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The Rearview Mirror for Looking Ahead: Know Yourself to Grow Yourself

rear view mirror

“Why do you accountants always focus on the rearview mirror?”

This question was posed to me during a small business workshop I was conducting. Read on to see how I answered it. But first some context:

I do workshops for small businesses frequently, to share more deeply about my Fractional CFO framework and approach. I share how business changes with growth that generally comes in 1’s and 3’s. (In other words, growth from $100,000 – 300,000, or $1m to $3m, or $10m to 30m.) In this particular workshop, I had been discussing the weekly scorecard and how to improve the accuracy of the company’s numbers using a solid financial close process. I also encouraged tracking many other data points like new customers, new web sign-ups, sales by segment, gross margin, inventory turnover, production and direct labor efficiency, etc. I was rattling on about how these metrics need to be on your dashboard and the importance of not judging your performance on the metrics of other people. I emphasized that their business is not your business. However, your business can always perform better. If you want to jump in 3’s, you first have to know your business well.

That’s about when I received this great, and understandable question. At first glance, CFOs do appear to look at the past a lot. The rearview mirror is important, and we do have to have accurate data; it’s essential to know where you are and where you’ve been. If you don’t it’s hard to get to where you want to go.

I ride my bicycle for my workout four times per week in the summer logging about 100 miles per week.  My bike is equipped with lights so cars can see me and I have a mirror that attaches to the handlebar.  The other day, when I was riding on some incredible roads we have here in Central NY, I was looking in my mirror, which is small and was so dirty that it wasn’t useful.  Using the mirror is safer than turning my head, but the visibility with the mirror was terrible. Trying to focus on the images in the mirror, I almost rode off the road. (I recently bought a radar tool that beeps when there’s a car behind me. Much safer.)

But ironically, a good CFO uses the rearview mirror but doesn’t focus on it. We shouldn’t look in the rearview mirror too often.  We do need to see what’s behind us if it poses danger – like a car for a bicyclist. But we shouldn’t constantly be looking in the mirror to see where we’ve been. We need to keep our eyes focused on the road ahead. 

The job of a CFO is to help a business look ahead. Yes, we focus on getting the monthly financials closed and the reporting package published, but those are tools for our main priority of helping the business deliver on its mission. Reasons come first, results come second. We try to make things better for the future.

To do this well means that a lot of my time is spent trying to help businesses improve processes. Consistent improvements over time often lead to impressive results. Companies that stay stuck in their ways tend to stagnate. Small businesses that are nimble tend to grow and flourish.

In Robert Greenleaf’s book, The Servant Leader, he shares how the servant leads from the back with empathy and compassion. They see the struggle of others and bring clarity and solutions. I’ve seen the suffering of many small businesses over the last 30+ years – and I have been there myself, so I have a desire to help turn that around. Having solid processes and taking a regular, but not obsessive, look in the rearview mirror helps me do that.

The other service that is very helpful to a CFO is to know the valuation of a business. Click here to learn more about our valuation service.

What is the next thing that you need to do to get ahead? Do you need to shift your perspective from the rearview mirror to the road in front of you? I’d be happy to help. Contact me!

Image by Hebi B. from Pixabay

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The Two Things a CEO Must Know

A recent CFO survey shows that although inflation concerns have decreased some, it continues to rank as a high concern for business owners – as it should.

During one period of time when inflation seemed out of control at 9%, Biz Equity, the company that provides the backbone to my business valuation program, published a white paper discussing the effects of inflation on business valuation. Although inflation does have a tendency to cool down, the long-term effects of a large bump in inflation are significant. We sometimes never return to the pre-high levels.

If you are a business owner, this whitepaper is worth the read. We all know inflation affects our long-term purchasing power and that we need to continually increase income to counteract increasing costs. Inflation also degrades the value of our business. Over time, the effects on valuation are dramatic.

The trick is to ensure that your business outpaces inflation with profit and growth so that you keep building value. For example, for 2022, a successful business would have needed to grow by 10% just to keep pace with inflation rates.

The first step in being more intentional about staying ahead of inflation is to know your numbers. This is a frequent topic with me because it is so important. Your business is your biggest asset and you need to know the facts. I am a huge proponent of a weekly scorecard to track key data and measure how your company performed the previous week compared to last year and to plan. Using a review like this, we can easily see ways to improve in key areas.

The second step is to perform a business valuation report. It is a great way to get an overview of what your business could bring if you wanted to sell it today.

If you are properly prepared, we can complete a valuation in about an hour. The BizEquity platform works great to perform a low-cost, accurate business valuation using strategic technology and a large database of business valuations. They are world’s only patented and the largest provider of business valuations, having valued 33,466,715 private businesses globally.

The frequent self-monitoring I recommend in knowing your numbers helps you improve performance, be proactive, and focus on the key factors that are moving the valuation needle, so these steps actually work in tandem.

Research shows that self-monitoring improves progress. Yes, you can blame external circumstances such as who is in office, what the interest rates are, or how the economy currently stands for the success or failure of your business. But that’s not the truth. Many businesses still survive (or even thrive) when external conditions are less-than-ideal. The value of your business is directly proportional to how well your company works. And how well your company works is directly proportional to the effectiveness of the systems you have in place.

So be courageous and self-monitor frequently. Become comfortable taking a hard look at your performance. Set high standards for yourself and your business. Know your daily/weekly/monthly numbers as well as what your business is worth.

No one may have told you that as a business owner, your role as CFO is the most important (or working closely with a qualified CFO.) But without understanding your numbers and valuation, you don’t understand a major portion of how your business runs and its health for the long term. And as a leader, that’s YOUR responsibility. Your team and the market is depending on it.

Contact me to schedule a valuation or a review of your numbers.

Image by Gerd Altmann from Pixabay

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Keep the Bathtub Full: Understand Your Numbers

Most business owners went into business to do what they love and do what they are good at –  and they hoped to make a living and improve the business’s value while doing it.  Most started their careers as employees, so they tend to carry an employee mindset vs. that of an owner, entrepreneur, or CEO.  As a result, some business owners have created a high-stress job for themselves, not a business.

Successful business owners create a vision of the business and think like a CEO.  Smaller business owners may wear several hats, but in order to become a better CEO, they must strive to delegate responsibility and create sustainable processes to deliver customer value consistently. Employee vs. CEO.  There is a big difference.  The successful business owner also understands their numbers – the balance sheet, the cash flow drivers, and the income statement as well as their overall performance scorecard. 

I’ve had many business owners tell me over the years tell me “I am not an accountant.”  True, but you ARE a business owner and you need to understand your numbers!  That means learning how to read and understand financial reports such as balance sheets and income statements and understand how they relate.  You need to understand your working capital needs and cash flow drivers.  Most business owners know how to read a P&L, yet have no idea where their cash is going. They wonder, “How can we be tight on cash when business is booming and sales numbers are growing?”

It is a common perception that reading and understanding financial statements is difficult.  Some of the problem is that many of the system-generated reports of many ERP systems are too detailed and difficult to read.  But also, business owners haven’t invested the time to learn how to read financial statements and interpret what the numbers mean.  I find it generally makes sense to simplify.

It reminds me of the bathtub illustration I learned from a banking CFO back in my KPMG days, used to explain the bank’s cash flow statement.  He said, “Cash is like a bathtub of water.  Cash comes in through the faucet and goes out through the drain.  The trick is to understand the flows in and out and keep the tub full of water.”

One way to gain confidence is to review your financial reports regularly.  Develop a weekly scorecard and review your financial statements with your controller or accounting team monthly.  Notice trends in key areas like new customers, sales, average transaction value, gross margin, cash flow turnover, and operational efficiencies. What are the financials telling you?  Are you increasing your company’s valuation or are you just sustaining a high-stress job? 

Spending time on this will help you avoid “reaction” mode (daily firefighting) and allow you to work more in “ready” mode. Ready mode is working on needle-moving activities, the kind that will truly grow your business in all the right ways.

If you spend time with your numbers, you will get better at understanding them. In addition to studying your reports, take a course. Read blog posts like these.  Prepare or update your business valuation.  Get people on your team that know financial stuff well and can help YOU understand it.  Trust me, everything you apply time to, you get better at.

Contact me for additional help!

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Four Things to Regularly Assess in Your Business

avalanche

One of the skills an experienced big mountain backcountry skier practices is testing the snowpack for avalanche risk. “I think it looks good,” won’t cut it. We have to pull out the shovel and test the pack to ensure we can venture down in a safe way. Otherwise, we risk life-threatening conditions and danger. “Where’d he go?”

It’s similar when it comes to your business. You can glide along thinking “I think it looks good,” but without regular testing and evaluating of the conditions, you can end up in an avalanche of trouble. So I encourage my clients to take the time to regularly assess and evaluate their business. Natural times for this include quarter-end and year-end, but you can even do monthly evaluations to some degree.

At regular intervals, I like to pause, reflect, and delve into data to evaluate the progress of the businesses I serve. I like to look at goals that were set at the beginning of the year (such as sales growth and EBITDA margin growth) and the list of initiatives and projects we’d hoped to have well underway. We face the facts and compare our expectations with reality.

It’s easy to fall into the trap of self-assurance, saying, “I think it looks good! This is a great year so far! We’ve been busier than ever.” But we also need to honestly assess four crucial elements to support or adapt our hopes that we are indeed, in good shape.

Here are some questions to ask yourself when you assess your business.

Your Team

Just as they say in sports, “You are only as strong as your weakest player,” the same applies to business. Here are some questions we ask regularly:

  • Are there any individuals on the team holding our business back?
  • Are we as leaders unintentionally becoming a hindrance?
  • Which team members (including those in leadership) need coaching to improve their performance?
  • Are there any team members (including those in leadership) that need to be promoted, or conversely, helped into another career?
  • Do all team members possess the necessary skills, resources, and attitudes to help us achieve victory in our industry?

Your Strategies

  • Has the competitive landscape shifted, demanding adjustments and recalibrations on our part?
  • What strategies have worked for us?
  • Which strategies should be changed (or even eliminated?)

Your Financials

It is astonishing how often struggling companies and overwhelmed owners have financials that are in disarray. Transactions are delayed, balance sheet accounts lack accuracy, and cost-of-sales accounts fluctuate without any apparent reason. Inaccurate data produces unreliable results. These questions will help:

  • Are we consistently following a monthly close procedure?
  • Is our staff able to keep our transactions and records current?
  • Are our receivable days increasing?
  • Are inventory turns slowing down?
  • Did we gain or lose significant customers?
  • Are our cost of goods sold numbers slipping?
  • Is the average selling price (ASP) increasing?
  • Are we able to make decisions on accurate and up-to-date numbers?

By measuring these primary financial drivers, we gain valuable insights into our business’s performance.

Your Projections

  • Are we on track with our projections? If not, what do we need to change? (It might be uncomfortable to do this, but you are better off dealing with accurate results for goals set.)
  • What changes would help our current situation align better with our goals?

Embrace these moments of reflection, evaluation, and adjustment. By examining our team, our strategies, our financials, and our projections, we can set ourselves up for a stronger future.

At Verbeck Associates, we can help with these evaluations. For example, we produce CFO reports for our clients, providing them with a comprehensive financial story that aids in decision-making. Contact me if I can help you in this evaluation process!

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Three Ways to Grow Your Business

Grow Your Business

When it comes to ways to grow your business, it may not be that you lack time but that you need to do some prioritizing. It’s important to constantly evaluate your growth and progress. With the year already well underway, it’s time to take a closer look at how your business is doing. Is it multiplying? Are revenues increasing? If not, here are three ways to grow your business.

Let’s dive into each of these and see how you can measure and improve your progress, using a fictional example of a mid-size coffee roaster, employing 40 people, and supplying over 50 coffee shops with custom-roasted blends.

Add More Customers

This is the most obvious way to grow your business. The more customers you have, the more potential sales you can make. Look at your metrics for new customer acquisition. How many new customers have you gained since this year began? If you aren’t seeing the numbers you’d like to see, do you need to adjust your marketing strategy or invest in new acquisition channels?

Example: ABCoffee expands their strategic social media campaign to target not just their base city and suburbs, but counties 100-200 miles away. Their sales reps do “coffee shop tours” of shops in this expanded area, sharing photos their marketing specialist then posts to encourage people to visit the shops, and leaving a packet of information and sample roasts to the owners of the shops, so they will consider carrying ABCoffee.

Increase How Much You Sell to Each Customer

Another way to grow your business is to increase the amount that each customer spends with you. Look at your average order size. Has it increased compared to previous years? Consider offering bundle deals, or upsell items during the checkout process. I’m sure you’ve seen stores that have multiple low-price items in the checkout area or have been asked online if you want to add “these regular items” to your cart. Always try to add another line item to an invoice and offer premium/higher-priced products to encourage customers to spend more.

Example: ABCoffee offers specials that allow regular customers to add free bags to orders over a certain size. They occasionally slip in samples of new roast, hoping to whet the customer’s appetite to carry more varieties. They host “cuppings” for coffee shop owners to do tastings of their coffee blends, and offer special pricing for orders placed at these events.

Increase the Number of Times a Customer Buys from You

You can also grow your business by increasing customer loyalty and encouraging repeat purchases. To measure this, look at your purchase frequency metrics. Have customers been buying from you more frequently this year? If not, consider implementing a loyalty program or offering discounts to encourage repeat purchases. Make it a desirable thing to be a regular customer.

Example: ABCoffee implements a wholesale customer subscription program that provides a 10% discount to customers that sign up for their automatic monthly delivery service, thereby increasing the frequency of orders (with the bonus of providing reliable and predictable orders to their fulfillment center, increasing efficiency.

By evaluating your metrics for each of these areas of potential growth, you can identify where your business is thriving and where there’s room for improvement. (There’s always room for improvement.) Maybe you’ve been focusing on customer acquisition when your efforts would be better applied to increasing customer spend or loyalty.

Remember, there’s no one-size-fits-all approach to growing a business. Find out what works for your specific business and customer base. By concentrating on these three key areas and monitoring your metrics, you can make data-driven decisions to drive growth and achieve your business goals.

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Avoid Waste, Improve Profit

waste

Today’s business environment is competitive. Companies are constantly looking for ways to improve efficiency, reduce costs, and increase profitability. One way to achieve these goals is to implement lean accounting practices, which help businesses identify and eliminate waste in their processes.

According to a study by the Lean Enterprise Institute, a nonprofit organization focused on promoting lean thinking and continuous improvement, a staggering 85% of all effort in business is wasted. 85%! This means that only 15% of a company’s efforts actually contribute to value creation. This waste can take many forms – wasted time, wasted resources, and wasted effort. In my CFO Services practice, I work with many business owners and SMB companies trying to get to the next level with revenue and profitability, and I agree with this finding – there is so much waste, particularly in two areas: employee time, and reworking.

Employee Time
One of the first questions I ask in my initial business assessment process is to review the employee census and ask

“What do each of these individuals actually do?”

“What is their value to the customer? The development and creation of the product? The efficiency of the operation?

One of the largest areas of waste is time. Employees spend a lot of time on activities that don’t add value to the business. These include attending unnecessary meetings, responding to irrelevant emails, not automating processes, or engaging in non-work-related activities during work hours.

This not only decreases productivity but also can dramatically increase labor costs. To implement lean accounting principles in this situation:

  • Evaluate your meetings and determine who should attend them. Can some attend only once per month? Or stay for only a portion of the meeting?
  • Encourage employees to unsubscribe ruthlessly to emails they don’t need. Consider using fewer “all staff” distribution lists in favor of tighter lists that apply to specific projects.
  • Train employees to welcome automation, not fear it. Be open to their input about what tasks could be handled better with improved technology, or eliminated altogether.
  • Build a culture where people aren’t afraid to occasionally connect casually or do something “non-work-related” during work hours as a way to strengthen team bonds. But also have a culture that expects dedication and excellence. This isn’t accomplished as well by policing as it is by providing ways for people to feel human while at work, and celebrating wins to which everyone contributes.

Reworking

Another area of waste is reworking. This is when products, services, or backroom processes are not performed correctly the first time, resulting in the need to apply additional work, resources, and time to fixing the problem. This increases costs and often decreases customer satisfaction.

Fixing issues like this is like fixing a leak in a utility closet. Cleaning up the water is not enough to solve the problem. Identify the root cause of the leak (i.e. faulty faucet) and turn off the water. Don’t address only the symptoms. Find the underlying cause and work on it, first.

For example, is the process unclear? Are steps being skipped? Standardize the procedures, and write them down. Follow the example of “pre-flight checklists” that are used in various industries. Using checklists will help your staff build muscle memory for the process, but also keep them accountable, and help get them back on track if distracted. This also helps in training new people, and teaching your current employees how to identify and prevent quality issues themselves and with their coworkers.

Lean accounting is an approach that focuses on providing accurate and timely financial information that is relevant to the decision-making process. It emphasizes the importance of waste reduction and continuous improvement, which helps businesses increase efficiency, reduce costs, and improve profitability. It should be a critical component of any business strategy, especially for small and medium-sized businesses struggling with cash flow and profitability. Put it into practice in all your business operations, and see how the bottom line, and your culture, can improve.

Contact me to help you implement lean accounting practices into your business.



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What’s the Score? Track Your Key Performance Indicators

key performance indicators

What are your business’s Key Performance Indicators (KPIs)? Are you even keeping score of your business’s performance? When it comes to business results, leaders often have a target in mind (i.e. make more money this year than last year.) You probably have some specific hopes and goals, and are trying to move your results toward those targets, hopefully by following a plan. But without measuring performance results, you won’t have the information you need to hit the bullseye.

As a guiding North Star, there are three components that need to be top of mind when measuring business success: revenue, margin, and profitability. While these financial results are guided by your purpose, values, and service differentiators, these elements are the number one tangible success indicators of your business. If you track your progress with components of the top three, you can manage your business effectively.

Remember these top three measures are lagging indicators. It’s important to look at leading indicators for your specific business – what factors are driving the sales. These include things like tracking new customers, website traffic statistics, customer acquisition costs, customer retention or churn, sales pipeline statistics, and production results. These will give you a better idea of what’s going on “under the hood.”

I suggest using a weekly scorecard to keep track of your Key Performance Indicators (KPIs.) Keep your scorecard simple and choose a few key items to track. Here are some leading indicators you may want to consider choosing from:

  1. Revenue Growth Rate – consistent growth in revenue indicates a healthy business and is a good indicator of future financial performance.
  2. Customer Acquisition Cost (CAC) – if your CAC is too high, it may indicate a problem with the business model, marketing strategy, or product-market fit and can be a leading indicator of the sustainability of the business.
  3. Customer Retention Rate – a high customer retention rate indicates that the business is doing well in meeting customer needs, which can lead to more predictable revenue and a better bottom line.
  4. Net Promoter Score (NPS) – NPS measures customer loyalty and can be a good indicator of future revenue growth. A higher NPS indicates a higher likelihood of customer retention and referrals, which can lead to increased revenue.
  5. Employee Turnover Rate – a high employee turnover rate can be an indicator of poor management, low employee morale, or lack of opportunities for career advancement. High turnover rates can be costly for a business because recruiting and training new employees can be expensive. This can also indicate that a separate, but important, effort should be made in regard to improving the culture and people side of your work.
  6. Sales Pipeline – a healthy pipeline indicates that the business is generating enough interest from potential customers and that there is a strong chance of closing deals.
  7. Cash Flow – monitoring cash flow can help business owners anticipate potential cash shortfalls and take steps to mitigate them before they become a problem, making it essential for the sustainability of any business.
  8. Website Traffic and Social Media Engagement – an increase in website traffic and social media engagement can be an indication of growing brand awareness, which can lead to increased revenue and market share.

I like to track metrics manually versus a fancy automated dashboard. It lets me know where the number is coming from and to me, it seems to mean more if I manually enter it into the scorecard.

Keeping track of your business’ performance is crucial for its success. Use a weekly scorecard and focus on a few key performance indicators to manage your business effectively. It will help you predict future financial performance and take steps to improve it.

I provide a variation of a Weekly Scorecard here. Contact me if I can help you customize it for your needs.

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From Controller to CFO: Nurturing a Financial Leader

Mentor

Learning how to mentor a controller to think more like a CFO is an important investment for any organization that wants to grow and succeed. As a fractional CFO, I have worked with many accounting managers and controllers over the years, in different industries and in different stages of their careers. One of the most common challenges I’ve found accounting managers and controllers to have is developing a strategic and forward-looking mindset that is more in line with that of a CFO. Many controllers are highly competent in financial reporting and compliance, but may struggle in applying that understanding to the bigger picture, and could benefit from improving their ability to make strategic decisions that impact the future of the company.

I’ve found that one of the most effective ways to mentor a controller toward more of a CFO mindset is to work closely with them on a regular basis, using the following strategies:

  • Educate them on the role of a CFO. Many controllers do not fully understand the breadth of responsibility and decision-making that comes with being a CFO. I typically start by explaining the differences between the roles, expanding their understanding of the context, and why a more strategic mindset is necessary.
  • Collaborate on strategic projects. Working together on a project that requires strategic thinking (such as an acquisition or expansion) and involving the controller in the due diligence process and financial modeling can be an effective way to expose them to the strategic thinking required of a CFO.
  • Provide feedback and coaching. As the controller works on strategic projects, it’s important to provide regular feedback and coaching. This can include constructive criticism of their thought process, suggestions on how to approach problems, and guidance on how to present their ideas to senior leadership.
  • Encourage continuous learning. It’s important for a controller to stay current with trends in finance and business. The skills that got them here won’t get them to the next level automatically. We need to encourage financial professionals to continually improve by attending webinars, conferences, and other professional development opportunities that can broaden their knowledge and exposure to different industries.

What if a controller isn’t interested in changing their mindset? Here are a few things to consider to encourage them to grow in this area.

  • Our fast-paced world is constantly moving forward. New technologies are automating work that used to require a completely human touch. To stay relevant and employable, all financial professionals should be willing to adapt and grow.
  • The role of a controller has historically been to “look at the rearview mirror” while a CFO tends to “look out the windshield.” There’s nothing wrong with a role that evaluates and processes the past – it is needed. But to refuse to also learn to look forward can reduce the opportunities a controller is given to contribute to leadership decisions.
  • A controller may discover that they enjoy the increased opportunity for responsibility in other roles. This can be a pleasant surprise, and help them consider other positions that will improve their career trajectory.

What do I do if I’m the controller?

If you are in a controller position and want to grow in this area, reach out to your CFO or a CFO you can trust and ask to shadow them. Offer to take them to lunch to learn more about their mindset and ask them to mentor you. If you don’t have a CFO to chat with, you can contact me and we can develop a plan for some professional development mentoring to help get you to the next level.

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Maximizing Your Business in the New Year

business

If anything highlights the importance of maximizing cash flow and reducing the cost of leverage, it is the surge in interest rates: from 3.75% in December 2021 to 7.5% at the close of 2022. As we embark on this new year, all small and medium-sized businesses (SMBs) need to set targets for improvement – the stakes are high.

What methods are effective in maximizing your business in the new year?

The Weekly Scorecard

One way to achieve this is by implementing a weekly scorecard to provide feedback on the business’s performance, instead of relying on month-end financials. This allows for real-time analysis of your business’s performance, making it easier to identify areas that need improvement and take corrective action as needed. I provide a tool here to make this easier.

13-week Cash Flow Forecast

Additionally, updating a 13-week cash flow forecast on a weekly basis is essential to understand and monitor inflows and outflows of cash, and the ability to identify any potential shortfalls, so you can take steps to mitigate them. Check out mine here and read more on increasing your cash flow.

Automation of Processes

Automating and improving processes is another way to maximize cash flow and reduce the cost of leverage. Streamlining processes not only saves time and money but also increases efficiency and accuracy – and ensures that results are real-time.

An Up-to-date Valuation

In these times, national business valuations are down, with public companies’ valuations being down as much as 20%. For small businesses, as defined by the Small Business Administration (revenue between $1 million and $40 million, and fewer than 1,500 employees), valuations can be even lower.

This makes it an opportune time for small business owners to update their valuations. I use BizEquity for a high-quality, relatively inexpensive, current valuation with industry comparisons and key performance indicators (KPIs) to improve your company’s overall valuation. Understanding the value of your business helps you to identify any areas that need improvement.

A High-performing CEO and Team

None of the above will work if your leadership and team aren’t performing at their best. High-performing CEOs and team members:

· Closely monitor their results

· Are aware of the drivers of the business

· Consistently track progress

· Adapt to achieve their goals

As a business owner, it’s important to not wander through the year without measuring your results and implementing tools for improvement, and encouraging your entire team to do the same. A consistent methodology, rhythm, and measuring can help identify what works, what doesn’t, what your competitors are doing, and how to best serve your customers.

This year, take a more disciplined approach to maximize cash flow and profitability. Implement a weekly scorecard, automate and improve processes, use a 13-week cash flow forecast, refresh your business valuation, and develop high performance in yourself and your team. You’ll increase efficiency, improve performance and ultimately increase the value of your business.

Let me help you evaluate and implement these methods for a very successful year!

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Great, Good, So-So, or Bad Year?

Great good so-so bad

Great. Good. So-So. Bad. It’s been quite a year for all of us. As I look back on this year and think about my clients’ results – determining wins and losses with hard, comparable data on sales, margins, efficiency, and profitability – it is sometimes still hard to quantify a year as a great year, good year, so-so year, or bad year. Or perhaps a combination of all of these. Let’s look at a fictitious, but very possible scenario, for a business experiencing all four.

Great Year – We gained some new, big customers!

As you wrap up your 2023 planning, make sure you take the time to reflect to recognize and celebrate your wins. Did you land a major client? Solidify relationships with current clients? I talked about this before in my year-end planning post, but recognition and celebration of wins is one of the things high performers tend to forget to do. It’s so easy for us to magnify our failures, but not our wins.

Good Year – We kept steady customers.

Look at your historical data. What is your profitability by customer, segment, and revenue stream? You may find that while you have some significant accounts, you might also enjoy smaller but steady sales that feed profit every month. This is worth celebrating and cultivating too. You never know who your smaller accounts know, and if you treat them well and they speak highly of you, there could be some significant downstream sales coming your way.

So-So Year – We tried some new tools and got distracted.

Maybe this year you tried some different technology, and it wasn’t always a smooth ride. New technology like DataRails, Asana, Monday.com, Loom, Bill.com, and older technology like NetSuite, 3PL’s, LEAN, remote work and outsourcing can go long way to making your business more efficient. But you can also experience bleeding edge, always looking for the “latest and greatest,” and getting caught up in “shiny object syndrome.” I have done this several times with technology, never maximizing the expected improvements. The man who chases two rabbits, catches none. Don’t overthink (and overspend) on improvement tools and experience paralysis through analysis.  Look at the options, decide, and move forward – with efficient growth always the goal. Ask yourself “Will this tool help us improve the process to get to timely and excellent deliverables? Or will it take more time and energy from our staff and get us behind – and end up in the same place we started?”

Bad Year – We made mistakes. We lost some money. We had to let people go.

No business has a perfect year. Some have terrible years. Maybe you lost (or had to lay off) key personnel. Maybe you made a major mistake on a client deliverable and had to redo the work for free. Maybe you overspent in areas that you should have kept a better eye on.

EVERY business makes mistakes. The key is to learn from them, change processes or get help/training to avoid the same mistake again, and most importantly, learn to truly let go and MOVE ON. Failures can be expensive lessons but dwelling on them will only drain your mind and pockets even more. Put the past where it belongs – in the past.

Questions to ask at the end of the year:

As you try to evaluate whether your year was great, good, so-so, or bad, here are some questions to ask. These will also help you prepare for the future.

What technology served you well? Do you need to make a change? Add features?

What does your team and personnel plan look like?  What are their metrics? How are you measuring their contributions to workload, culture, and profits?

What is the work culture like? Are people enthused about working here?

Is the team improving its capabilities regularly? Are team members always learning and improving?

What business segments are most profitable? Which are not?

What is the volume for your top 10 customers? Do we expect the same or better next year?

How could you improve the sales process and customer onboarding?

What one process could you improve to at least double efficiency? What one process could you eliminate?

How can you improve the back-end processes in accounting, payroll, accounts payable, and accounts receivable? (Ask the people who do the daily work in these areas.)

What are our top three goals for next year?

I can help!

Whether you had a great, good, so-so, or bad year, I believe Verbeck Associates can help any business be better.   I’ve seen so much as a full-time fractional CFO for the last 16 years. Many businesses wish their net income was better. They are experiencing scarcity in the supply chain, more competition for qualified team members, and rising interest rates/inflation. You are probably feeling the effects too. But you still have choices and power to fix some leaks, institute better processes (like consistently going over a Weekly Scorecard), develop strategy, pick the right team and technology, and move forward. The choice is up to you, and I’d love to help. Contact me for a free conversation and a basic evaluation of what we can do together to make the end of 2023 reflection contain more of the “Great/Good” elements than the “So-So/Bad” ones.