Build a Strong Foundation for Effective Business Strategy

Written by Carol Coughlin. Posted in Financial Strategy

When we think of successful, high-growth businesses, like Apple, like Google, like Microsoft, we think of ideas, flashes of brilliance, innovation that promises a bright future. We tend to focus on the spark, not solid processes that have to be in place to sustain those dreams, to sustain that growth. These form the foundation we need to develop a sound business strategy, make better decisions, and run our businesses more effectively, efficiently, and profitably.

I’m Growing, But…

We worked with one client, who just blurted out his issues. It’s not always that easy! Sometimes we have to work to coax it out – but this business owner had reached his limit. “I’m growing, and what keeps me up at night is that I don’t know if I can hire anyone. I don’t know if I can afford it. I don’t know what my margins are. I don’t get financial statements from my bookkeeper, and if, by some chance I do, she doesn’t tell me what they mean.” But there’s more…

He continued, “I have no cash flow analysis. I don’t have a budget. My number 2 is keeping all of the financial information to himself; all the employees go through him, and he’s demanding more money. I need a lot of help.”

Implementing Processes to Support and Guide Strategy

  • It sounds like an incredible laundry list of woes, and it is. But it is also not uncommon. Many companies lack the basics, including a budget. So, what did we do? We helped this poor guy get some sleep! Some steps we took to move him to more solid ground:
  • Moving him to accrual basis accounting so he could put more faith in his financials.
  • Identifying which reports he needed and working with his bookkeeper so she could provide him with the concise information he could actually use to help make smart business decisions.
  • Developing KPIs so he could, in snapshot-form, compare current month to same month last year, YTD to YTD last year, average annual revenues and expenses to the current budget, and look at margins by product and net profit by piece.
  • Putting a projection in place for the year and working with him to set sales goals, strategies for achieving them, and staffing requirements.
  • Setting up a weekly cash flow process to reduce dependency on his line of credit.
  • Creating a plan to improve his number 2’s leadership skills and setting up training and cross-training for employees.

What Does This Mean for Your Business?

While this is a specific example of one business owner’s challenges, the lessons apply more broadly to all businesses. Processes should be:

  • Repeatable. Success, as they say, is a habit. Processes, such as the weekly cash flow process we implemented, reduce variation and increase efficiency. You can achieve great results consistently, not accidentally.
  • Redundant. They can’t be wrapped up with one person, as they were in our client’s case. There needs to be layers of accountability and a method by which information is documented and shared.
  • Well-documented and communicated. This, again, prevents knowledge from being locked within the mind of one person and contributes to the ability to produce repeatable results. It also gives employees a guide, for actions like following up on payments or making sure the people to whom they extend credit are, in fact, credit-worthy. 

 

I bet you’re all wondering what happened to our struggling client. The year before we started working with him, his bottom-line was $40,000 and after a year of working together, it increased tenfold, while his top line increased by 50 percent. As importantly, for his health and sanity, he isn’t up all night worrying. He knows he has a process in place to handle his business. He has the information he needs to know exactly what’s going on in his business – not just intuitively, but with facts.

This owner – like all owners and CEOs – needed a solid foundation of repeatable, redundant, documentable processes so he could know, at any time, what the financial status of his company was and how to use that information to make decisions for the future. Without this foundation, you’re guessing at strategy. With it, you’ve got a powerful tool for jumpstarting and maintaining growth, for keeping the spark alive for your business strategy. 

Carol Coughlin

Carol Coughlin founded BottomLine Growth Strategies, Inc., in 2006 as a way for small and medium-sized businesses to access the same high-level financial and operational expertise that gives large companies a distinct advantage. Using her own extensive corporate experience and willingness to sit in the hot seat as a catalyst, Carol helps BottomLine Growth clients climb to the summit of their success.
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