Mid-Year Checkup: Avoiding Excuses and Rationalizations

In a prior post, we covered how to build your own Mid-Year Checkup Blueprint. With the combination of art, science and a little Nancy Drew investigation, a mid-year checkup can bring value to your clients that other reviews and analysis can miss.

There’s also an opportunity to get completely off track in the review – more so than in monthly or even quarterly ones. The nature of the mid-year checkup lends itself to more rationalizations and even judgements about what is going on – and not in a productive way.

Mid-Year Checkup for small to mid-size businesses

Sound Familiar?

Here’s what justifying and rationalizing can sound like.

There’s been a lot going on. The sales team is sure they can make the lost ground in the next 3 to 6 months.
We’re sure it is just timing – it will work itself out.
We’ve heard that everyone in the business/city has been going through a rough patch. It will turn around soon.
Supply chain issues

The tricky thing here? Each and every one of those statements holds some piece of truth. Maybe a complete truth.

And each and every one of those is considered a complete answer so that no other analysis is done. Those are the explanations and that’s enough.

We beg to differ.

Even if each of those statements is 100% true, they are not moving the company forward. They are largely justifying the results without considering what can be done to better perform inside those statement. In fact, in most of the above instances, the company has abdicated its ability to something outside the organization (except for sales, maybe).

There is no business power in doing that or letting your clients do that. Settling for those explanations is agreeing to “just see what happens” or “hope for the best.” Hope is not a strategy.

Out of Rationalizing and Into Root-Cause Analysis

The challenge is in marrying the current circumstances with the assumptions based on past performance. It is in finding the balance of internal and external factors, assumptions that need to be tweaked and results that are fully missing the mark. An additional challenge is getting to the root cause or causes of issues that are showing up in financial results. It is highly likely that there are all kinds of symptoms but what really started it all?

For example, let’s say that revenue is falling behind budgeted expectations. Here are the questions we might ask:

Are there (really) timing issues? That is more likely to be true if you have a business that is more project based than a ongoing retail storefront. It can also come into play if the budgeted revenue was straight-lined every month (e.g,. it’s the same each month), and there is seasonality in the business. That said, at some point, each timing issue could become permanent – the business will simply run out of days in the year to make up the lost revenue.
Has there been a shift in customer mix? Some customers buy more than others. Some buy on repeat like clockwork. If expansion plans were in the works, have the new customer additions met expectations? Did you gain new customers only to lose committed ones?
Is this a volume issue, a rate issue or both? This could also link back to the customer mix. Are there too few customers overall or plenty of customers who just aren’t buying at the same level or price?
Were the sales growth expectations unrealistic? This should have been a key item for discussion when the budget was completed, but if the budget was finalized with full sales commitment, then it may be time to ask this question again.
Was there sales team attrition or turnover? This one is a little riskier because revenue is not always 100% reliant on sales. It starts there but there can are also fulfillment and customer service elements as well. However, if the sales team is down by a person or two or there are new team members, that can create a lag in sales revenue.

We prefer to ask these questions at the outset of any review process – mid-year or otherwise – instead of waiting to see what unfolds without direction. However, each situation is different, and there is almost never a bad time to focus or refocus the conversation.

The goal is to get answers that guide the company forward. It’s not about right or wrong or sliding into judgement about performance, budget design or whether it’s Facebook’s fault. Ask questions and analysis in a way that sets the tone and path for the next six months based on the learnings from the past six.

And then get into action.

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