It’s important to take a look at where your small business stands as the year comes to a close. These small business year end tips can help you to make sure your small business is in good shape financially as you head into the new year.
Small Business Year End Tips
Set Aside the Time to Look at Your Business
First, set aside time to look at your business closely at year’s end, Michael Chaffin, Senior Vice President and National Business Banking Sales Manager, Fifth Third Bank told Small Business Trends recently. This means small business owners need to stop focusing on making money long enough to take account of where their business stands and where it’s going financially as the year draws to a close.
“Business owners and entrepreneurs tend to go from year to year just seeing how it all happens,” Chaffin said. “They don’t take the time to step back and look at the big picture.”
If you haven’t done this already, block some time out on a calendar today.
Look at Your Margins
This is one of the biggest places to start. You need to look for the places where your margins are being squeezed and then dive in deep to find out what’s going on. The metrics you want to pay attention to here are the gross profit level and the net profit level.
Employee costs and/or vendor prices are two of the common points you should look at.
Have a Team Meeting
Bring key employees together as the year winds down. Depending on the size and nature of your small business, that team could include CPAs and lawyers too.
“If you use consultants, you should bring them in at the end of the year too,” Chaffin says.
Having this kind of team meeting is a great way to look at what’s going well operationally — and what’s not.
Talk with Your Suppliers
Looking at the financials like revenue growth is self explanatory. To get a really complete overview, you’ll need to chat with your suppliers too. Understanding how these contracts are impacting your small businesses’ margins is important.
Talk with them about what they see on the horizon as far as cost and availability go. Dig deep into the reasons behind any price increases.
Look at Estate Planning
The end of the year is also a great time to look forward for small business owners. You might still be years away from retirement. However, it’s always a good idea to look at plans for selling the business or transitioning off ownership to family.
Start now. These aspects take three to five years or sometimes longer to put into play. Reaching out to your CPA is the first step.
Spread Out Your Client Base
Chaffin says it’s especially important at year’s end to make sure you haven’t concentrated too much on one client.
“That’s always a challenging item for smaller businesses,” he says. Although those larger clients are usually quite profitable, they present a big risk. If one suddenly leaves, your bottom line could tumble.
As tempting as it might seem to concentrate on one or two big clients, you need to remember a diverse client portfolio is a healthy one. Try branching out a little. For example, if you run a diner that services the local mill, try advertising to the local hospital.
Prepare for the Year Ahead
It’s also a good practice to remember your small business is moving into another year. Looking at your financial health at the close of one year means preparing for the upcoming one.
Asking whether you have the staff and equipment needed for the year that’s about to start is necessary too.
Here Chaffin suggests getting out in front of any of these needs by having some credit in place. That way, your small business will be able to fund the changes quickly as a new year starts.
Calendar App Photo via Shutterstock
Aira Bongco
Every business should dedicate some time for these. You don’t need to be a big company. A yearly review is a must.