Owner managed businesses are often innovative, creative places, thriving by responding to change and opportunity. Growing the business is a natural ambition which will require investment in assets & staff.
Spending time budgeting and planning the next move are essential practices, in my experience, an exercise most business owners undertake diligently.
Once implemented, the performance and return on the investment is important to measure. Too many owner-managers research and invest in new opportunities yet fail to measure the ongoing impact on the business.
It is important, even vital to producing regular management information, enabling the owner & management team to monitor performance, making changes as necessary. Relying on statutory annual accounts, a sales figure or even the amount of money in the bank is not enough information.
Producing monthly or at least quarterly management accounts, together with some key performance indicators, relevant to your business are essential tools to properly manage, understand & achieve the best results on the investment (and additional cost) you have committed to.
Sales may very well increase but at what cost? Has the gross margin improved? Has the net margin improved? Have you achieved the sales & return as predicted in your budgeting? Is the new investment working to capacity?
In can be very tempting to continue to invest as a follow up to the original investment, at this point you really are fumbling in the dark without good financial information.
For any growing business, the most important investment is the one that’s sometimes overlooked because its often seen as an unnecessary cost: A good accounting system, bookkeeper (employee or outsourced) and a commitment to produce regular, consistent financial information, for the owner and management to use enabling better decisions to be made based on factual, performance-based information.