The month of January marks the beginning of a new year. Originally the first month of the Roman calendar, Januarius as it was known was the month dedicated to Janus, the Roman god of doorways, gates and beginnings. Janus was depicted as having two faces looking forwards and backwards simultaneously.
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. First should be how performance compared with the relevant business plan.
Where did performance vary, and were results above or below the planned objective? Can the reasons for performance variance be identified? It is important to realise that while an underperformance of sales against target, has a negative effect on income, over performance of sales against target, can have serious repercussions on cash-flow and production, which can put a strain on company resources and customer relations. 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? 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? If business growth was less than that of the market, it would suggest that sales resulted from increased demand rather than effective selling. Any growth in sales should at least be in step with any growth in the market, if market share is to be maintained. 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?
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. The numbers of customers gained, lost and especially retained, can be a useful indicator of customer satisfaction. Similarly, the numbers of bad debtors, and the total value of their debt, give an indication of the quality of the customer base and the reliability of the cash flow. It is as important to understand why customers are gained as it is to know why they are lost. Continuing to win new customers is necessary to replace those lost through natural wastage. It is also more cost effective to maintain the existing customer base than have an expensive drive to gain new customers at the expense of the existing ones.
Looking forward to the New Year, commercial managers should consider the economic outlook from several sources. However it should be noted that 2016 saw the predictions of many economic “experts” confounded, largely because it is often forgotten that economics is more of an art than a science. 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, the commercial manager will benefit by identifying the successes, failures and missed opportunities of the previous year, with a view to learning from mistakes, and building on success in order to develop and improve performance in the coming year.