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Monday, April 5, 2010

Reviewing Business Performance

The first quarter of 2010 is now behind us, and it's time for businesses to look back and see how they did.  There are typical measures of success that many companies use:
  • Did we make our target numbers?
  • Did we do better than first quarter of 2009?
  • Did we do well compared to our competition?
All of these are valid questions and can give a company insight into their business compared to their projections, their historical achievement, and the rest of their industry.  But does that really indicate whether or not a business is doing well?  Should you be pleased your company is doing a little better than others in an tumultuous industry?  Should you be upset if you don't achieve budget numbers that were overly aggressive?  Is it really smart to gauge year-over-year success compared to the worst economic period in recent history?

As corporations report these types of numbers their shareholders will overreact as usual.  Good companies will see their stocks devalued because of slow growth, and share prices in a few mediocre companies will increase based on performing a little better than expected.

Small businesses, however, have the luxury of looking at the big picture.  Can you meet your short term obligations?  Do you have a product/service mix that satisfies your customer base?  Is your company well positioned for future growth?  These are the types of questions that monthly/quarterly/annual reporting should attempt to answer. 
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