For the past 40 years or so, businesses have increasingly been dominated by financial control to create the “bottom line”. This is understandable because the sole purpose of any business is to make money, but for whose benefit?
The past is but a prologue to the future
While January may not be the start of an organisations commercial year, it is still an opportunity for the commercial manager, to consider the opportunities and threats which a new year might bring. Although it is important to continually be looking to the future, in order to prepare for situations and opportunities that present themselves, it is equally necessary to consider the performance of the previous twelve months.
Generally, most businesses appear to concentrate on their future business plans, and give little detailed attention to an analysis of their past performance. However, a proper critical analysis of commercial performance is essential if in future, mistakes are to be avoided and good performance identified, maintained and developed. While it is easy to criticize under performance, by asking obvious questions, over achievement against the business plan, may have equally bad repercussions, of which the commercial manager should be aware.
Commercial managers have the responsibility of producing and maximising profitable income for the long term future of the business, by anticipating and satisfying customer demands. Ideally, the commercial manager should have a range of relevant performance measures, in the form of management ratios to cover every aspect of the commercial activities for which they are responsible, so that performance analysis can be based on quantified data.
Looking back over the previous year, there are many things which the commercial manager should consider.
- How did performance compare with the relevant business plan?
- Where did performance vary?
- Were the results above or below the planned objective?
- Can the reasons for performance variance be identified?
- Were the reasons for underperformance internal, such as the commercial plan being over or under ambitious?
Looking at how the market and the market environment developed over the past year,
- Were the changes anticipated?
- If not anticipated were there indicators that could or should have been identified at an early stage?
- What trends in the market, technology, or competitor activity were identified in the past year that may be expected to continue and develop into next?
- How did the market perform - was it growing, contracting or steady?
- What was performance like in comparison to the market, was it better, the same or less?
Commercial managers are responsible for producing and maximising profitable income by anticipating and satisfying customer requirements. It is important therefore that they should consider the state of customer relations over the past year.
- How many new customers were gained?
- How many old customers were lost?
- Is the customer base growing or shrinking?
Similarly it is important to know:
- The numbers of bad debtors?
- The total value of bad debt
Considering the economic outlook for the New Year, commercial managers should seek forecasts from many differing sources, before making their own assessment.
It should be remembered that economics is more of an art than a science and that 2016 saw the predictions of many economic experts confounded, by events. Thus all economic forecasts have limited reliability.
Sir Winston Churchill said: the past is but a prologue to the future. While the past does not define the future, analysis of past performance, provides indicators for the commercial manager to improve potential results.
About Nicholas Watkis
Nicholas Watkis set up Contract Marketing Service (Business Development Specialists) in 1981, providing professional interim marketing management for a wide variety of businesses.
Over many years practical experience in organizations, large and small, national and international, led to the development of Business Performance Maximized specialist in marketing performance measurement
(710)© N.C.Watkis, Contract Marketing Service 12 Jan 17
Contract Marketing Service, (Business Development Specialists)
Nicholas C Watkis AE MA DipM CMC FCIM MIC
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