Annual business review checklist for founders
An annual business review is a short, structured look back at your year before you plan the next one. Do it once, in a quiet week, and you will set goals from facts instead of guesses. This checklist gives you the numbers to pull and the questions to ask.
Why review before you plan
Most founders set next year's targets from memory. Memory favors the big wins and the loud problems. A review replaces that with a page of numbers you can point to.
The Internal Revenue Service tells U.S. business owners that good records show whether the business is improving, and they also show which items are selling and what changes to make. That is the point of a review. Your records become the page you plan from.
Block half a day. Mid-December works well because the year is almost closed, but your books for the last weeks will not be final. Plan to refresh the figures once in January.
Sources: Internal Revenue Service, Publication 583, Starting a Business and Keeping Records (irs.gov/publications/p583), section "Why Keep Records."
Pull five numbers first
Keep it small. Five numbers tell you most of the story. Write each one next to last year's figure if you have it.
- Revenue: total sales for the year, and by month.
- Gross profit: revenue minus the direct cost of what you sold.
- Net profit: what is left after every cost, including your own pay.
- Cash in the bank: today's balance, and the lowest balance you hit this year.
- Money owed to you: unpaid invoices, and how old they are.
Look at the trend, not only the total. Revenue that rose every month tells a different story from revenue that spiked once. A profit that shrank while sales grew is a warning, and you should find out why.
Sources: general business practice; no outside source is needed for these steps.
Check where the money went
Next, sort your costs into groups. Common groups are people, rent, software, marketing, travel, and tax and fees. Add each group and divide it by revenue. That gives you a share, such as "rent was 8 percent of sales."
Now ask three plain questions. Which cost grew faster than sales? Which cost do we pay for but barely use? Which cost brought in customers, and can we prove it? Cut or cap the first two. Protect the third.
Make sure someone in the business owns the routine money jobs: invoicing, paying bills, watching cash, matching the bank statement to your books, and payroll. If that someone is you, list those jobs and note which ones slipped this year. A late bank reconciliation is a common reason for a surprise in December.
Sources: general business practice; no outside source is needed for this step.
Look at customers, product and people
Numbers on the page are only half the review. The other half is how the business actually works.
For customers, list your top ten by revenue. Ask how much of your sales come from the top three. If one client is more than a third of revenue, that is a risk to plan for. Then ask who left this year and why. Call two of them if you can.
For your product or service, ask what you sold most, what earned the best margin, and what took the most effort for the least return. These are often three different things. Plan to sell more of the second.
For your team, ask who carried the year and who is stretched. Ask what one hire, tool or process change would remove your biggest bottleneck. Write the answer down with a rough cost.
Finish this part by listing three things that went better than planned and three that went worse. Keep each line to one sentence.
Sources: general business practice; no outside source is needed for these questions.
Check your records and obligations
A review is also a good time to tidy your paperwork. Gather bank statements, invoices, receipts, payroll records and contracts for the year. File them in one place with clear names.
Then list the dates that are coming up. These include tax filing deadlines, license renewals, insurance renewals, lease end dates and loan payments. Put each one in your calendar with a reminder two weeks ahead. Rules on how long you must keep records differ by country, so check the tax authority's guidance where you operate.
Finally, ask whether your business structure, bank accounts and insurance still fit the size you have reached. If you are unsure, book a short call with your accountant.
Sources: general business practice. Record-keeping periods vary by jurisdiction, so confirm them with your local tax authority.
Turn the review into next year's plan
End with decisions, not notes. Pick no more than three goals for the next year. Turn each goal into a figure tied to a deadline, such as "raise net profit from X to Y by the end of September."
For each goal, write the first action, the person who owns it and the date you will check it. Put a short monthly check in the calendar now. Fifteen minutes with the same five numbers will tell you if you are on track.
Last, save your review page. Next December, it becomes your comparison. A review you can compare with is far more useful than one you start from scratch each year.
General business information, not financial, tax or accounting advice. For your own situation, an accountant can check the numbers behind your review.
Sources
Internal Revenue Service, "Publication 583, Starting a Business and Keeping Records," irs.gov/publications/p583.