By Don Sadler
WHEN MAKING YOUR New Year’s resolutions, don’t forget about your business. January
is the perfect time to resolve to take steps that
will improve the performance of your company this year.
There are three key areas where small-business owners should focus their attention at
this time of year: goal setting, forecasting and
budgeting. “Paying careful attention to these
key aspects of business management will pay
dividends throughout the year,” says John
Barrickman, a Costco member and the president of New Horizons Financial Group
( newhorizonsfinancial.com), a financial consulting firm on Amelia Island, Florida.
Adopting your goals
The first step in setting business goals for
the new year is to analyze how successful you
were in achieving your goals for last year.
“Based on this, you can set goals for 2015
that build upon the success you had last year or
shore up areas you’d like to improve,” says
Michael K. Menerey, a partner with CFO Edge
LLC ( cfoedge.com) in Los Angeles, a provider
of outsourced financial services.
Menerey recommends setting goals for the
most critical aspects of performance as they
relate to your business. For most companies,
crucial areas include sales, revenue, profits,
growth (in both new customers and income),
and employee and customer retention.
“When setting goals, you need to consider
the current state of your industry and of the
economy, both from a broad national perspective and locally,” says Menerey.
Making a forecast
With goals in hand, you can now make
forecasts and projections to point the way
toward meeting them. Specifically, you should
forecast your sales, revenue and profits for each
month of the upcoming year.
Barrickman says many small-business
owners make forecasts based on faulty or unrealistic assumptions, or no assumptions at all.
“For example, they will just extend last year’s
numbers into this year without considering
changes in the economic or competitive environment,” he says. “It’s important to test the
The year ahead
The Costco Connection
Setting a budget
Costco offers a variety of business services,
including payroll, payment processing,
checks and forms, health plans and more.
Visit Costco.com and click “Services.”
assumptions behind your forecasts.”
Often, business owners are required to
prepare financial projections as part of a small-
business loan application. “But these projec-
tions aren’t just for the bank,” says Barrickman.
“They can be a valuable management tool that
helps you spot problems in your business early
and address them before they get worse.”
As the year goes on, take the time each
month to refer back to your projections and see
how your actual performance stacks up against
your forecasts. “Look for variances and make
adjustments to your projections to reflect
what’s actually happening in your business,”
Your projections will provide the basis for
an annual business budget. “The budget will
define your company’s basic financial structure
and how cash will be managed within this
structure,” says Menerey. “Budgeting helps
reduce the uncertainty that often accompanies
expense and cash-flow forecasting, providing
owners with a fiscal framework for all of the
company’s financial decisions.”
According to Menerey, one common bud-
geting mistake many small businesses make is
failing to budget for capital expenditures (or
CAPEX) that might be required during the
upcoming year. “These typically include fixed
assets like machinery and equipment, comput-
ers, plant and property, buildings and ware-
houses,” he says. “These expenses should be
planned for in a separate budget that details
anticipated CAPEX needs for the upcoming
year and how they will be financed.”
Don’t wait: Resolve now to set goals, make
projections and create budgets for your busi-
ness for 2015. Doing so will lay a firm founda-
tion for a successful business year. C
Don Sadler is an Atlanta-based writer who
specializes in small business and finance.
YOUR BANKER, ACCOUNTANT or an
outsourced CFO services provider can
offer valuable assistance with your
business resolutions and planning.
Also check your local Small Business
Development Center (SBDC) or the
Service Corps of Retired Executives
(SCORE). Visit sba.gov and click
“Local Assistance” to locate an SBDC
office or SCORE chapter near you.—DS
Start your business planning now