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How to Run a Healthy Small Business—With a Monthly Review Checklist

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When you run a small business, one thing’s for sure: you’ll never be short of things to do.

But one of the dangers of a lengthening to-do list is that you can end up losing your focus. You rush around every day completing tasks, but are they the right tasks? Have you prioritized things that will truly contribute to the long-term success of your business?

One useful way to step back from the day-to-day firefighting and get yourself back on track is by conducting a monthly business review.

But what exactly should that review entail? What are the key areas that you should look at every month, and what kinds of questions should you be asking? That’s what we’re going to look at in this tutorial. I’ll go through each step in detail, and I’ve also provided a summary small business checklist as a PDF for you to download.

Monthly checklist for small businesses
Monthly review checklist for small businesses

1. Review the Business Plan

Every business should have a plan. It doesn’t have to be a formal, 30-page business plan with snazzy charts and graphs, but it does need to explain clearly what your business does, how it will attract customers, what goals you have, and how you will achieve those goals.

There’s much more to it than that, of course—if you want more detail, check out the following tutorials:

And if you’re just getting started with your plan, you can also find some useful business plan templates on Envato Market.

Once you have your plan in place, the most important thing you can do each month is review it and measure your progress. Some business owners write a plan for a specific purpose, like raising funds, and then leave it to gather dust on a shelf. But to be truly effective, it needs to be a living document.

So, every month, review the long-term goals you set for your business, as well as any more immediate objectives you’ve set. Ideally, you should be breaking your long-term goals down into milestones to be completed over progressively shorter time periods. So five-year goals feed into your three-year, one-year, and monthly objectives.

Each month, assess your progress against the most important goals in your business plan, and then set new goals for the coming month that are aligned with your overall plan.

Also, don’t forget to reassess the plan as a whole. Ask yourself whether anything substantial has changed during the month. Do you need to change direction, or add anything to your plan? Do your goals need to change? How about your overall value proposition? Has anything happened that means you need to change that?

There can be a temptation to stick to the plan, no matter what—change can feel like weakness or an admission of defeat. But the best plans are fluid and are updated to account for changing situations, so don’t be afraid to make changes whenever necessary. Thinking about these things on a regular basis also ensures that they are top of mind for you throughout the month.

2. Check Your Cash Flow

When it comes to the finances of your business, cash flow is the most important thing to keep track of. That’s especially true for very small businesses. According to Dun & Bradstreet, 90% of small business failures are caused by poor cash flow.

Large companies, after all, may have deep reserves to draw on, and in a crisis they can usually borrow more or raise funds in other ways. But small businesses often have limited options. If you run out of cash, it's game over, even if you're doing everything else right.

So check your cash flow monthly, and forecast it for the month ahead, to make sure you won’t run short. According to this Bank of America paper, businesses doing monthly cash flow planning have an 80% survival rate, compared with 36% for those only planning once a year.

To be clear, cash flow is simply the flow of money in and out of your business. When you receive money from customers, that’s a positive cash flow; when you have to pay it out in the form of rent, salaries, supplies or other expenses, it’s a negative cash flow.

The difference between cash flow and profit is mostly about timing. Think about your personal life to understand the difference. If you get a $3,000 monthly salary and have to pay out rent and other expenses of $2,000, that’s a nice profit of $1,000. But what happens if your rent comes due before your paycheck hits your bank account? You’re in trouble. Even though you’re earning more than you’re spending, you’ve hit a cash-flow crisis, and your landlord is unlikely to sympathise.

The same thing can happen with a business. In fact, it’s even more likely, because companies often have to make upfront investments in equipment and raw materials and make regular payments for rent and staff, but may only get paid by customers a month or two after sending out an invoice.

So, each month, analyse your company’s cash flow for the prior month, and forecast your cash flow for the month ahead. Try to plan for the worst, and if you see any potential crises looming, work out ways to delay spending or speed up inflows.

For more on managing cash flow efficiently, on forecasting it accurately, and on the measures you can take if things are going wrong, see the following tutorial:

3. Review Other Key Metrics

We live in the age of data. Even if you run a small business and haven’t invested in complex “big data” solutions, the amount of data instantly available to you probably dwarfs what business owners could access in previous generations.

In such a context, the hard thing is not to find data, but to decide what to focus on. So the best thing to do is to decide on some key metrics that define success for your business.

If you’re worried about holding onto your existing customers, for example, you could track your monthly churn rate. If you’re investing in marketing efforts to reach new clients and want to assess their success, you could look at things like the Cost of Customer Acquisition or the Lifetime Value of a Customer. If you want to become more efficient in your production processes, perhaps check your inventory turns or capacity utilization.

If you’re not sure what these metrics are or how to calculate them, you can find definitions and formulas for these and many more in our series on the key metrics every business should track:

Whichever metrics you settle on as being the most relevant for your business, come up with a quick, painless way to gather them in a dashboard for your review each month. Then set some targets, and then each month you can review your progress against those targets and decide on actions to take if you’re not meeting them.

4. Review Customer Engagement

How are your customers? What are they thinking? Are they happy with the service you’re providing?

If you don’t have immediate answers to these questions, you may be missing something important. After all, many customers don’t take the time to let you know that they’re unhappy—they just go elsewhere. If you can identify issues up front, you have a chance to resolve them and keep the client happy. You may also uncover opportunities, such as new services a client would love you to offer. You never know until you ask.

Of course, there’s a balance to be struck. You don’t want to be like those waiters who interrupt your meal five times to ask if everything’s OK. Reaching out to every customer every month might be overkill. But if you have 20 major clients, checking in with a couple of them each month could be a good goal, and would ensure that you make contact with each of them at least once a year.

If you have more of a mass client base, you could send out periodic surveys—for more on designing those surveys, see these tutorials:

But don’t underestimate the appeal of a personal email either. Imagine how you’d feel if you got a genuine email from Apple CEO Tim Cook, just checking in and asking if you had any feedback on your iPhone. Clearly, that sort of thing is not very scalable, but it can reveal some interesting insights, help you keep your finger on the pulse, and build strong relationships with customers.

So each month, review your customer engagement over the previous period. Did you hit your goals for reaching out to your clients? Did the process reveal any issues or opportunities? What actions will you take in response? And what will you do to engage with your customers in the coming month?

5. Check Your Marketing Efforts

Now that we’ve checked in on our current customer base, it’s time to reach out to new customers too. No matter how happy your existing clients are, there’s always a chance that they’ll stop or reduce their spending, even if it’s for reasons completely unrelated to the service you offer. So you’ll need a constant supply of new customers just to maintain your business, and you’ll need even more of them if you want to grow.

That means that marketing must be a constant focus, and it’s something you’ll need to check in on each month. What have you done to get the word out? How successful was it? What did you learn, and what could you do differently? Do you need to invest more in your marketing efforts, either in terms of time or money? What will you commit to doing in the coming month?

For more on designing your marketing plans and measuring the success of your efforts, check out:

6. Measure the Bottom Line

Of course, the bottom line of your business is profit. Businesses operate by selling products or services for more than the total cost of producing them. Startups can survive for a while without making a profit, but the profit has to come eventually.

So the final thing to do each month is to check your company’s revenue, expenses and profit against your targets. As with the other items, be honest in your assessment of progress, and don’t be afraid to re-evaluate your targets whenever necessary. If you’re falling short of what you feel you need, that information should feed into your other goals for the business—you may devise ways to cut costs, for example, or plan a marketing drive to win new business.

For more on assessing your company’s bottom line, see the following tutorials:

Next Steps

So now you’ve seen the most important things to check every month as you review your small business and its progress.

The next step is to schedule time in your calendar every month to complete this process. Once you’ve set it going, it shouldn’t take very long to go over the small business checklist every month and make sure you’re on track. But it’s easy to let something like this slip, so make sure you set up a recurring appointment in your calendar, and keep that appointment with yourself. It makes sense to do the review at the end of each month and set new goals for the coming month, but of course you could do it on any day that makes sense for you. The important thing is for it to be a regular commitment.

Also, remember that this checklist is only a starting point. In this tutorial, we’ve covered the most important items for a small business in general, but you should spend some time thinking about your own company and any specific items that you want to track.

If you are in charge of a lot of client data, for example, you may want to review the safety of that data every month and make sure that you have the right measures in place to keep it secure. If you work in a fast-changing industry in which training in new skills or software is important, you may want to keep track of the amount of training you and your staff have completed.

These things could easily be dealt with as part of the general business plan review, but pulling them out to track as a separate item can help to increase your focus on those items and make sure you treat them seriously.

So that’s it! I hope this tutorial has been useful for you, and if you have any other suggestions for items to add to a monthly small business review checklist, please add them in the comments below.

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