A Thorough Year End Business Analysis Provides Educated 2012 Predictions

Retail OwnerRetailers, while not acclaimed fortune tellers, quite often are asked to predict the future. What products are going to sell well during the holiday season? How much inventory must be purchased to meet demand? Will markdowns be required? And as the fourth quarter comes to a close, retailers are expected to make the largest prediction of all: Can growth and profit be expected in the new year? Without proper analysis of your financial situation, this prediction is nothing more than an uneducated guess. Leanne Hoagland-Smith, a Chicago area business consultant and coach, suggests that before forecasts are made and planning begins for the new year (based on these uneducated guesses), retailers must perform a thorough evaluation of their business and its current success. This can be done by answering the following five questions:

Questions to Consider

1) How did this year’s sales compare with sales in the past three to five years? If your business has a history, use the archived statistics to your advantage. Look for trends within your sales performance. Hoagland-Smith emphasizes, “You can predict, based on the analysis what will happen in the future.”

2) How did this year’s profits compare with profits in the past three to five years? When measuring profitability, add up revenues and then subtract expenditures. Every little bit counts, and if you are saving/earning a little more each day, week, month or year, you are making a profit. Profitability is the key to sustainability.

3) Did your business meet its goals? While most retailers share a similar goal in making profits and increasing customer traffic, each store owner may have a list of goals they were hoping to meet and exceed for the year. These goals could be in sales, marketing, management, finances and more. Meeting goals shows determination, innovation and makes next year’s goals that much easier to attain. If you haven’t made goals in years past, consider this an opportunity to start your success off on the right track.

4) Are repeat sales up, down or flat? Remember, the target is not only new customers, but loyal customers who continue to add to your bottom line and provide free marketing through recommendation. Hoagland-Smith mentions, “Encouraging repeat business increases profitability because you don’t have to spend profits to bring in new customers.”

5) Is overall equity up, down or constant? While your business may seem like your life, as you continually pour you blood, sweat and tears into it, the real value can’t be determined by sentiment. Looking over balance statements and considering items such as the property’s worth, sales figures and the current customer base may help give a more accurate perspective.

This article has been adapted from a piece on the Intuit Small Business Blog.