Typically at year end businesses are frenetically scrambling to close their books (at least preliminarily) until their accountant performs their final review. That could be anywhere from now until April, or if on extension, quite a bit later in the year.
Often, business owners will wait until meeting with their accountant to analyze and review the past year. There are so caught up in the everyday challenges of operations that they don’t put time and attention to much of anything else. However, there are many benefits to taking stock of prior-year performance in order to plot and plan an effective business strategy for the coming year.
So, take a moment. Stop. Breathe. And most importantly, think.
What did you like about the past year’s performance? What didn’t you like? Are you prepared for growth in the new year? Do you even want to grow in the new year?
That last question might seem like a no-brainer. But actually, not every company truly has a desire to grow and change. Status quo is acceptable to some. And that’s okay, if that’s what you truly want from your business. Even if business-as-usual is your objective, you still must strategize to avoid losing ground.
One of the best tools for any business review is a SWOT analysis. No, that's not a typo. We aren't suggesting that you bring in a SWAT team. SWOT is an acronym for strengths, weaknesses, opportunities and threats. Let’s take them one at a time.
- Strengths: What gives your business a competitive advantage over your peers? If you’re a brick producer, perhaps it’s the quality of your product or the unique design of your pavers. If you rent equipment, it could be the fact that your equipment is well-maintained, better than all of your closest competitors. Or it could be that your company provides the highest degree of customer service known to man.
- Weaknesses: What disadvantages does your company have? For example, are your peers open for business longer hours than your business? Do they provide more services in some area then you do? Do you often run out of inventory? Are your deliveries often late? Is your staff poorly-trained or uninterested in the company’s success? Whatever it is, be honest. You can’t fix a problem that you don't first identify.
- Opportunities: Think of opportunities as reasons your business is likely to prosper. What opportunities exist in your industry market? Is your business perceived in a positive way? Has your market recently changed or grown resulting in more opportunity for you? Another very important question: Are you facing a small window of opportunity or is it ongoing?
- Threats: Threats are external factors that can place your strategy or business at risk. While you have no control over these, you can prepare now with contingency plans should these events occur. Who are your existing competitors? Are any potential competitors on the horizon? Are you under-capitalized? Is an unfavorable trend developing that could have a negative impact on revenue or profits? Is a downturn in the economy or a change in government regulations expected? Are new products or technology being introduced that could make your offering obsolete?
SWOT COMPLETE – NOW WHAT?
Okay – so you have your SWOT results. What’s next?
It’s time to put all that great information and data that you just gathered into action. You now need to build a business strategy. If not, the SWOT analysis was nothing more than an exercise...going through the motions. It’s kind of like looking in the mirror, seeing a big smudge of dirt on your face, and walking away without wiping it off. Looking in the mirror was pretty much pointless, right?
You’ve identified your strengths. Now leverage them to maximize your opportunities. At the same time, put these strengths to use to minimize the threats you’ve identified. Work on weaknesses in order to build more opportunities. Use the positives to offset the negatives (threats) that are out of your control.
Year-end is the perfect time to implement a SWOT analysis and strategically plan for a productive new year.