1. Key Performance Indicators can be a valuable tool in understanding your business. Tracking too many can lead to frustration and confusion. Here we highlight a few key indicators that you can rely on.

  2. An annual budget creates a roadmap to success – at least that is what has been drilled into every business owner. But there is a big difference between having a budget and building success. And there are a few easy ways you can fail at budgeting.
    1>  Your budget is not in sync with your strategic plan.
    Annual budgets have a short-term focus, which creates an intrinsic focus on “making the numbers each month. This is especially true when bonuses and incentives are tied to quarterly or annual targets. The fallout is that managers become reluctant to spend money on initiatives or opportunities that are not in the budget or have a multi-year timeframe.
    2>  It’s obsolete within months.
    Business conditions change – the last two years illustrated this in dramatic fashion, but even outside of those years, businesses endure changing conditions on a regular basis. Opportunities arise, major customers leave, suppliers disappear or are bought out and new owners change terms. Despite these changes, internally people are still trying to achieve the outdated numbers. As the business world becomes more dynamic, the static budget diverges from reality more and more.
    3>  It doesn’t motivate the right behavior.
    Depending on the perceived role of the budget, the behavior of different departments can function more for preservation than success. Managers may ask for larger budgets than needed to make sure they don’t get penalized the next year with a smaller allocation. Others may lowball targets to make their performance look better; as mentioned above, this is a larger risk when incentives are tied to budget measurements. Innovation is avoided and the result is that the company is looking to the past instead of the future. (In the military this is defined as fighting the last battle instead of the next one.)
    4>  It is ignored.
    Often the biggest reason for failure is that once the budget is finalized, the binder is put on the shelf, and that is the last time anyone thinks about it until the next year’s process starts.  For managers, the long-term success of the company is out of mind, replaced by “what results can I show this week or month”.
    Building an annual budget that includes these traps will almost certainly guarantee that your budget will not help your business succeed.

  3. Business Hurdles 2023

    2022 has been a challenge for many businesses and 2023 looks like more of the same. Three areas require special attention for the next year.

    1>  Staffing
    The Great Resignation is ending, and Quiet Quitting was probably more overblown than reality (nine to fivers and clock watchers have always been part of the work environment). However, finding quality employees and managing payroll costs will still be challenging in 2023.  Having a business plan and budget is a key part of understanding and controlling costs.
    Also, be aware of any new employee laws and regulations that start in 2023. Consulting with an HR expert or Employment Law Attorney is important to avoid labor or employment actions.

    2>  Inventory
    Supply chain issues mostly ending for now, but still fragile. The result has been that many companies have gone from empty shelves to overflowing warehouses. Walking the line between liquidating current inventory and avoiding more empty shelves will be key to profitability in 2023. Knowing your sell and replenishment cycles is one of the KPIs you need to focus on. And you need to be in regular contact with your suppliers to their cycles too.

    3>  Technology
    Cybersecurity is still a major concern. There was less publicity this year than the last several years, but hackers and scammers are still going full speed. The IT area is one where having an outside vendor, even if you have internal staff, can keep your company defended against these threats. An outside vendor brings in the knowledge that comes from seeing multiple varied situations every week, and as good as your IT staff is, it is hard to duplicate that knowledge when dealing with day-to-day issues.
    Business owners need to keep your eyes up. This can be hard when you are trying to grow and manage daily operations; but being buried inside your business risks being blindsided by changing conditions. Using outside resources for some administrative operations and to access detailed reporting on your business can help relieve this crunch. Outside resources = outside views. Outside support in Finance, Legal, Human Resources, IT, and Marketing will avoid surprises and/or missteps, with the additional benefits that those connections can lead to other connections and new opportunities.

    #Business #Planning #2023