When it comes to financial reports review or analysis, many focus on budget vs actual performance.
Did we make a profit? How does it compare against the budget?
If you are a bit advanced, how is our profit compared to competitors?
The balance sheet growth, the cashflows etc
So financial statements tell you how good you are performing? Do they tell the full picture?
Of course there have been attempts to get a balanced picture such as the use of performance metrics in other areas or Key Performance Indicators (KPIs) and The Balanced Scorecard.
But how often are these measures used by small businesses?
Welcome to the world of lost business or hidden costs.
Self Assessment
- How much money did you lose due to the absence of a Digital Strategy?
- How much did you lose due to non disclosure of prices on your ads?
- How much money did you lose due to extortionate pricing?
- How much money did you lose due to bad customer experiences?
- How much money did you lose due to customer inconveniences?
- How much money did you lose due to insistence on USD payments?
- How much money did you lose by not hiring experts?
- How much money did you lose due to high employee turnover?
- How much money did you lose by using obsolete machinery?
- How much money did you lose due to non registration of your business?
- How much money did you lose by not partnering with others?
What you don’t know doesn’t hurt right? Well not so true….you will eventually encounter problems and many often regret when it’s too late.
The focus is often times centred on selling, selling, replenishing stock and selling. If the income comes in then we are fine BUT we never think of lost opportunities because most of them are invisible.
If a potential client searches for your business online and they don’t find you…no official record is registered in your books!
If you post an ad with no prices, no one comes to you to complain!
Perhaps you can record the number of clients who inquire about your products and services intending to use Ecocash and when you insist on cash, they walk out of the door?
How do you track the number of clients lost due to your employees being rude to clients?
Difficult world
When reviewing performance, focus on what is measurable –analyse for decision making but also PAUSE and reflect. What is the value of lost business? How do you measure it? What actions are you taking to recover potential lost business?
With most entrepreneurs not fully appreciating the value of financial experts, the results is you have to be a CEO, HR Manager, Marketing Manager, Finance Director, Production Director at the same time! Too many skills demanded at the same time and honestly no one can possess all of these skills at the same time.
This is why most start-ups fold within 6 months and for those that ride the wave, less than 15% remain standing on both feet at the end of 5 years!
So during the extra 2 weeks of the lockdown, take a pen and a paper and calculate the value of lost business—create a corrective plan and implement it as soon as yesterday.
