How Strong is Your 3-Part Foundation?

Written by Carol Coughlin. Posted in Business Leadership, Financial Strategy, Operations Management, Uncategorized

Once a business is past the start-up phase and ready to grow to the next level, something key changes about the nature of its foundation.

Specifically, it has to be rock solid.

You might be thinking that every organization needs a rock solid foundation at every stage and, of course, you’re right – but only in theory. Because we all know that business owners can often grow their companies even if there are major foundational gaps.

At least, to a point.

That point comes when the business owner determines its time to achieve significant GOOD growth: Growing profitably, sustainably and with the goal of increasing the value of their organization.

At this point, there can’t be any holes in a company’s foundation because, if there are, they’ll be made even bigger when the CEO implements a growth plan. It’s here that profit will stop merely slipping through the gaps and, instead, start pouring downward in big bucketfuls, making the current growth trajectory unsustainable and causing the company to lose value.

The scenario ends in either the dismantling of the company or the need for a major turnaround. Not a pretty place to be as it takes a toll on the business owner not just financially, but emotionally and mentally too.

To avoid this outcome the question becomes: Exactly what is a strong foundation for growth?

Every organization’s foundation is comprised of three critical parts – its:

1. Financial foundation

2. Operational foundation

3. Leadership foundation

Younger, smaller companies might have strong financial and operational functions that make up for weaker leadership. Or, super strong leadership might overcome smaller “holes” in finances and operations. But once a company is ready to attain good growth that increases not only profit, but value, things change.

Smart operations no longer counter lack of financial savvy. Strong finance stops covering up operational inefficiencies. And even the best leadership doesn’t stand a chance against failing financial reporting and lousy processes and systems.

If you want to take your company to the next, you have to strengthen its foundation – and that process starts by putting all three parts under the microscope.

How Strong is Your 3-Part Foundation-graphic

The reason closely examining each part separately is such a game changer for companies ready to grow is that it prevents you from looking too broadly and thus missing the connections and interplay between each of three foundational areas, as well as those more subtle factors that often create the biggest roadblocks when under pressure from growth.

As you take this action toward moving your business forward, it’s important to remember that it’s the rare organization that doesn’t have a foundational gap or two – or ten – to shore up before pursuing an aggressive growth strategy.

Also, keep in mind that each area is equally critical so that you don’t fall prey to an all too common perception business owners hold.

Specifically, that operations and leadership are not as important as financial.

It’s understandably easy to believe that having a strong finance function and receiving accurate financial information monthly that allows you to make growth projections and, therefore, plan out and test your growth strategy will overcome weaknesses in the other two areas. After all, if your financials are good, they’re good, right?

The problem is that we are not talking about simply surviving and maintaining the status quo. We are talking about making a significant leap forward in the profitability, sustainability and value of your company.

Becoming a major player or a more major player in the marketplace and making it last (not to mention having the ability to exit your business in a big-win type of way) requires foundational strength. If your company’s foundation is strong in only one or two areas, its not nearly as strong as you think it is – no matter what current results you’re getting.

CEOs serious about growth do what they need to do to strengthen all three areas until all gaps are filled and they are certain that the stress of their growth strategy will be no match for their company’s rock solid core.

What’s Your Perspective on the Challenges of Growth?

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