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Financial Experts… How Can They Help?

Financial Experts… How Can They Help?

In business, as in life, we run into common situations and problems that can hold us back from reaching our full potential. As a small to medium-sized business owner, can you relate to any of these situations and wonder what you can do about them? If so, see how adding financial expertise to your team can help…

Communication – or rather, a lack thereof. Keeping everyone on the same page is difficult. You often have to repeat yourself, and it can seem frustrating to keep delivering the same message. But communicating expectations, building routines (or “good habits”), and checking progress is important and healthy. It may seem obvious to you where the business is going and how you’re going to get there, but things can get off track if you’re not measuring them and communicating them.

For example, pilots making a transcontinental flight don’t just set the autopilot and forget about it; getting off track even to a small degree over such a long distance can drastically change where the plane ends up. That’s why pilots constantly check their vectors and make course corrections along the way. The same applies to your business, you know your destination is somewhere out there on the distant horizon, but it’s not always easy to see. Don’t let turbulence change where you end up. Pay attention and make course corrections to stay on track.

Communicate the vital financial and operational information with those helping you pilot to ensure everyone knows where the company needs to go and what they need to do to get it there. Make sure you have a financial expert on your team. They can help develop a reporting package that is accurate, timely, and summarizes what everyone needs to know, and then help interpret it and identify red flags.
Accountability – have you ever started a new diet or exercise regimen? Is it easier to stick to it on your own or with a partner to encourage you and hold you accountable? When you’re a business owner and you’re at the top of your organizational chart, you may feel isolated. It’s not always easy or even possible to talk to your employees about the problems you or your business are facing.

Getting honest feedback about what you’re doing right and, more importantly, what you’re doing wrong, is valuable to help you grow. Start to build that accountability into your business by building an executive team that gives you honest feedback. Do you have senior employees whom you trust and who have the right mix of expertise? If not, look for consultants that can provide that as needed.

Do you have a group of peers that provides oversight? If not, think about joining a professional peer group, hiring a board of directors or (less formally) an advisory board. Look for a group that could add insight where you might have blind spots or lack expertise.

Use that accountability to help you set goals, put up guardrails to stay focused, and ensure that you’re making progress. Make sure there is someone on your team that can give you an experienced financial perspective.

Growth – most business owners want growth. At first, it can seem like a pathway to the realization of your dreams, but if it’s not managed, it can turn into a nightmare. Even if you aren’t looking for it, it can happen anyway. Maybe there are market forces pushing you, and you need to grow your business to take advantage of that demand. Perhaps there are forces pulling you as a business moves from one generation of ownership to the next; the previous generation only had two owners, but now it has eight. To divide the same income amongst more people means that the business’ output is shrinking even if the income stays the same. In fact, staying the same size might not even be optional.
Growth can be painful, especially if it’s uncontrolled. If you don’t invest enough, you overstretch your resources and start to fail to meet customer expectations. If you invest too much (especially with today’s cost of capital), cash inflows won’t support outflows. Either situation can damage or even destroy a business.
Do you have a plan? Do you have a budget? Have you built financial and operational forecasts to see where and when you can expect these pitfalls and to come up with ideas for how you’re going to deal with them? Developing and keeping this reporting current and relevant takes financial understanding and skill. Make sure you have the right expertise on your team.
Optimization – are you getting the most out of your business? Of all that you sell, do you know what makes the most money? Do you know what makes the least? Who are your best, most profitable customers? Who are your worst? What are your best markets? Have you estimated your business’ capacity? Is your business performing under capacity, or over it? How does your business compare to others like it? Do you have systems that capture data but don’t summarize it into something useful?
Analyzing and planning help you gain an in-depth understanding of your business and helps you optimize its operations through setting targets and benchmarks. Once you figure out what you should be doing, you can make plans for what you will be doing. This understanding can help you build a strategy and discover where you best fit in your market. A financial expert can help you with this analysis and help build a strategy to develop the best path forward for your business.
Do you see the benefits of adding a higher level of financial expertise, but your business is at a stage where adding it is cost prohibitive? Consider alternatives to full-time employees like part-time consultants or Fractional CFOs (“Chief Financial Officers”). These are experts who spread their time between several clients and can tailor their services to what you need either on an ad hoc basis or for regularly scheduled terms. Discover how adding big business expertise to your small business can help!

Written by Scott Nabozniak, CA from Mowbrey Gil. This document was written for our quarterly bulletin, Canadian Overview, published by Canadian member-firms of Moore North America.