By James Chittenden
If your business runs like most, June 30 is the end of a day, a week, a month, a quarter, and half the year. One of the things your business should do at mid-year is a progress check. If your goal is to make $10 million in sales this year, then by June 30, you should have made at least $5 million. Are you at or ahead of goal? Good. Maybe it is time to experiment so that you can blow through the $10 million goal. If you are behind, step on the gas. Either way, maybe it’s time to switch things up.
Here are five things your business should do at midyear.
1. Update your fixed expenses.
Watch out for creeping expenses. An eight percent increase in your internet service here, a 30 percent increase in your insurance bills there. It is easy to omit updating these and lose track of them. If your profits are less of than they were on December 31, but your sales are the same or better, you are having a bottom-line problem. These extra costs snuck up on you. One of the things your business should do at mid-year is to update these costs.
Watch your bills and account for increases or decreases in your phone bill, rent, salaries, insurance, etc. Use this business budget calculator or free template to track these costs, and easily carry them over from month to month.
Be liberal when predicting expenses, and be conservative when predicting sales. Think of “thirds”. Take all of your meticulously planned expenses. Now triple them. Now imagine your best marketing projections of first year sales. Reduce that to about 1/3 of what you planned.
If you can still make a profit, consider the plan workable.
We have created a book that walks you through expenses of operating your business, complete with fillable pages. There are many other costs and not all of these will account for your unique situation.
2. Re-visit your break-even point and reset your sales goals.
As we said, costs creep up on you. Salaries, taxes, phone bills, etc. may increase in small ways but add up big over time. Since you must make the sales to cover those costs, you have to keep updating that profit/loss. In times of high inflation, these costs will have changed by midyear. Updating your break-even point is one of the things your business should do at mid-year
Set sales goals that cover all fixed and variable expenses. In order to do that, you need to know what margin you must collect.
In this video, you will learn exactly how to set your goals and meet them, including profit:
MANAGE PRICES BY MARGIN, as opposed to simply setting markups. For an explanation of markup vs. margin, see here and watch the videos.
If you are a service business and not a retail business, you still have costs that include the hourly rate of yourself and employees, along with costs of travel, laptops, or other expenses. Set margins in accordance with your industry. Learn more here. Margins for professional services have averaged 30 percent in recent years.
3. Update your prices.
Checking and adjusting your prices is another one of those things your business should do at mid-year. Do not just set markups and try to sell. Set accurate profit margins, NOT markups. There is a difference. Calculating margins is simple, so learn this simple way to set profit margins.
COGS (Cost of Goods Sold) is the direct cost of producing the goods that a company sells. It includes materials and labor required to produce the goods.
Contribution Margin. The Contribution Margin is how many dollars each individual item sold contributes to the total gross margin. It is the selling price of the item minus the variable cost per item, and those dollars are now available to cover fixed costs.
Contribution Margin = Sales Revenue – Variable Cost
Each industry has a range of margins, so determine where you should be within that range. An example may be convenience stores, which in recent years generally set margins anywhere between 29 and 35 percent. The cleanest ones with the highest levels of service may be at the higher end, while high-volume, lower service quality may be on the lower end. If you don’t know the exact margins common in your industry, learn them.
Where can those be found? This site is free, but rather nonspecific about businesses within industries. However, it can serve as a guideline. Keep in mind that you may see it in “median” view, which means that the number provided is directly in the middle of the range. Half of the peer businesses will sell at higher margins and half will sell at lower. For more specific data on margins and other crucial financial measurements that accounts for your sales size, exact location, and exact business, see Bizminer.
This simple one minute video will help you understand how margins are calculated and why.
4. Stay in touch with current and prior customers.
Another one of the things your business should do at mid-year is revisit your current or previous customers. Develop a process for doing this regularly.
Did you know…
According to the Harvard Business Review
- Acquiring new customers for your business is anywhere from 5 to 25 times more costly than retaining an existing one.
- There is a 60% to 70% success selling rate to existing customers, and a 5% to 20% success selling rate to a new customer.
- Increasing customer retention rates by 5% increases profits by 25% to 95%.
- Average cost per lead across industries is $33 to $34.
What are some ways to upsell current customers?
- Ask probing questions in anticipation of building a buyer persona. Refine your buyer persona. Only talk to people relevant to your target market. If you need clarity on what that is, HubSpot has a buyer persona generator .
- Make customers into cheerleaders. Give them things they can use and profit from. Good content helps with that. What to write about? Once you have mastered some simple guidelines , this task becomes easy.
- Show care. Keep in touch and follow up. This is rarer than you think.
- Think of all the ways you can upsell clients. Don’t start with your most expensive upsells. Try tiered selling.
- Explain why there are benefits to taking certain actions based on their pain points.
- E-mail marketing can provide a 3800 percent return on investment if done right!
E-mail marketing gifts for you
- We could all use a little education. Here is a free e-mail marketing course.
- You will need great subject lines, or else your e-mails will not be opened. Here are some good ones for you.
- Cold e-mails are a little easier if they have been written for you. Here you go.
- If you are prospecting, some high-converting, pre-written e-mails could come in handy. Try these.
- And finally, you need to sign off properly. Use this signature generator.
5. Tax Projection
Tony Morales is a CPA at Miami area-based FinTax . In over a decade of small business accounting, Morales has found a few trends of what business owners do correctly as well as common mistakes. Morales offers this tip:
TM: “Leverage your accounting system to work for you by forecasting your financial activity to get a glimpse of the potential future. By performing tax projections, you can budget and plan for tax saving events, like big purchases and their tax impact.”
As another one of the crucial things your business should do at mid-year, Morales recommends estimating, or projecting, your taxes midway through the year. His clients usually do this around July; others do it throughout the year. Others don’t do it at all. You can send quarterly payments or withhold enough to send them while depositing that money into an interest-bearing account.
TM: “You wouldn’t believe how disorganized people are with their finances. Not properly tracking your business financial activity often leads to missing out on precious tax deductions come tax time.”
Recommendation: Financial organizing software such as Quickbooks is a good start. Hire whatever personnel necessary such as a bookkeeper, accountant or CPA to handle these duties if you are unable to do it yourself.
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Finance, because it is the scoreboard, and keeps everybody paid. Change the “score”, find bookkeeping help, and find capital.
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