2021 is a new year with fresh hopes for a return to business as usual. The transition may be slow, and for many business owners, the reality is there will be a focus on creating their new normal.
Words like pivot, adapt, and hold describe the recent business environment. Not much can be done about the past, so it's time to focus on the future.
Business owners will need to Recover, Embrace, Innovate, Accelerate, and continue to be Agile.
What Should You Be Focused On?
Our experts agree there are six areas you should focus on as we move out of the pandemic and look ahead in 2021 and beyond.
- Innovative Ways to Grow Your Company
- Benchmark to Key Metrics
- Transparency Through Risk Management
- Agile Working Capital
- Assess Your Entity Choice
- Embracing Tax Credits and Deductions
All of these will impact your bottom line.
1. Looking for Ways to Grow Your Company?
Being nimble and adjusting to consumer demand is vital to the survival of all businesses. Some companies have thrived during the pandemic as their products and services were in demand. The future challenge is determining if this is a sustainable growth area and how to keep capitalizing on that consumer demand.
If your business faced more challenges during the pandemic, then look at ways to diversify to help you keep market share. Be creative. Think outside the box. Enlist your staff to brainstorm ideas to expand your client base.
No matter which of these categories your business is in now, we know the future will be different. Recent events will impact consumer behavior. You may be looking at a longer time frame to rebound or a slowing of the recent demand as the business environment continues to change. As you develop your strategic growth plan for the next five years, focus on the key metrics discussed next.
From that baseline, you can determine where you want to make adjustments to current service or product lines and you will discover where you have capacity to realign for new offerings. Combine your creative brainstorming with your numbers and financial trends to ensure a successful strategy. Utilize outside experts to help you look at your business from a different perspective. Often that view from the outside will give you a perspective you might not have considered before.
2. Key Metrics to Measure
Business owners need to answer the simple question of:
"What are the key metrics you expect to measure your business against in 2021?"
Those metrics could be different for every company and it is up to you to decide what you want to measure against. These should be determined at the beginning of the year by your leadership team and calculated monthly, quarterly, and at year-end.
These metrics are your performance indicators that measure your business's health and they can be compared to your peers. Here are a few you can choose from:
- Gross Profit Margin should be calculated for each product or service line, as well as used to determine your company's overall health.
- Net Profit Margin should also be calculated for each product or service line. Just calculating this for your overall company doesn't give you enough information to determine areas that are doing well or those that need more attention. Dive deeper into this area as the data should drive your future decisions.
- The Current Ratio measures your assets against your liabilities to indicate your ability to pay short-term debt.
- Working Capital Turnover Ratio assesses sales against working capital and shows how much company value you have available. See number four for more information on working capital.
Work with your CPA to determine the metrics you want to measure against and be consistent throughout the year by evaluating and modifying operations to improve those benchmarks.
Ready to find out what the other 4 areas are? Download our eGuide:
Our CPAs take the time to learn about your specific needs and assemble a team of advisors with the particular expertise you need to get the job done. We provide our clients with accounting, audit, and tax services and help them keep a strategic focus on growth and success.
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