Thursday, December 14, 2006

Bring On The New Year

I’m going to offer a few year end tips – some we learned from some past mistakes, of course – to help you save some money. First off, discuss all of this information with your accountant. They are far more qualified to give advice than I, but here are a few things you might want to inquire about:

Any Accounting Updates: Any changes in bookkeeping can be made simpler and more efficient if done at the close of the fiscal year, which is more than likely December 31. It's important as part of your year-end tax strategy to have a good understanding of your company's financial situation. Spend extra time ensuring your books are up-to-date and accurate.

Defer Income: Any revenues you can receive during the first week of January as opposed to December cuts your tax bill for this year. All revenue earned up to December 31st has taxes paid in April of 2007; whereas income deferred to January will not owe taxes until April of 2008. Talk with your accountant and make sure your cash flow can handle the deferment.

Of course, any deferral should will depend on your profit and losses for the year and your legal structure.

Increase Expenses: I’m not a big fan of this method for Fitness Professionals, but after consulting with your accountant, you may want to purchase items your business will require in the immediate future to maximize deductions for this year. If you can see a need for goods and services in the first quarter of the new year, buy them now, if cash flow permits. Consider paying bills early also, so long as the payment shows on your books before the new year.

Beyond Taxes

If you haven't already done so, now is an excellent time to review your company's year-end results and plan for the coming year. If you've already created your annual plan, you may want to look at it in a new light.

A typical approach to business revenue planning suggests multiplying last year's quantitative results by an acceptable growth factor. Industry standards vary, but you don’t have to go by industry standards, you can set your own standards. You should set goals relative to past performance. You may want to increase revenues by 10, 20, 40%. Like all goals, they should be realistic, but challenging.
A well rounded strategy which will provide a platform for continuous growth should impact these critical factors:

  • revenue and profit
  • product and service development
  • customer service
  • productivity
  • strategic partnerships
  • new client growth
  • client retention
  • employee retention

What can you learn from last year?
What did you do right - what worked - what should you do more of? What did you do wrong - what didn't work - what should be stopped immediately? What is missing? What should we eliminate? What results are you committed to produce? These should be quantifiably results that I mentioned earlier. 25% increase in retention. 20% increase in monthly revenues. Zero employee turnover. This list could go on forever.

How are you going to achieve these goals?
Who is accountable for each result? What steps are going to be taken? What strategies and tactics have the best chance to produce the results? The approach to some targets will be simple, others more complex. While there are no guarantees of success, each target should have an identifiable path with a good probability of getting your business to where you want it to be. That path will also include benchmarks to measure the ongoing success. What structural and procedural changes will you make? Does this initiative have any staffing implications? Do you need to create new job descriptions or add managers?

What happens to your business if you don’t?
Can you live without addressing all of these factors? Of course you can - but will you prosper, and for how long? Increase sales, but neglect quality - what will happen to customer satisfaction? Improve product quality but neglect employee retention? What will happen to quality next year? And then what will happen to sales? Focus on profits but not new customers or strategic relationships - next year's sales (and profits) decline, and so on. Each aspect's improvement contributes to your company's prosperity.

Can you do everything at once?
You may not be able to do it all at once, but the solution can not neglect any of your critical factors. Create a breakthrough in planning which commits your company to some level of advancement for each of the factors. One that ensures they all receive some level of attention so that each is moving forward, although maybe not all to the same degree.

And finally, a quote:

“Cleanup and planning tasks don’t just happen in December and January. If you review these tasks quarterly, they won’t sneak up on you at the end of the year.”

That was in the email Kelly, my fiancé, sent me when I told her I wanted to put some year end and goal setting information in the blog.

Ironic, huh.

Nick Berry

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