“I can’t believe it’s already the middle of the year!” says every person you come across, when contemplating that it is indeed halfway through June of 2016. It feels like just yesterday you were pulling yourself out of your post-holiday dwaal and focusing on goals for the year.
Apart from figuring out how to brace yourself against the frigid weather, the June halfway mark provides a psychological opportunity to reassess. It’s a great time to take a look at the goals you set in your financial strategy, see how things have panned out for the first part of the year, and then make some changes. It’s time to give your financial strategy a fresh outlook on life. Here’s a five-step process to get that done.
- Start by looking back. Before you can refresh your financial strategy, you must understand what it contained in the first place. What were the overarching goals that drove your financial strategy?
For example, you might have centred your objectives around the company’s aim to increase sales by 15%. Therefore, your strategy would have allocated budget toward advertising and awareness-building, growing your supply chain, increasing efficiency around logistics and incentives for your sales team to meet new targets.
- Determine whether you’re on track. It’s time to take inventory of the numbers. Look at the goals you set in your financial strategy, and compare them with actual figures your company is seeing. By halfway through the financial year, you should be roughly halfway towards achieving your goals.
- Determine why you are on track – or not. If you’re on target, then great! It could be time to push your targets up a bit. If you’re lagging behind, now’s the moment to determine why. This will involve taking a holistic look at the market over the past six months.
Going back to our previous example, wherein our financial strategy aimed to increase company sales by 15%, let’s say that company sales have only grown by 2% in the first six months. What is causing this? Is it:
- A lack of application of the financial strategy? For example, is the company not spending its marketing and sales incentives budgets in order to drive this growth?
- Being outpitted by a competitor? Sometimes, the company has been carrying out its financial strategy as planned, but a competitor unexpectedly jumps in with a more attractive offering or a more aggressive advertising campaign. In this case, there was nothing you could do to prevent it, but now that it’s here – and hampering your own goals – it’s time to decide what to do about it.
- Related to the spending ability of the consumer? This June, many South African businesses will reflect on this particular point. The GDP contracted by 1.2% last quarter, interest rates are on the rise, and food prices are soaring. It’s a mighty tough time for the economy and the people participating in it. If you didn’t foresee it coming, don’t beat yourself up about it. The Reserve Bank and market commentators such as the IMF also predicted higher growth rates than the ones we’re seeing. Again, you can’t control these factors, but you can react by adjusting your financial strategy.
- Regroup. And at this point we suggest you go right back to point one, and think about whether the overarching tenets of your financial strategy are still appropriate. If unforeseen events have caused significant change in your business environment, is it still relevant to base your financial strategy around sales increases? Is it time to think more about retention or consolidating market share instead?
It might be a painful or unwelcome process to rethink the basis of your financial strategy, but it’s more honest and helpful to your company than chasing an unrealistic or irrelevant goal.
- Revitalize. If your company is on track with its goals, then set targets that will stretch you a little more. If you’ve decided to go for a strategic overhaul, identify what your new overarching strategy will be. Look for a single theme and a few basic points to get you there.
If you need some assistance in getting this done, contact The Finance Team. Our associates are all qualified, experienced financial professionals who can give you part-time or interim assistance as you need it.