It’s important to set goals for your business. It’s also important to track, on a month by month basis, how close your actual finances are to those goals.
You need to know if your sales are coming in close to budget, and if your overhead expenses are in line with your budget.
If you do your yearly projections between November 15 and December 31 each year, you know to the dollar what your projected overhead expenses should be on a monthly basis. If your sales come in on target with your projections, and if your overhead spending stays in line with your budget, at the end of the year you should have the profit projected.
At the end of each month, run a Profit and Loss statement to see what your overhead expenses are doing. Watch them to make sure they are on budget. If you are spending over budget, find out why and make changes.
And if your sales are not up to your projections, you need to act. Let’s say it’s June 30 and sales are down 15% from your projections. You need to do two things immediately. First, cut your overhead spending by at least 15%. Cut overhead immediately, don’t decide to “wait until next month to see what happens.” Sit down, pencil out where you can reduce overhead expenses, then do it. That includes your salary by the way. Nothing is sacred.
Then, get busy and figure out why sales are off and what you can do to get sales back to your goal. Almost always, sales drop because leads aren’t coming in the door. And leads aren’t coming in the door because you stopped or reduced your advertising or promotions.
Advertising is a 24/7/365 proposition. 24 hours a day, 7 days a week, 365 days a year. When the economy slows down, you must increase your advertising because there are fewer people buying the services you provide.
Always know the financial status of your business, and be fast and nimble enough to make adjustments as necessary.