Stay Safe. People are closing emails with this entreaty, wishing it of friends and family at the end of a gathering. The caution is a new reality in our life.
“Stay safe” has many different interpretations to each of us and it is difficult to lead a team and keep them “safe” with so many interpretations. We cannot, as leaders, let the fear factor impact our ability to lead. We must remember that we are working with humans and lead with empathy, while encouraging each person to work as part of the team to execute the strategic initiatives of the organization. The employment contract between a business and an employee is a financial one and the investment in salary dollars must create a result that supports the initiatives to drive the strategy.
“The fear of failure can be one of the biggest impediments to making an impact,” said Aja Brown, mayor of Compton, California, noting that leaders don’t make excuses — they lead.(Bizjournals, 5 Leadership Lessons for Women, From Women, 9/25/2018)
Let’s lead, not make excuses. To help with effective leadership during this time I’d like to share my reflections on the challenges we have faced.
I’ve been thinking about the differences between this century’s big financial crises: September 11, the 2008 financial crisis and today’s financial crisis brought on by the pandemic.
9/11 united this country, but the pandemic has hardened a divide that was already in progress in so many segments. This divide creates opportunity for risk within all businesses, as all businesses have employees with so many different views.
The economic up-tick before the pandemic was fueled by fast- paced growth in innovation and technology that was not always backed by the proper governance and accountability.
According to Bain & Company more money has cycled through the PE industry in the last five years than any other period in the history of PE. The number of firms chasing opportunities to invest created a tilted supply/demand dynamic that significantly lowered the bar on due diligence and investment.
Why does all of this matter as we approach a post pandemic state and lockdown restrictions begin to loosen? Let’s analyze that.
Controversy in the media means that your employees may be more inclined to share their feelings and reactions to current events, with their teammates. As their leader you cannot ignore the impact this can have on the work environment, even if it’s a virtual environment. Maintaining healthy, constructive conversations while still performing and measuring results of work performance could be difficult for some types of leaders.
Financial leaders are generally not the best at managing the human factors of daily work life. Leaders must set priorities that have measurable results with employees, even if the employee is working from home or transitioning back to the office. Your goal is to create a team atmosphere with a sense of belonging and accountability for performance. You must stay mindful of your fiduciary responsibility to make sure the investment of salary dollars result in the desired outcomes. Be aware that the complexity of that is more difficult when distance and social issues divide the team.
Leading from a position of knowledge comes from having the right information infrastructure in place to set and monitor goals and performance. When you add leading your team so all feel they belong and are part of the solution development, you will have an edge over those companies that are blindly making decisions.
Let’s set up time to talk about how to effectively set up your infrastructure to provide real time financial data so you can have all of the brain power of your team working on developing a solution rather than doing data input. Use this link to my calendar to pick your free 30-minute consultation with me.
Many entrepreneurs who launch a business are focused on selling and bringing in revenue so much they are not thinking about the type of infrastructure needed to efficiently operate their business. I have to admit that some of this even happened to me when I first began my consulting practice. All of the support I received in my role as a corporate CFO was nonexistent. That saying about building the airplane while flying it applies here.
You bet I am – because it’s that important to the success of your business.
In an ideal world, your infrastructure can be represented by this graphic:
(* ERP – Enterprise Resource Planning – is the conductor that manages all of your business’s processes to integrate them into a cohesive database for reporting purposes).
Small businesses starting out often prioritize going after the work to generate revenue while building a “just-in-time” infrastructure. No thought is behind how all of the pieces should work together with the end result in mind. With a computer and a phone, you can run many types of businesses by the seat of your pants in the beginning.
For a business to grow to the next level, a business owner needs a vision and a roadmap that includes the evolution of their company infrastructure.
Understanding the basics of what your infrastructure should be able to do for you is critical when selecting the right tools to operate. Here are two of the most fundamental components: Cash and your General Ledger.
Knowing your cash burn rate – the rate at which you spend cash over time – is the most basic component for a business owner to know. Without cash you cannot operate. Maintaining a cash ledger, even if it’s in Excel or a tool such as QuickBooks, is critical. Select a tool that provides download capabilities for future integration needs. Forecasting cash needs over the next few weeks or months will help you decide the timing of critical versus discretionary spending. I advise my clients to know at least a 12-week forecast of cash needs.
You may be saying at this point that you already have a tool – your online banking site. Anyone who has heard me speak on this topic knows my position on this – you MUST have a checkbook that is reconciled each month to maintain history. The information gained from this piece of your infrastructure can be used to diagnose issues and strategically to plan for future growth. The online account is only a moment in time and does not serve your future.
Setting up your general ledger with the end goal of financial reporting in mind provides you with the insights you will need to answer questions such as, “How much did I spend in Marketing last year?” and “Am I making or losing money in my Hoboken location?”
Whether or not your future includes seeking investment funding, you must have the infrastructure in place to answer these types of questions when planning for the future. Potential investors will require you have data to back up projections for future sales. If you cannot rely on your general ledger and reporting tools to produce answers, perhaps it’s time to revisit your current infrastructure to support future needs.
Wondering where to start to build the right infrastructure? Let’s start with your General Ledger. Structuring your GL in order to generate reports from various perspectives is critical to daily decisions, budgeting, and financial reporting.
Note this example:
When a GL is structured with these various categories you can examine your business from multiple angles to determine if a location, product, or department are serving the business as needed. If you cannot produce financial reports to support tactical and strategic decision-making, perhaps the GL structure is the problem.
Mindy’s Money Tips contains in-depth, free advice for new entrepreneurs and mature business owners, alike. Find out when new articles are published by following me on your favorite social media platform – the links are shown at the end of this article.
If you would like to discuss how to structure your general ledger to work for you or other specific areas of concern, I would love to speak with you. Click here to schedule a 30-minute free consultation to discuss your unique situation.
Since March nearly everyone in the world has experienced change in their lives beyond our average experience. Some of the changes have been stressful and devastating; some have been positive. Most people with whom I have spoken have found times of joy in spending more time with their loved ones, having the time to cook, play games and just talk.
However, the negative impact on so many businesses seems almost unbelievable. Eight months ago no one would have predicted that restaurants, retail stores and gyms would have to completely shut down.
What has not changed are the core fundamentals of business. In order to survive, a business must have a product or service that solves a problem and can financially make a profit. From what I have seen, many businesses that will not survive until the end of 2020 were not sustainable prior to the pandemic because they did not understand which products or services were making money and which products were losers.
The core metrics and accountability required to run a profitable business were overshadowed by the exuberance of the economy and the unrealistic valuations private equity and venture capital firms were paying for investments. These valuations stemmed from the limited supply of investment-worthy companies and the requirement for investors to invest in order to stay in business.
The firms being capitalized had the Seven Essential Tools® – and knew how to use them to attract investors.
Check out my Seven Essential Tools Road Map®, which shows the steps to preparing to pitch to investors. Along with the Seven Essential Tools® details, you can position your company for growth or simply gain a better understanding of where your company stands financially.
Investors are focused more than ever on the core attributes of a business when evaluating it for investment. The good news is that the information they want to know is the same information that is critical for you to run your business successfully.
If you are a founder or a C-suite executive of a fast-paced, growing entrepreneurial company, are you confident you have the Seven Essential Tools® you need to pitch to investors?
Don’t Just Hope For the Best – What Does the Data Tell You?
For months, the headlines have screamed that millions of small businesses will file bankruptcy due to impacts of the COVID 19 pandemic. Perhaps you have had the thought in the back of your mind, calculating how many weeks you can remain in business before considering closing your business and possibly even filing for bankruptcy.
Don’t just wonder – take steps to gain a confident understanding of your business’s financial position.
Communicating with your banker and investors effectively is essential during these times of economic upheaval and doubt. To do so, you must have the right financial data to inform yourself, and then to inform your financial support team if you will struggle to make payroll in a month or two. What you need is a 12 week cash flow projection.
Instead, you are hunkered down, uncertain of your cash position, keeping silent and hoping for the best.
This is not a great strategy. The most important thing you have as a professional is the trust you gain over time as other professionals recognize you do the right thing. I recently had a Senior Executive of Marketing where I was serving as an Interim CFO say that they appreciated my intention to always do the right thing and recognized how much it helped the team feel more comfortable. Prior to that comment, I would have never dreamed someone in marketing would notice.
Bankruptcy is not the only option if financial projections indicate your business is in serious trouble; in fact, your business has to qualify to file Chapter 11. The Small Business Reorganization Act of 2019 has created other options for small businesses (set to expire in March 2021) to seek protection from debtors. The key to moving to the next step is for you to communicate pro-actively with all parties and let them help you understand your position as well as the options available to you rather than using hope as a strategy.
Empower yourself with knowledge and get the cash flow projection you need! Listen to a podcast where I was recently interviewed about cash flow here.
If you need help starting the conversation with your financial partners and stakeholders, I invite you to set up a 30-minute free consultation with me right now by clicking on this link to my calendar – let’s talk!