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!

It’s the fourth quarter and your team has the ball on the 10-yard line. The score is tied with two minutes to go. Football is particularly exciting (or nerve-wracking) as the game winds down and the score is close. What happens in that last quarter determines who wins the game.

The fourth quarter of your business is similar, and we are cruising fast to the end of the year.  In this fourth-and-final quarter, there are four things you should do to help your business win, stay strong, and enjoy success.

Get Your Team Energized to Finish the Year Strong and Be Ready for 2023

With most of my clients, I am wrapping up the quarterly meetings.  In these meetings, we are looking at the numbers to ensure that everyone is on the same page regarding key goals and approaches.  I generally find that the team is around 70% aligned. We use the opportunity to increase that percentage by having an in-depth discussion of the historical results and looking at the rest of this year and going into 2023 to align the teams’ vision and long-term strategies. Knowing exactly where you are can give you motivation and energy for what needs to happen next.

Ensure a Solid Q3 Close

If you’ve established effective processes and routines, your accounting staff should be keeping up with the necessary tasks to ensure you have accurate numbers and information for future decisions. If not, focus on getting these procedures polished (with assigned task checklists ) and getting your staff on board completing them efficiently and effectively EVERY month.

Get Your Short-term Targets in Focus

What are you hoping to see happen in your business during the fourth quarter? Write down these short-term goals and initiatives, narrowing them to be specific, measurable, and fitting for your team.

Start the Budget Process

2023 will be here soon so you’ll need to have your budget in place to ensure an effective transition. It may be a simple matter of copying and tweaking this year’s budget. Or, you may have to revamp if some areas of your growth or scaling did not match your expectations. What are the big initiatives and capital needs next year? Develop your planned organizational chart and get input from your staff for their needs to support their roles for the upcoming year. Start formulating your sales targets now so you can solidify them in November. Consider cost-cutting measures or redirection of funds to more effective endeavors such as product development or marketing for next year.

Bonus Task

I find it interesting the statistic that 98% of business owners don’t know how much their business is worth.  Their business is their most valuable asset, yet most have no idea of its value until they decide it’s time to sell.  I know a couple of owners who recently transitioned from their business and the offers they received were substantially less than they anticipated. In addition, knowing the current value of your business makes it easier to intentionally increase it over time with well-informed decisions.

I suggest all business owners do a business valuation every few years. If you haven’t done this in the last couple of years, arrange to do one this year. Our valuation process is inexpensive and efficient, and you’ll be amazed at how the information helps you as you head into 2023 and beyond.

It’s that time of year again – the first half of 2022 is already over. We’re at half-time, just like in a football game. This is when the coach takes the team to the locker room to examine how they’ve performed so far, give some leadership inspiration, and reinforce the plan to regroup and outperform the other team in Q3 and Q4.

In a similar way, I just wrapped up Q2 reviews with a couple of my clients, and I tell you it’s eye-opening.  It’s an opportunity to increase performance with a solid plan and to make adjustments as necessary based on more realistic and better data now available to us.

Here’s the simple process I use for a mid-year review:

• Do a solid close for June and get the reporting package completed asap.  I like to close the books in 2-5 days. 
• Lay out monthly income statements for the last 18 months on a spreadsheet.  Format to print on one page.
• Breakout revenue in COGS (Cost of Goods & Services) by significant business segment.
• Develop a revised monthly sales plan if your sales results differ significantly from your initial budget for this year.  Solidify the plan and lock it down.
• Examine your org chart with actual monthly data by department. For some businesses, this is easy – for others it is cumbersome.
• Re-forecast your operating expenses based on current levels aligned with the next six months’ expectations.
• Develop a 2nd Half Year Business Plan (2HYBP) – one page with monthly summary income statements.
• Make necessary changes to the personnel plan – review all accountabilities and ensure all are aligned with the revised plan.
• Review and communicate the plan with the team.
• Review at least monthly.

This process becomes easier if you have a rolling forecast versus a static budget  – meaning as one month completes another month is added to the forecast. I use a rolling forecast for all of my clients.

I have a client in the professional services consulting business that lost a large customer in May. The sales plan needed to change significantly because of this loss. The team developed a revised sales plan; if they achieve it, they will be strategically much stronger.  Difficult changes were necessary, but with brief stutter-step, they were nimble enough to make the change.

You can do this too. You can’t always control what clients and customers will decide. But YOU are in charge of running your organization with a best-practice approach. This habit positions you to handle storms and be ready for potential new business. I can help. Contact me!

The first quarter just ended. It’s time to check in to see how your performance is tracking compared to your goals. Do you need to rethink any goals or realign any projects? Are you on track with your financial forecast and the large projects you laid out last fall in anticipation of the new year?

Things constantly change, and we are facing new challenges already this year. Inflation. Interest rate increases. Global conflict impacts. Supply chain issues. Attracting and retaining talented staff. There’s likely something going on in your company that isn’t coming together in quite the way you expected. (If that’s not the case, keep up the good work!)

For many, a quarterly review provides the opportunity to discern what needs to change to get back on track. It could be the plan itself. Maybe it’s too ambitious given current challenges. Then again, maybe it’s not a big enough stretch! Or it could be the approach to daily work and decisions that needs changing. Are the processes and expectations set up in a way to encourage movement toward the goals?

Schedule a time to take a deep dive with your team to review, reframe, and rekindle what the goals and priorities should be over the next quarter. This meeting is also a good time to realign all team members to the common goal, if necessary. (Doing this quarterly helps everyone stay on the same page.)

Here are some questions you can use at your meeting:

Review

• What went well last quarter?
• What didn’t go so well last quarter?
• How are we tracking with our revenue, margin, and net income goals?
• Are one-year and three-year goals still on target?
• Did we finish any Q1 goals? If so, celebrate! If not, determine why not.
  

Reframe

• Are our current projects aligned with our long-term goals?
• Overall, are we on track with our mission?
• What goals are too ambitious that we can modify while still stretching ourselves?

Realign

• Are all team members on board with the mission of the company?
• Do all team members understand our upcoming quarter’s goals?
• Are we working in a collaborative way (not silos) to accomplish goals that benefit the entire company?

Rekindle

• Are we tired? What do we need to do to refresh ourselves and the team?
• What haven’t we celebrated that we need to?
• Have team members had the opportunity to personally speak about the company goals so they can be part of the goal-setting process?

Let me give you some real-life examples.

Kicking Myself into Gear

I do my own reviews, and I find that when my goals have slipped, it’s generally because my focus has slipped.

For example: in the first quarter of this year, I had set three prime goals for one of my clients. I misjudged the amount of time the projects would require, and I had to push like crazy in March to make the deadlines. It was a scramble, and honestly, I rushed more than I should have in order to get them done. Lack of focus/misjudgment of time in January and February caused the buildup in March. But I didn’t give up. Instead, I dug deep, focused on meeting shorter, bite-sized, biweekly milestones, and got two of the projects done. (We were able to push the third to Q2.)

The Big 3

For another client, we publish quarterly “Big 3” goals, breaking each one into smaller tasks for visibility and accountability. This really helps the team know where they are at and stay motivated.

Beefing Up Accountability

I’m also seeing many goals and projects slip with some clients. Their intentions are good, but there is a lack of accountability for unmet goals. For those clients, I help them strengthen accountability structures/policies and build in some “intolerance” for continued deadline slips. (My CPA upbringing plays into this – deadlines were unbending.)

You can see that there isn’t a “one size fits all” with quarterly reviews. The important thing is to DO THEM so you can review, reframe, realign and rekindle enthusiasm for your organization’s goals and dreams.

CEOs and business owners are under a tremendous amount of stress these days. Even if the business is profitable and has decent cash flow, leaders face uncertainties such as supply chain issues, inflation, difficulty finding staff, the potential of rising interest rates, the pressure of the board of directors to perform better and corporate taxes.

It is said that the bigger your business, the bigger your problems. But effective leaders can handle the challenges, if they are prepared. The key is to notice potential problems early enough to let you develop a plan and be ready to execute early to avoid or soften the impact. For many business owners and CEOs, forward-looking financial reports can really help.

Here are a few tools I use to help CEOs and business owners reduce the stress load caused by the financial side of their business:

1. A weekly cash flow forecast process that lays out incoming and outgoing cash activity on a weekly basis
2. A weekly scorecard to get early detection of upcoming issues
3. Systems and processes that produce consistently accurate financial results

I’ve discussed the weekly cash flow process in the past and can’t emphasize enough the importance of this tool – it’s one of the best tools to see and predict cash sources and uses and spot any problems in advance. Many of us are used to running our companies using monthly financial statements. While they contain valuable information, the numbers tend to come out too late and are based on accrual accounting. Using the 13-week cash flow forecast, we can see more granular changes more quickly on a cash basis. This gives the company and the team a weekly view of results and time to mitigate any cash crunch.

The weekly scorecard tracks key performance stats and leading indicators that help spot areas of concern in advance. With data compiled and reviewed weekly, these leading indicators can signal if some things are heading off the rails. For example, a scorecard can provide early detection for margin erosion or an indictive problem with the warehouse causing customer service issues.

Having solid back-room processes that produce up-to-date, accurate, and reliable data consistently, reduces stress. If leaders are unsure if the numbers are accurate, it’s harder to make wise, data-based decisions. If they can’t rely on the financial system, they are operating a business while wearing blindfolds.

In my turnaround work, most companies I work with do not have solid financial statements and certainly aren’t producing them in a timely way. Leadership can’t rely on the data, and they waste time when they try to figure it out.

Even with tools and processes in place, issues and difficulties will arise. You should expect that. One of my associates does her bookkeeping for business AND personal life every Friday. She self-admits that number-crunching isn’t her core strength, but staying disciplined with this routine helps her spot challenges and make adjustments as needed before they become major issues. She’s learned to be less discouraged about finding an error and celebrate the fact that staying faithful to her system helps her course-correct before a major source of stress develops.

Things happen, but the better prepared we are, the better we can handle the situation. Use these CFO tools consistently. Just like getting a medical physical helps you ensure systems are functioning and indicates where to make corrections, CFO tools like these help you examine and encourage that your business is running optimally. And that means far less stress for you.