himself or herself: “Why?” Why did April sales dip this year when last year they increased year over year? Why did my business do better than expected in June? Why were July and the year overall on par with expectations? One of the biggest mistakes a business owner can make is to take performance for granted.

Why are the questions above so important? Not meeting sales expectations at any time is an obvious concern. It is important to know what caused the shortfall. Was it external factors over which you had no control such as road construction in front of your store? Did you have an employee not providing good customer service and driving away business? Is it something that you could fix? That is important to know for the future.

Why did you do better than expected? Was it because of an intentional business decision that you made such as running a well-timed promotion on a particular product? Or was there an unexpected event in the community that drove up sales for your business and others? Again, was it something you had control over?

What if your sales and performance level were exactly what you expected them to be? You still ask why! Sometimes we can do what we expected despite ourselves! We can make some bad decisions that don’t have a major impact on our performance. The concern here is that while those decisions didn’t cause us to have a loss or low sales numbers, they could have prevented us from exceeding our expectations. Not attaining reachable sales levels regardless of whether they were budgeted is called opportunity lost. We had the opportunity to exceed sales budgets and goals, but lost the opportunity because of a bad decision.

As you prepare to close out the books on 2012, don’t forget to do a thorough review of your sales and budget performance. Asking why can be a very useful tool for preparing for 2013. At the SBDC, we wish for you a very successful 2013 and don’t forget to ask why!

“Business Tips” was written by James Leavelle, Business Development Specialist of Angelo State University’s Small Business Development Center. Contact him

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