The goal of every business owner or shareholders is to maximize the owners’ wealth via increase profits and generating more sales. The management team really needs to monitor the business activities and goals to ensure that they direct the business in the right direction in order to grow. But how can the owners assess how the business is performing? It is critical for any business to assess the financial “health” of the business and identify issues and solutions for continued growth.
The accounting function is most important for assessing historic financial results. Depending on the size of the organization, having monthly or quarterly financial statements prepared by the accounting team helps provide some insight for management. Comparing results from the prior month or quarter can help management assess whether the company has performed well. For example, simple measures such as comparing sales, expenditures, receivables or inventory can help assess whether the company has performed well. Other more complex key performance indicators derived from historical financial data provide meaningful information for management to analyze. Other quantitative data such as employee head count, website or store visits, production results, etc. would be ideal to compare periodically as well.
Reviewing historical data for periodic comparison helps management to prudently assess the company’s performance. However, to grow the business, it is imperative to set targets and goals for the company to achieve. Preparing financial budgets for the next year helps set targets and creates a benchmark for the organization to meet the following year. Budgeting is a critical tool for helping management assesses the ability of the company to grow and identify issues as to why targets were not achieved. Also, it is important to think about re-investing into the business and assessing the return on investment. For example, it may be time to think about acquiring new equipment. Performing an analysis using financial data can help make the right decision.
Obviously, you cannot asses the company quantitatively alone.
Employee Morale and Firm Culture
It is important to stay in tune with the employees of the organization. Staff is the lifeblood of the organization as each one carries out their specific duties. Ensuring that the overall staff is happy and enjoy what they do helps ensure that the organization functions properly. Listening and communication between management and staff is critical to ensure everyone is on the same page and overall happy. Having a great work environment for staff is the best way to get the most from every individual. This helps ensure that the company is performing well.
If the company is operating in a competitive environment, it important to be aware of some of the move the competition is making. The goal of every company is to have a competitive advantage over their competitors. This ensures having higher market share and results in higher sales. If competitors are performing better, whether it is brand recognition, marketing or sales, management will need to determine what needs to be done.
Is the marketing generating more leads and eventually sales? Sales are what drive the business. To generate sales the company needs leads or prospects. To generate leads, the company needs a good marketing strategy. Having the right team and assessing whether the marketing is working or not is very important. Marketing can get very expensive for companies; therefore, it is the company’s goal to have a successful marketing campaign. And it is important to assess whether the marketing is working by determining how sales have increased from the marketing efforts.
Whether you are selling a product or a service, it important to know what customers or the general public think about the company. Understanding the overall impression that market has of the company can help management come up with solutions to ensure that the impression remains favourable and positive.
Assessing the company’s performance is a very detailed process and is unique for each business. We have covered only the tip of the iceberg in this post. MP Group assists with preparing periodic financial statements and providing detailed ratio analysis, identify key performance indicators and help identify issues. Measuring financial results helps management stay competitive and guide the business in the right direction. Furthermore, MP Group can help assess with decisions on whether to lease or buy or whether to purchase new equipment or not. MP Group helps many management teams of companies with budgeting, forecasts, and assessing business strategy or creating a business plan to make the best business decision. And helping companies make good business decisions is what MP Group is truly passionate about.