This is according to Matthew Cumming – Regional Investment Manager for East Africa at Business Partners International, a subsidiary of Business Partners Limited (BUSINESS/PARTNERS), who says that businesses which do not allocate time mid-year to reflect and plan are running the risk of not operating at their full potential.
“The questions asked in the locker room at half time are strikingly similar to those that a business has to ask from time to time: Are we ahead or behind with where we wanted to be? What worked well? What didn't work well? What impact has the competition had on us? What opportunities did we miss? What competitor weaknesses did we not capitalise on? What do we need to do in the second half? What changes need to take place and in what area do we need to up our game?
“The benefits of such an exercise are hard to overstate as it helps the business owner to crystallise the business’ strategy for the rest of the year, clarify the challenges that lie ahead, celebrate and strengthen the successes of the past six months, and then prompt the necessary changes. The process also tends to unlock ideas, strategies and solutions not previously thought of.”
Cumming adds that this kind of formal planning session is by no means reserved to big corporations. “In comparison to big corporations, it is much quicker for a small business to adapt its strategies in reaction to a market challenge or an opportunity, and a mid-year planning session is an ideal method to ensure that the business makes use of that advantage.”
Depending on the complexity and size of the company, the time needed for a half-year review will differ, says Cumming. “This will depend on how good the business’ systems are, but if all the necessary information for such an exercise is up to date, reliable and available, then the business will save a significant amount of time.”
While there is no prescribed way in which to structure your mid-year review, Cumming offers the following guidance on what should be considered when conducting the review:
- The cash-flow forecast should be central to the process.
- Adopt an ‘all-encompassing’ approach: Reflect not only on the sales targets, but also on staff members who may need to be re-motivated, as well as the business’ operations. For example, evaluate what is and is not working, and how the business can improve efficiency.
- Work towards some kind of structure, such as a SWOT analysis, where the team considers the strengths, weaknesses, opportunities and threats facing the business.
- Do adequate research: A half-year planning exercise is pointless if the business owner is not realistic about what is happening – not only in the business, but also in the marketplace. The over-optimistic estimation of sales is the biggest mistake entrepreneurs make in their planning as it can have disastrous consequences for the cash-flow of the business.
Cumming says that no matter the output of the session, it is vital that the new strategy or plan is decided upon by the whole team, and then developed into a formal plan for the business.
“Should the half-year review lead to a new finance application, or the purchase of a new piece of equipment for example, a formal plan to present to the financier is a must. However, sometimes a half-year review reveals that just a few tweaks to the cash flow forecast and a couple of email circulars are needed. Whatever the outcome, it is advisable to document the main points discussed or decisions taken during the review as a point of reference for later reviews.
“The overall purpose of a mid-year review is to ensure that the business owner is still in tune with their targets, their team, and the marketplace,” he concludes.