Year-end planning is an essential part of any business’s operations. Too often business owners think about year-end planning as something you do in December, but the reality is that it needs to happen much earlier than that. If you haven’t sat down to analyze your operations over the past year, it’s time to do it now.
Once you have a clear picture of what transpired in the past year, you can look ahead to find what changes you can make to your business.
For business owners who want to grow, there are 5 year-end planning questions that are an absolute must.
5 Year-End Planning Questions for Your Business
1. What Happened in 2021?
Year-end tax planning for small business owners isn’t the only planning that you should be doing. It’s important to take a high-level overview of your business operations in 2021 to see what happened:
- What goals were met?
- Did you make more or less money?
- Did certain markets drop or increase?
- Did you hire new staff or lay people off?
- Were new products or services brought to market?
- Did you increase your debt?
- What new assets were purchased?
You’ll want to make a long list of questions to learn more about your business’ performance over the past 12-month period. There’s a lot that transpires over the course of the year, and you’ll need concrete data moving forward into 2022.
2. What Happened in 2020?
While you’re looking through your business’ data, you need to do the same analysis for 2020 as you did for 2021. The goal is to compare the years to see:
- What changes you made in 2021 to improve your business
- Missed opportunities that may be worth pursuing in 2022
You can’t change the past, but you can learn from it. So, when you’re going over your books, be sure to note segments that lost or gained market share. If market share is lost, this is a time for reflection to see why you lost sales.
Sometimes, market share loss is expected while you focus on other areas of your business that have more potential.
3. What Markets, Products, or Services Are Bringing in the Most Money?
Markets change and evolve, and some become obsolete. There are a lot of markets, products, and services that businesses have to exit or stop offering because they’re not bringing in enough money. You’ll want to look through your financials to identify:
- Markets, products, and services making the most money
- Markets, products, and services making the least money
You’ll have a tough decision to make for products not making money: do you want to cut them? If products aren’t in demand by your customers, they may not be worth keeping around. Services also fall into this category.
Learning is a part of your business.
You might introduce a product that forecasts predicted your audience would love, but the product flops. If this is the case, you must determine whether there is a market demand to justify pumping more marketing dollars into the product or service.
If you find that a market doesn’t exist or is shrinking, you’ll want to consider removing the product or service. You can realign marketing dollars to products that are performing well or that have the best potential.
4. What are Your Profit Margins?
You’re getting paid, but how much profit are you making on each product? This is a question a lot of businesses can’t answer because their business is still making money. As inventory or component costs rise, profit margins begin to shrink.
If you don’t know how to calculate your profit margin, Microsoft has an insightful blog post that can help.
You’ll want to calculate profit margins for every product or service that you offer. These figures will provide valuable insights into:
- Products and services that may need to be eliminated
- Products and services that need a price increase
You may find that the profit margins of your third-best-selling product decreased, so while sales aren’t as high as your best-seller, you can see a lot of net profit from this product. In this scenario, you may want to funnel more money into higher profit margin products or services with potential for future growth.
- What Changes Do You Need to Make?
Businesses need to evolve and change, or they’ll continue to make mistakes that cost their business money. Using the information above, you can create a solid plan going into 2022. Your data will dictate your next steps, which may include:
- Targeting new markets to continue growing sales
- Exiting markets that are underperforming or slowly dying
- Improve marketing budgets for specific markets
- Reduce marketing in other markets
- Purchase new equipment or assets to meet demand
There may be times when you find market opportunities that you can’t fully leverage due to a lack of capacity or financials. If this is the case, you may go into 2022 with a new business loan or a revolving line of credit that can help you capitalize on the market.
Roughly 82% of businesses fail because of cash flow problems.
A line of credit or loan may be a necessity to keep your operations running smoothly. This change can be determined based on your previous year’s profits and your debts.
Changes may need to be made in multiple segments of your business. For example, supplier agreements may need to be renegotiated to lower costs due to rising purchase quantities. You may also need to shake up internal teams or hire new employees.
If you find that employees or teams are underperforming, ask yourself if you can provide them with additional training. It costs a lot to hire new employees, and if an employee fits into your company culture, it is often worthwhile to train them.
Bonus: Check-In and Review
Periodically, you’ll want to check in throughout the year to ensure that the business decisions you’re making align with your vision and mission. After all, those are should be helping guide your company.
Once you have the answers to the questions above, it’s time to initiate changes going into 2022.
Through 2022, don’t forget to:
- Track changes throughout the year
- Analyze whether changes are working
- Adjust and adapt as necessary
Training may also be needed to ensure all stakeholders are on board with the changes you want to make in 2022 and beyond.
Year-end planning makes it easier to focus on the year ahead. You can use your year-end planning to reach your business goals in 2022 and reinforce your focus on your customers, employees, and creating a profitable company people love!business planning