I’m going to go out on a limb. I know what talent is lacking in more of your employees than any other. It’s an ability to understand and work with numbers. Expense budgeting, price analyses, sales forecasting, reviewing a profit and loss statement or a product line margin analysis, understanding cash flow or a balance sheet, comprehending both the value and the burden of debt.
Whatever your business, I’m sure you have some really good employees,who do their jobs really well, whether they are dealing with operations or marketing or whatever. You’re able to get away with financial incompetence in most positions in your company. But if your management team lack facility with the numbers, we probably have a problem, Houston.
If your succession plan or exit strategy relies on managers who are not able to read a balance sheet; who do not understand the long term impact of pricing to achieve volume; who do not appreciate the value of debt as a tool, or the suffocating crush of too much debt – if the keys to your successful retirement are in the hands of such staff, then both you and your business are in a bit of trouble.
If you are guilty of tolerating financial ineptitude, you owe it to yourself, your business, and your employees to turn it around. You may not have the capacity to personally teach a key employee how to deal with the numbers, but it really is your job to find some thing or some body that can.
Are you a better driver because you can easily determine how fast you’re traveling, how much fuel remains, and what time it is? Are you more likely to safely reach your destination because you can readily see the compass direction of travel and because you’re immediately alerted to a loss of oil pressure or tire pressure? Does the dashboard improve your overall ability to travel efficiently and effectively? Would you be upset if the auto manufacturers decided to reduce the cost of their vehicles by eliminating all the instrumentation and alarm lights?
Now consider your business dashboard. Have you identified and do you regularly review your key business performance indicators (KPIs)? Here’s why every CEO should:
- Identifying your KPIs forces prioritization of data. The total data available can be overwhelming and you have to keep your eyes on the road.
- The correct KPIs provide a regular monitor of business historical performance, as well as the outlook for the short-term future. They enable you to stay on track.
- The habit of routinely reviewing your dashboard (KPIs) creates a powerful sense of having your “arms around your business”, regardless of how well or how poorly the business is currently doing.
- Your dashboard provides a jump start for when you need to:
- Create a long range business plan
- Create a marketing plan
- Apply for a bank loan
- Discuss the business with a potential investor
- Interview a candidate for a key position
- As a habit, your review of your KPIs is an excellent accountability tool for you personally as well as for your entire business.
You wouldn’t drive your car without a dashboard. Is it any less dangerous to drive your company without one?
Posted in Financial, Leadership, Planning, Strategy
Tagged Business Owner, Business Planning, CEO Development, Company Vision, Financial Planning, Goals, Leadership, Strategic Planning
It’s been my experience that many CEO’s either omit or give short shrift to three major parts of their annual business plan. The first is how they wrestle through Critical Success Factors. These links between the upfront analytical sections of your plan and the downstream implementation sections provide a solid reality check against your objectives. They also force you to consider all reasonable alternative strategies for achieving your major objectives. Continue reading
Record your strategic thoughts.
To plan, or not to plan – Most CEOs openly admit to the value of planning, regardless of the level of effort they put into it. Those who do not see value in planning have their reasons: The creative entrepreneur finds the structure of planning simply too restrictive. Or, the world simply moves too fast. Any plan is immediately obsolete.
Whether these are rationalizations or heartfelt beliefs, I beg to differ. Continue reading
Posted in Financial, Leadership, Planning
Tagged Business Owner, Business Planning, CEO Development, Company Vision, Financial Planning, Goals, Leadership, LinkedIn, Strategic Planning
Cute, but distracting
Near the start of a recent peer advisory board meeting, the CEO to my right was noticeably jittery. I asked him if everything was OK, and he explained that he had decided to leave his cell phone in the car for the morning. He believed it would be a good idea to get away from it for several hours to devote his full attention to the meeting, but he was definitely showing some physical signs of withdrawal. Continue reading
Posted in Business Processes, Financial, Leadership, Planning
Tagged Business Owner, Business Planning, Company Vision, Financial Planning, Goals, Leadership, LinkedIn, marketing, Strategic Planning
I saw a medical specialist 7 months ago. Three weeks after my visit, I received an insurance company statement indicating what was covered and what I should expect to be billed for. Two months later, when I had not received a bill from the doctor, I called his office and was told they could not find the paperwork from the insurer. I emailed it to them. Three months later, I called again to explain I still had not received a bill. They told me they were running behind on getting billing out. It’s now seven months and still no bill!
This crazy episode has caused me to start asking my CEO clients: “What are the soft spots in your business processes?” Continue reading
It’s that time of year again. A number of my clients are ready to fire their accountant and find a new one. Why is this a recurring event?
I’m not an accountant, but my experience tells me there are two reasons. First, accountants speak a slightly different language than most business owners. They speak Tax Accounting. When it comes to the numbers, most of us speak Managerial Accounting or some other financial dialect.
Second, the business owner often fails to make his or her expectations of the accountant clear. As a result, they do not receive the accountant’s commitment to meet those expectations (or, if they do and it’s received verbally, there is still no real understanding).
Here is a short checklist of questions to review with any firm proposing to be your accountant: Continue reading