Why Every Business Owner Should Do a Year-End Review


From finalizing sales contracts to preparing for tax season to managing employee holiday vacations, small-to-mid-size business owners might be tempted to tell themselves they’re simply too busy to set aside time for an end-of-year review.

If you find yourself among that number, it’s completely understandable—but you should nevertheless reconsider: Much like your own annual physical, an end-of-year review can be an essential, forward-thinking component of establishing and maintaining a healthy, flourishing business.

The concept is relatively straightforward: You want to evaluate the progress your company has made over the last twelve months, identify trends—both positive and potentially negative—and strategize for changes that can set you up for more success.

“You’ll determine whether 2017 turned out how you wanted,” Fifth Third Bank's National Sales Director Michael Chaffin says. “You can find ways to improve your operations and profitability—and ensure you don’t miss good opportunities.”

First, the financials

The metrics and topics you review will, of course, depend upon your business, industry and the stage of your company. Still, Chaffin believes there are several important finance-related figures every entrepreneur should examine as the year wraps up.

These include:

  • Overall margins. Many business owners pay attention to their top-line revenue. But when it comes to profitability, Chaffin notes, the devil can be in the details. The end of the year offers an opportune moment to analyze the current costs of your product, overhead, labor and more, which will allow you to remain vigilant against any upward trends that may impact your margins. “Sometimes incremental price increases by vendors can seem small at the time, but make a significant difference over the long-term,” Chaffin says. If your margins are decreasing, it may be time to raise prices or renegotiate with your suppliers.
  • Margins by customer. Not all customers are created equal. Businesses owners should examine their customer roster and evaluate which relationships are most profitable—and which may need some attention. Which means it might be worth revisiting the contract of a client who pays the same rate as the rest of your clients, but requires dozens of hours more of your staff time. In some cases, breaking up with less profitable relationships creates space for more profitable ones.
  • Income and taxes. For most business owners, limiting tax liability is an ongoing mission. With the year coming to end, you want to get a sense of the taxes your company may owe—as well as any moves you can make to reduce that burden. If, for example, you’re planning to make equipment purchases and have also had a good year income-wise, you may want to make them before 2017 ends to maximize potential tax benefits. Also pay attention to any distributions you’ve received: How will these affect your personal income? And are there any actions you can take before year’s end to subsequently offset your tax bill? Loop in your accountant for advice on both this year’s filing and any new tax issues on the horizon for next.
  • Commercial loan covenants. Be aware of the financial requirements of any commercial loans your company has on the books. It is vital to understand what’s mandated by any loans you have and to be sure you’re in compliance. If not, the lender could change the terms of your loan or raise your interest rate.

Getting the big picture

Remember, non-financial metrics—staff performance, employee retention, benefits and the culture or quality of work life you’re providing as an employer—can have a profound effect on your bottom line as well. “If you’re not making sure that your employees are engaged and happy,” Chaffin says, “then you run the risk of losing one of your most valuable assets.” Enlist the help of your staff or even an outside consulting firm to conduct surveys, do a compensation analysis or provide ideas for improving benefits without adding extra costs.

The right guidance

As a business owner, you’ll likely spearhead any year-end review. It also makes sense to bring not only your leadership team and employees in on the process, but also to seek out input from top clients and any key business partners from integral vendors to professional service providers. Every stakeholder perspective will be unique in some way, and to explore each can only strengthen your business. If you’ve never conducted an end-of-year retrospective before, your business banker can also serve as an extremely beneficial resource for providing data and guidance as you set and pursue your overall goals—as well as access to a loan or line of credit should the need arise.

In the ongoing effort to build and grow your business, information will prove one of your greatest allies. The wider the net you cast in your year-end review, the more comprehensive—and, therefore, actionable—the final snapshot of your business may be.

“You’ll be able to identify trouble areas as well as think about what comes next for your company,” Chaffin says.