Entrepreneurship Success: End of year activities (I)

Planning and performance monitoring are crucial to the success of every business. These are activities that are both ongoing and periodic. There are short-term and long-term components of past performance monitoring and future planning. Specifically, they are carried out at the end of each year as well as for the upcoming year. Today, we will take up the activities that an entrepreneur and their team need to carry out each financial year.

The end of your financial year might be 31st December and, technically, any performance review for the year 1st January to 31st December can only be conducted after 31st December. However, nothing stops you from reviewing your business performance up to say 30th November and then conduct a full year review early in January the following year. As for planning for the upcoming, it must be completed sufficiently before the beginning of the new year as time is required for people to be clear of what is expected of them and also to mobilise any required resources. I would always suggest that an upcoming year’s planning should be fully completed two months before the beginning of the year. On one hand you do not want to plan too far ahead while on the other hand you do not want to get too close to the beginning of the new year without a plan for the two reasons mentioned earlier. The point is that a right timing balance should always be struck.

As mentioned, there are two components to end-of-year activities that the entrepreneur should carry out at a time like this. First are performance monitoring activities, which have to do with ‘looking backwards’. Second, are planning activities, which are to do with ‘looking ahead’. The pragmatic thing is to first conduct the performance monitoring activities before the planning activities because the former will give insights on strengths, challenges, and opportunities that would help in the latter. On this basis, therefore, we will take up performance review activities first.

How well have you done in the marketplace? The ultimate test for most businesses is how well they are doing in the marketplace. To be clear about how well you are doing you need to ask yourself questions and provide answers robustly, intelligently and honestly.

Are your products providing value to your customers as they are designed and expected to?
Are there trends and shifts in the market? What is causing or will likely cause them?
Are there rooms for improvements in the value your products are providing to customers?
What can you do to catch up with the competition if it is ahead of you? Otherwise, what can you do to stead farther ahead of the competition?
What market share do you want to achieve in the near and medium-term future? How would you go about it? What resources and competences would you require for that?

You need to be rigorous in understanding your customers, the market, competition and how well or not you are doing.

What is the financial state of your business? Your business performance in the market will impact on the state of your finances.

What and how are your sales revenues?
Are your gross margins, for each product, contributing towards covering your overheads and making a net profit?
How is your cost structure? How can you improve it to make you more efficient and profitable?
Cash flow is the blood in a business. How much cash do you have in the bank? Are you able to service your maturing obligations as they fall due?
Do you have the funds for the capital investments you are planning to make? If you don’t, can you raise the funds from external sources? If you raise the funds from external sources, can you pay them back on the likely terms to be agreed?
What are your business risks and what are you doing, or can we do about them?
How resilient is your supply chain and production activities? How efficient are they?

What is the level of competence being demonstrated by your people? If you provide the other resources as may be required, whatever you are achieving or failing to achieve has a lot to do with the level of competence and commitment of our people. You need to be sure you have the right people and they are doing what is expected of them and, hopefully, so much more!

Do your people have the knowledge, skills and attitude required for the jobs they do and your business?
Do your people have the required initiatives, commitment and creativity required to do their jobs very well?
Are the individuals and teams working in support of each other and aligned in the same direction?
Are your people reasonably rewarded for their accomplishments? What are the areas of improvement on staff productivity?

How compliant have you been with regulations governing your business? One of the issues that many entrepreneurs tend to play ostrich to is in complying with regulations. Whilst the financial costs of complying might be considered high in our environment, the benefits are enormous. At the end of the year, you need to check and be sure that you are in compliance with all regulations applicable to your business. You should be alert to those actions that need to be taken after the end of the year and plan to meet them. In our country, you need to ensure that you make necessary staff contributions; file your annual returns; comply with health and safety regulations; pay your taxes, etc. Staying on the right side of the law is right and beneficial for the opportunities it will open for you.

What social services have you provided to your community and nation? Beyond what you want to achieve in the marketplace and what the law demands of you, it is important that you and your business contribute meaningfully to society. What is popularly called ‘corporate social responsibility’ is our way of paying back part of what we benefit from our communities and the world and large. What have we achieved in these areas? How can you do better?

What are the rules? What are the operating and procedural rules for conducting a performance review?

Always start with the right mindset and attitude.
You should have a performance review team and the rules and objectives should be clear to all.
Performance reviews are not about apportioning blame but understanding what has been achieved and what can and should be done better.
Performance review should be fact-driven. Get your numbers right.
It is about understanding your individual and business strengths, and weaknesses as well as the opportunities in the environment and the threats therefrom.
It is about understanding your business better.
Document what has been discussed and agreed.

These are some of the basic issues to think through as regards end-of-year performance reviews. We will take up business planning for the upcoming year next week.