BUFFALO GROVE, Ill., Dec. 7, 2010 /PRNewswire/ -- One of the most powerful closing tools a business owner can use in the fourth quarter of every year is to perform an annual review of the business operations to improve productivity and profitability.
"It is often said that the definition of insanity is to do the same thing over and over again and expect different results," said Tyler Burgess, President of GPS, a business development firm based in the Chicago area. "All too often small business owners hope their business will improve, but fail to take the most elementary step in improving their business - perform a comprehensive review of their annual performance."
All major corporations conduct annual reviews of their performance as part of their normal business operating procedures. Annual business reviews are considered to be a "best practice" among industry leaders. The investment advisory services of all Wall Street brokerage firms regularly conduct independent reviews of the financial performance of publicly traded companies to provide the best advice for their clients concerning the future performance of the companies.
Even outside the business world, annual reviews are commonplace. All professional sports teams conduct an annual review of player and team performance, which becomes the springboard for improving the team. Burgess noted that the annual performance review by NFL team owners has resulted on average with 9 of 32 coaches fired for failing to meet ownership expectations in recent years.
"The most important question facing every business owner at the end of the year is how are they going to improve their business and their profits for next year," Burgess said. "The most probable path for success for entrepreneurs is to model themselves after the best managed and most profitable companies in business today."
Business owners can benefit by bringing in a business consulting expert who has no connection to the business, Burgess said.
"Business owners will benefit more if they open their doors and eyes to an objective analysis performed by someone who does not have any built-in bias as to how the owner is managing his business," Burgess said. In addition, the business analysis should include a review of his tax situation, exit strategy, and estate planning.
To understand the importance of estate planning, Burgess said there is a simple self-test a business owner can take by asking himself these simple questions: "Are you running your business like you would if you were going to try to sell it tomorrow? Are you building a business that is worth buying? If you died tomorrow in a car accident, could your business run without you so that your family would get the benefit of all your hard work? Or, would they have to sell the business below market value to raise the money needed to pay the estate taxes?"
What the business owner needs to do is confront the truth, no matter how painful the truth may be, Burgess said. And, if the business owner finds out through his self-assessment that he has failed to adequately plan for the future, now is the time to bring in a team of consultants to make a mid-course correction in the business plan for 2011.
Moreover, one of the other advantages of doing the annual review now rather than waiting until after the calendar year ends for 2010 is the business owner can get a jump on competitors who most likely will wait until the year ends to do their performance review, Burgess said.
"By performing a 4-year trend analysis now, which would include the first three quarters of this year, combined with the results of the prior three years, a business owner can acquire all the information needed to perform a trend analysis of the business concerning costs and other factors affecting the bottom line," Burgess said. "The trends established in the business over the past three full years and the first three quarters of this year are not going to change in the final quarter of this year. By reviewing the financial trends now, rather than waiting on the CPA for the business to put together the year-end financials for this year, the business owner can hit the ground running in January and get a jump on the competition."
"At a time when the economy is still trying to find its footing, figuring out how to get an edge on your competitors can give every business owner a head start on making 2011 a profitable year," Burgess said.
GPS is a full-service business development group and general management consulting firm focused on small and medium-size, privately held companies in North America.