Did You Have A Great Year?
 By Greg C. Horn

It’s easy to have a great time and only later realize how much it cost. Conversely, it’s possible to feel like you’re doing terribly only to discover that when all’s said and done, things turned out pretty darn well.

When it comes to running your own business, deceptive feelings aren’t much help in evaluating progress or success. At year’s end you need something concrete to judge whether those months of elation (or depression) were accurate gauges. If you’ve deceived yourself – for better or for worse – you need to know the truth before embarking on another 12-month adventure.

So, what benchmarks should small-business owners apply to determine whether they had a successful year?

Some measuring sticks are more applicable to one business than another. But all of these will give you a more realistic assessment than relying on the ebb and flow of feelings during the year.

Profits And Revenues
These are perhaps the most obvious standards for measuring success. After all, you’re in business to make a profit, and revenues are necessary to do that.

Did you meet your profit goal? Did you at least meet your conservative forecast?

If not, that’s a red flag to delve further into the reasons for falling short.

Debt Reduction
Debt is a cancer on profits.

It’s difficult to stay in the black if you are plagued by debt siphoning off money. It’s hard to invest in the future when continually paying off the past.

If you have debt, you should have a plan for wiping it away. If not, expect all your other benchmarks of success to falter.

Customer Numbers
More isn’t necessarily better when it comes to customers. When counting heads at year’s end be sure to be discerning.

Are you adding a lot of low-value, high-cost customers, known as C grade and below? These folks are costly to persuade to buy, and usually costly to maintain. They nitpick and complain, return purchases rather than return to purchase. That’s expensive.

Or are you adding A-one, top-grade customers, the loyal ones, who return to buy again and again with little prodding. They’re the ones who love what you do and even market for you by word of mouth and referring others to you without being asked.

Know which customer is which before putting too much stock in a mere numerical increase in your customer base.

Faster Receivable Collection
There’s no truer application of the saying, “Time is money” than your receivables. If what you are owed comes in slower than what you owe goes out, you’re headed for the red side of the ledger, which isn’t a good place to be.

This benchmark has more than a little to do with the previous one about grade C versus grade A customers. The better the customer, the more likely you are to be paid quickly. The worse the customer, well, you get the idea.

It’s good practice to periodically (not just at year’s end) assess your receivables and spot the ones that drag along. Devise a plan for encouraging quicker payment and apply it. Then at year’s end you can see how you did overall.

You pay interest on money you borrow. Money you’re owed that shows up late is effectively money borrowed from you without paying you interest. Cut down on those free loans.

When you need a low-cost, effective method to collect delinquent accounts, turn to National Credit Systems (NCS), available with your AFS Membership. For one flat fee per account, NCS will take action on your behalf. Choose from three programs to meet your collection needs. You keep 100 percent of the money recovered. Get details at http://www.AFSwebsite.org.

Penetration Of A New Market
This is a relatively easy benchmark to measure because if you haven’t sold in a particular market niche before, every sale you make in that new niche should stand out like a sore (or in this case, a very healthy) thumb.

If it’s not overtly apparent, take the time to devise a method of flagging new market sales so you can segregate them from your traditional business. Only by measuring them separately can you determine whether your new marketing, advertising and sales campaigns to those new niches are being effective.

Benefit availability dependent upon membership level and state of residence and is subject to change.

(Posted December 2007)

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