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Growing Your Company

Will this Year be Any Different?

It may be too ambitious to plan how you want next year to be different from this one. Sentimental resolutions have expiration dates stamped all over them. And long, involved business plans leave no energy for implementation!

The perfect compromise is to measure a few key indicators and let the planning process emerge naturally. Take a few moments now to answer the following questions from your recent data:

  1. On average, how many hours did you work per week? About 45-50 is sustainable.
  2. How many weeks of vacation (away from the office) did you take? The more the better, since it is a good measure of how institutionalized your firm is.
  3. What was the size of your largest client? Your top 5 clients should represent 10-25% each of your business. Any single client that represents more than 35% puts your business at risk.
  4. Of all the new clients you began serving last year, what percentage came from referrals vs. your own marketing efforts? Referrals are flattering but dangerous if you rely on them. Aim for a mix of half and half.
  5. What employee turnover did you have? Below 20% might indicate insufficient management strength. Above 20% might indicate poor management ability.
  6. How much of your time is getting billed? Not how much is recorded, but how much is actually getting charged to clients. To get a quick idea, go to www.recourses.com and "take your pulse" from the calculator at the top. With a normal client mix, it should be 60% of all the available hours at your firm.
  7. What is your debt to asset ratio? Take your balance sheet and divide total assets into total liabilities. It should be between 0.20 and 0.60, with lower being better.
  8. How much cushion do you have? Take the total of your cash, savings, and investments (not including accounts receivable) and divide by fixed monthly expenses. The result should be 2.0 to 4.0, with higher being better.
  9. What is your equity (total assets less total liabilities)? What was it a year ago? Movement is slow, but the direction of movement is telling. It should be rising. These are just nine of the dozens of ways your firm can be quantified...and then compared to other firms your size. (A few of the other measurements that are more important than these are too difficult to synthesize here.) But if you'll answer these nine questions you'll begin to concentrate on the key measurements of change. The act of keeping score will make you a better golfer, even without taking lessons.

This article has been provided by ReCourses. For more information, please visit their web site at www.recourses.com