By the midyear mark, businesses have six months of information to dictate where they need to reallocate resources and take corrective measures that will mitigate the impact of inefficiencies or ineffectiveness in the business during the second half of the year.
Here are seven steps to an effective midyear review that will help you build on your strengths while eliminating any weaknesses.
1. Compare your financial results to the budget
The strength of a business rests on its financial results and financial position which are reflected in the income statement, balance sheet, and cashflow statement. By looking at your business's midyear results, you are able to get a good indication of the overall health of your business. Once this comparison is done, it is important to investigate any material variances (discrepancies) between your actual results and your budget, and put corrective measures in place where necessary. You should also look closely at any unusual or once-off events, and consider the impact they may have on your business.
2. Review departmental and staff performance
The feedback from individual midyear performance reviews will provide you with valuable insights that should be considered as part of the overall midyear business review. Your business should have formalised performance measures and performance review processes in place. Once you have completed performance reviews, it is essential for you to reward good performance to avoid a potential midyear slump in morale, while putting the necessary measures in place to improve poor performance. This may seem obvious, but is a step that cannot be overemphasised.
3. Adapt to your external operating environment
As a business owner, you need to ask yourself if you are still operating in the same environment that you were at the start of the year. If not, you need to adapt to the current environment, by identifying the ways in which your business (or operations) need to change. Scout the environment – including global economic growth rates, general business confidence, exchange rates, interest rates, fuel cost drops and hikes, as well as events like national elections – and evaluate whether the current environment has changed compared to any assumptions you made when drawing up the annual budget.
4. Analyse your customer retention (and attraction) strategy
The midyear mark is a great time to relook at your business’s customer retention and attraction strategy to make sure projected figures are on track for the end of the year. Look at which customers you have lost and make sure you understand why. You should also look at which customers have moved over from competitors, and develop insight around this.
5. Re-evaluate your suppliers
It is a good idea to take the time to re-evaluate your suppliers in terms of their pricing, quality, and the service of their product. If better alternatives are available, you should carefully start the process of moving part your procurement over to these service providers.
6. Identify any inefficiences in your operating procedures
At the midyear mark, you should identify the sources of any inefficiencies and bottlenecks and look at innovative solutions to these problems. The theme of innovation should run throughout your business. This innovation should extend beyond products to also inclue the production process, administration, as well as all other departments.
7. Adjust the budget (if necessary)
If need be, you should make the necessary budget adjustments for any assumptions that you made that have proven to be incorrect or inadequate. Part of this process includes assessing your business's liquidity position and the working capital finance needed to achieve your business objectives. If your business has exceeded its growth expectations, then it may be necessary for you to rework your working capital finance needs and to put those facilities in place.
While a midyear review may not set the pace for a business strategy, it is instrumental in allowing a business to identify any problems with systems, processes, and employees, and to set up the necessary corrective measures. Conducting a midyear review brings about a renewed sense of focus, attention, and action. A holistic understanding of where a business finds itself at the midyear mark, is vital to stay on the correct track moving forward.
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