How To Keep Your Small Business Goals On Track With An Annual Review

This article was originally posted on LinkedIn.

Tim Ferriss, author of “Tools of Titans” and “The 4-Hour Workweek,” doesn’t believe in New Year’s resolutions. He feels they are a complete waste of time. I would tend to agree. As a small business owner, I never found much value in them either. What I have found great value in, is an Annual Review. I’ve been doing an end of year review in my businesses, for more than 25 years. 

To find out if you’re on the right track with business and sales goals, it’s important to look back over the past year and analyze where you really made your money and spent your time. An Annual Review makes goal setting a breeze and helps you to uncover the most profitable sources and types of business.

Referral Sources and Business Categories

I’m one of those spreadsheet geeks, so I start the Annual Review process by opening up Excel. You can also use Google Sheets, if you prefer. I find this exercise takes several hours, depending on how detailed you get with your information gathering, how organized your business records are and how many contracts or sales you’ve closed.

I start by reviewing each contract or sale from the previous year. I record in my spreadsheet how much money I made from individual clients and the source of the lead or referral. It’s important to keep track of your referral sources. Record where every client came from, even if it’s “word of mouth.”

To add another level of detail, you can record what business category each contract or sales falls into. For me, I have pay-per-click contracts, SEO contracts, website projects, consulting arrangements, speaking gigs, etc. If you don’t have multiple products or services, you can skip this part.

Even if your business is a retail oriented business, you can still get value out of this exercise. Maybe you have different product lines instead of business categories or maybe you have a wholesale division, an e-commerce division, and a brick-and-mortar location.

Small Business Annual Review Business Categories

To find out who the most important referrer was to your business last year, add the totals of your contracts by the referral source. It can be a real eye-opener to business owners when they see the total amount a customer spent over the course of the year. Then add up the totals of your contracts and sales by the category of business they fall into. This will tell you want type of service or what product added the most to your bottom line. You may find that one area of your business is grossing considerably more than another.

Don’t stop there or you might not uncover the true value of this exercise. The referral source that brought you the most business in the past twelve months, might not be where you want to focus the majority of your sales and marketing attention in the upcoming year. Stick with me.

Proposals & Quotes: It’s All A Numbers Game

Now you want to analyze how many proposals and quotes you submitted by each referral source. I create proposals in PowerPoint and save them as a PDF file. I save all the files to one folder on my computer that is identified by the year. That makes it easy to go back and count how many proposals I sent to prospects. If you want to add another level of detail, include the referral source in the name of the file. That makes the year end review process a breeze.

Now add up the totals. Maybe you sent 50 proposals to prospects that were recommended by friends and colleagues, 75 proposals to prospects from networking events and 150 proposals to prospects from an online lead generation system.

Here’s where the magic takes place. Divide the number of clients you gained from each referral source by the number of proposals you sent and multiply the outcome by 100. This will give you a percentage known as your conversion rate or close rate.

Small Business Annual Review Close Rate

Your close rate will uncover what referral sources are most valuable to your business. If you’re closing 10% of the proposals you submit to referrals from LinkedIn but only 2% of the proposals you submit to Thumbtack, then you might want to spend more time in LinkedIn.

I found that proposals submitted to prospects that had been recommended by colleagues or I had met in person, had a close rate three times higher than Upwork and LinkedIn Pro, two online systems where I generate leads. This was no great surprise. What did surprise me were the proposals I was submitting through Upwork converted 1.5 times more frequently than proposals I submitted through LinkedIn Pro.

If you would have asked me a month ago which one I thought would convert more business, I would have guessed LinkedIn Pro. I would have been wrong. Data doesn’t lie. It has no preconceived notions. It makes no emotional decisions. That’s why this exercise is so important.

What Is Your True Cost of Doing Business

It’s great when a prospect just appears out of thin air or one finds you on Google. You can now justify what you spent on all the search engine optimization you had done. Leads that you get from various online sites, business matching services, or professional organizations, do come with a cost.

Google Adwords, Upwork, Angie’s List, Thumbtack, and LinkedIn Pro, among many others, all have pay-per-click costs, fees and/or monthly charges. Which one is taking the biggest bite out of your bottom line? Include a column in your spreadsheet to show what each referral source cost you in fees last year.

Are Some Contracts Larger Than Others?

Take a hard look at your average contract size. I found that LinkedIn Pro contracts, for the types of online marketing work I do, were 2.5 times the size of the contracts that I was getting from Upwork. Even though my conversion rate was higher on Upwork, LinkedIn Pro only cost me $60 a month, where Upwork was taking 10-20% of every contract. All important considerations to help me decide where I want to spend my time, and my money, in the upcoming year.

Small Business Annual Review Average Contract

Setting and Meeting Financial Goals As A Small Business

Another way to use the information from an Annual Review is helping you figure out how to meet the financial goals you’ve created for your business. You should have goals that are established, written down, shared with employees (if you have any), and that you consciously work towards every day. No one wants to wake up bankrupt or unable to make payroll. You also don’t want to discover 29 days too late that you aren’t going to be able to pay your rent or your mortgage. An annual financial goal and monthly goals will help to keep you on track.

A good place to start to help you figure out this number is to add up all your business expenses. Consider your salary and salaries of employees. Would you like a raise? Do people working for you deserve one? Also take into account any large purchases you’d like to make in the upcoming year. Wouldn’t it be great to pay cash and not have to borrow money for those expenditures? Add up all these numbers and this will give you a number to shoot towards.

Let’s say you want to gross $500,000 in the upcoming year. All you have to do is work backwards to develop a realistic plan for the next twelve months.

Small Business Annual Review Goals

A Bit Of Math To Help You Keep On Track

Your Annual Review uncovered your conversion rate and your average contract size. From here, you can easily figure out how many proposals you need to send out each month to meet your financial goals. It’s a heck of a lot easier to meet your goals, when you know exactly what you’re striving to achieve. Here’s the formula:

Small Business Annual Review Sales and Proposals

Don’t let a daunting number of proposals discourage you. Break it down into bitesize chunks. Consider who on your team you can delegate some of this work to. If you need to send out 120 proposals in the upcoming year, that’s 10 a month or 2-3 a week. You can do 2 or 3 a week! Make it a priority! Schedule time every day to actively look for potential jobs and new clients. Then get those proposals out!

I find that keeping a visual scoreboard in the office, helps to keep everyone on track. I record the number of proposals I’ve sent out and the number of contracts I’ve won. I have a whiteboard that hangs on the wall, that I can see all the time, plus I keep more detailed records in my spreadsheet.

If you need an extra push to keep your proposal writing momentum up, take your gross sales from last year divided by the number of proposals you sent, to establish a monetary value for each proposal. That can give you a little added encouragement when you’re just not in the mood to send out one more quote. When you realize that each proposal you’re sending equates to $100 or $200 or more, it can help keep your momentum going throughout the month.

1% Can Be a Real Boost!

Wouldn’t it be great to close more business without doing more work? That’s what can happen if you increase your company’s conversion rate. Even a one or two percent increase can have a huge impact on how much business you bring in. Ask yourself and your team, these questions to help uncover ways to increase your conversion rate:

  • Would offering a money back guarantee help close more contracts?
  • Would offering to do a small “trial” contract or project help you to get the big one?
  • Would adding an additional service for the same price help?
  • Would providing a testimonial or two from a satisfied client give your prospect the confidence in you as a small business?

Don’t automatically slash your prices. Your work is valuable and you need to be paid a fair wage.

Do You Love What You Do?

Have you checked in with yourself lately to take a happiness inventory? Are you enjoying what you’re doing? This is an important part of being in business and life in general, so if this hasn’t been something you’ve considered, make it part of the review process. Ask yourself what type of work, contracts, and clients you enjoyed in the past year and which ones were a pain in your butt. We’ve all had those clients that make us want to quit what we’re doing and just weep in the corner, but is there a correlation between the business that you loathed and the business that you loved? Really put some thought into this one.

Small Business Annual Review with Employees

I’ve had areas of my business, that for whatever reason, brought out the worst clients. I hated doing these jobs and knew when I was waking up each morning with a sick feeling in my stomach, that I needed to delete this business category from my offering.

If you’re just starting out, you may have to take on contracts and clients that you’d really rather not, but in the long run, no one wants to be miserable in the work they’re doing. That’s one of the reasons that we’re all in business for ourselves. Right? To do the work we love to do and to pick the clients that we want to work with.

Use this review process to make sure that you’re enjoying your work. If you’re not, consider getting rid of the business category that is causing you pain and unhappiness.

Was That Time Well Spent?

There is one last consideration in the Annual Review. What contracts and clients are sucking too much time and energy from your schedule? If you keep track of the time it takes you to produce and work on each contract that you have, you can add that hourly number into another column on your spreadsheet. Divide the number of hours by the amount of money you made to uncover what your true hourly rate is. Hopefully you’ll be delighted and not disappointed.

Small Business Annual Review Hourly Rate

Look at your real hourly rate across different business categories and referral sources. You’ll discover your most profitable source of business and where it’s coming from. Plus, this will point you in the direction of where you really want to be spending your time in the upcoming year. If you have employees, figure out what their cost to work on various contracts was.

If you haven’t kept detailed time logs on each contract, that’s a great goal for the year going forward. It will really help you evaluate where you should be spending your time and what you should be charging.

A Free Spreadsheet! What Could Be Better?

As an added bonus, I’ve put together a sample spreadsheet in a Google Sheet that you can download and start using today for free. It has the formulas I’ve discussed in this article built in. Just add your numbers and information to start analyzing your progress.

Consider keeping track of your contract and proposal information throughout the entire year so you can have an accurate record of your progress. You may even want to start doing a mini monthly review, every thirty days, to see where you stand. Include employees in this discussion so they can understand what their part is and what they need to do to help the company. If your business is meeting its goals, you might be able to ease off the number of proposals you’re sending out each month. If your business is falling behind its goals, you’ll know to ramp it up.

Now you’ve got a game plan for an annual review and a monthly review that will help you get your small business on track for the new year. If you’ve got a process or procedure you use at year’s end to help meet your business goals, share it below.


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