This week, we continue our month-long discussion on financial literacy, including best practices to increase your financial knowledge. While there are numerous reasons business owners do not have an adequate level of financial knowledge (some people are just not good with numbers, guidance from GAAP has gotten so complicated it makes it even more difficult to understand, and business owners are just “too busy” to get into it), this knowledge is crucial to having effective conversations about your business.
Can You Stand Your Financial Ground?
If the right investor came along tomorrow, how confident are you that you are prepared with accurate historical and projected financials? Can you demonstrate thorough knowledge of your company’s financials, cash flow, burn rate, and return on investment? Are you prepared to get drilled on each number you provide and have the ability to accurately explain where it came from? If you are not prepared, it will feel like the longest half hour of your life.
So, how confident are you?
If your answer is, “Not confident,” or “Somewhat confident,” it is time to make an investment in yourself. Here are a few tips to increase your financial knowledge:
Prioritize your financial education. We know how busy you are, but think of it as the investment it truly is.
Develop a financial advisory team. Ask these trusted individuals questions and encourage them to do the same.
Make the cash flow statement your new best friend. This is the lifeblood of business and you should understand everything on it at all times.
Take some basic accounting courses. It’s never been easier to take a class online.
Connect with a CFO firm. Not everyone has all of the required resources at their fingertips. Allow the right CFO firm to become that resource as a trusted partner.
Get a better understanding of key financial terms. We’re including some right here to help get you started.
Terms to Help You Stand Stronger
When an investor begins to ask about gross profit, net profit, or EBITDA, often the business owner’s face says it all – like when you’ve caught a teenager in a lie. Knowing these financial terms helps you not only have a more constructive conversation with potential bankers and investors, but also to truly have a better understanding of your business. Some of the basics (there are many more) include:
Aged Accounts Receivable. This is a report that categorizes a company’s accounts receivable according to how long invoices have been outstanding. This report is used as a benchmark in measuring the financial health (or lack thereof) of a company’s customers.
Burn Rate. Burn Rate refers to how much money it takes to operate your business for a period of time (generally, a month). Knowing your burn rate helps to ensure that you have enough available cash to adequately run your business. Experts advise being able to cover your burn rate for at least six months.
Cost of Goods Sold (COGS). This refers to the total cost of all labor and materials required to provide the products or services that your customers ultimately purchase.
Debt-Service Coverage Ratio (DSCR). A ratio calculated by dividing your business’s net operating income by your debt payments. This compares cash flow to debt obligations. With the information, you can determine if you can cover debts due within one year.
EBITDA. Earnings before interest, taxes, depreciation, and amortization. To calculate EBITA, take the gross margin and subtract total operating expenses, plus depreciation and amortization. Keep in mind the difference between EBITDA and EBIT. EBITDA subtracts all expenses, whereas EBIT subtracts everything except depreciation and amortization.
Gross Profit Percentage or Gross Margin. This refers to the percentage of total revenue that remains after subtracting the direct costs of producing the product or service. For example, if your company’s revenue is $400,000 in one year and your gross margin is 25%, then your gross profit is $100,000.
Profit Margin.Profit margin is the percentage of your total revenue that you retain as profit. This metric is most often analyzed on a per unit basis. To calculate profit margin, subtract overhead expenses (along with direct costs) from your sales and then divide it by your total revenue. While it may take some time for a business to start generating profit, it is ultimately what makes it valuable … and a priority for investors. It is imperative that you are confident that your revenue you are charging for the product will cover the overall cost of the organization. When you are in growth mode, this may not be the case – which is why the Cash Burn rate (referred to earlier) is so important.
Working Capital. Working capital is cash plus other current assets, less current liabilities.
Whether it’s understanding these terms (and the many others), using the tips to increase your financial knowledge, or tightening up financial reporting, successful leaders ensure these characteristics are not contained within the walls of their accounting departments, but instead, are a part of their entire company culture. With financial clarity, you can maintain stability to carry out the company’s mission.
Simply, when you understand the financial terms and their effects on your business, it not only helps your bottom line, but also helps you have a more constructive (and potentially profitable) conversation with potential bankers and investors.
Let Mindy Barker & Associates show you how to raise your knowledge and be prepared for that next big conversation. We can help you improve your financial brilliance and empower you with the tools and financial information you need to improve your company value, cash flow, and profitability. Schedule a 30-minute free consultation here to learn how.
Leadership: If it’s Lonely at the Top, it’s Time to Make a Change
“It’s lonely at the top!” We’ve heard that phrase circulated amidst leadership conversations for years. But what exactly does it mean? Is the perception different from the reality? And, more importantly, what does it say about our own leadership styles?
Clearly, it’s not a literal statement. As leaders, we are surrounded by other people (often more so than we may like). Rather, it is a statement born out of one’s personality, emotions, and ability to shift perspective. Loneliness in these terms is not referring to physical isolation, but from an inability to make connections at work due to the position itself. Maybe you’re not invited to lunch anymore. Maybe you’re not on the inside track of the office jokes that everyone else seems to get. But that’s okay. Ultimately, you’re not there to make friends.
Some leadership aspects lend themselves to justifying the phrase. Whether you’re the CEO, the CFO, or in another management position, leaders are the ones who bear much of the responsibilities in a constant attempt to balance the ever-increasing demands from both sides – higher management and staff. There are deadlines, operational issues, risk management issues, financials to be filed, and problems to be solved. This is particularly true for women leaders, who often struggle to find support from like-minded women who have the same abilities and the same challenges. It is also particularly true for financial leaders.
Financial leaders often struggle with discovering the right combination of leadership responsibilities and deadline based tactical responsibilities. They find it difficult to stay engaged with the professionals they lead, because, well, some deadline is usually fast-approaching. Yet, they understand that it is no longer possible to focus solely on the tactical aspects of their jobs. If they want to move up to the CFO level, they cannot do it alone. Rather, they must engage with those whom they lead.
Are We Doing Something Wrong?
Despite the reasons, the idea of being lonely as a leader still doesn’t sit right. In fact, John Maxwell has noted, “If you are lonely at the top, then you are doing something wrong.”
Consider this: if you are alone, it could be concluded that no one is following you. And if no one is following you, how can you lead effectively? Our job, as leaders, is to build relationships, build trust, and make those we lead better at what they do, helping them ascend, as we have. Once we fully accept those responsibilities, we understand that in order to achieve our goals, we must connect to those we lead in more impactful ways, including coaching and collaboration (with little time to be lonely).
The most obvious impacts of loneliness as a leader are on those we are leading, who may feel abandoned. However, it may also affect our own ability to do our jobs effectively. For example, good decisions never arise out of negative emotions, including loneliness. As such, decision-making, a crucial component of leadership, could also be affected when we shut ourselves off.
Lonely at the Top No More
While some of the physical circumstance may be unavoidable – you do have a separate office, you’re not privy to some of the same conversations, you may struggle to find support, strategies to stay engaged with your team abound. In their implementation, not only will you be less isolated, you’ll ultimately be leading in more effective ways.
Top Five Tips to Staying Engaged (and to not being lonely):
1. Be Visible. Your team needs to know you are there and accessible. Have an open-door policy and encourage others to use it.
2. Collaborate. No leader operates alone. You don’t have all the answers. None of us do. Increasing collaboration among the team not only increases creativity, it also increases the value placed on relationships and productivity.
3. Coach. Much of your responsibility as a leader rests with the development of others. Embrace that responsibility. Remember that in order for you to move up, others must do so as well.
4. Actively listen. Your team is valuable and so are their voices, whether they are in consensus or have diverse points of view, show them that you care about what they have to say.
5. Accept Change. Understand and accept that relationships will shift based on your leadership position, but those relationships still need cultivation.
Leaders shouldn’t sit in detached isolation at the top of the organizational chart. Rather, we should immerse ourselves into the organization’s culture and people. With bonding comes energy and with energy comes relationships. And only through those relationships can we bring out the best in others. Loneliness dissipates because we are highly engaged with those around us, not sitting alone behind the closed doors of a corner office.
Barker Associates has extensive experience with collaborative management styles, assisting organizations as they achieve increased productivity and efficiency. Use this link to my calendar to choose the best time for your free 30-minute consultation.
Celebrating International Women’s Day The Past, Present, and Future of Women Leaders and Founders
“We need women at all levels, including the top, to challenge the dynamic, reshape the conversation, to make sure women’s voices are heard and heeded, not overlooked and ignored.” – Sheryl Sandberg
Yesterday, we celebrated International Women’s Day, highlighting the accomplishments of social, economic, and political achievements of women around the world. It’s no coincidence that we celebrate this day as a part of Women’s History Month. How can we celebrate the achievements of today and look forward to the progress of tomorrow, without acknowledging the determination and sacrifices of the past? While there is no shortage of influential women leaders today, they stand on the shoulders of hundreds of others who paved the way.
A Look into the Past
Unfortunately, we cannot list every courageous woman leader from the past (not to mention those we each have within our own families and friends), but here is a celebration of a few, intended to honor all:
Sojourner Truth, after being born into slavery and escaping with her infant, became an abolitionist and women’s rights activist. She later became known for her “Ain’t I a Woman?” speech regarding racial inequalities in the year 1851.
As a young girl, Louisa May Alcott worked in the mid-1800s to support her family financially, something unheard of at the time. She later wrote “Little Women,” one of the most treasured novels in American history.
In the mid-1900s, Marguerite Higgins became the first woman to win a Pulitzer Prize for Foreign Correspondence after working as a war correspondent for the New York Herald Tribune during WWII, The Korean War, and the Vietnam War.
Rosa Parks became one of the most famous, influential women of the civil rights movement when, in 1955, she refused to give up her seat on the bus to a white man. Today, she’s known as the “Mother of the Freedom Movement.”
Sandra Day O’Connor was the first female justice on the Unites States Supreme Court (1981-2006).
The list, of course, goes on in all government and private sectors, industries, and facets of life. These women and thousands more played prominent roles in advancing women to where they are today. And, as we celebrate women this month, we share in our gratitude for them all.
The Here and Now
There is no doubt that progress continues for women leaders and founders. There have been great successes in the government, sports, finance, and corporate worlds. Women are breaking records every day, but there is still a long way to go. In 2019, the proportion of women in senior management roles globally grew to 29%, the highest number ever recorded (same percentage in 2020). On the one hand, we love breaking records. On the other, at only 29%, there is much room for improvement and many more glass ceilings to crack.
The gap doesn’t just exist within the boardroom. It is also very apparent in female founders and funding. We need improvement in women led companies locating and securing the funding they need to scale their companies.
While there was already a significant gap in funding, according to Crunchbase, global venture funding to female-founded companies fell further in 2020. Whether this is the result of COVID-19 is unclear; however, there is data that suggests the pandemic has disproportionately impacted women in the workforce.
Through mid-December, 800 female-founded startups globally had received a total of $4.9 billion in venture funding in 2020, representing a 27% decrease over the same period in 2019.
Optimistically, early 2021 Crunchbase data shows improvement. In fact, 30% of investments in U.S. companies at Series A and B stage between January and mid-February went to teams with female or Black founders. While it is a brief study period, this trend is worth watching over the coming months.
Overall, while female entrepreneurs are still far underrepresented in startup funding tallies, at least there are some signs of, and initiatives to, continue that progress. In fact, there is a new target set by All Raise (an organization that advocates for female investors and founders) of growing seed and early-stage funding amounts from the current 11% to 23% by 2030 for U.S. companies with a female founder.
So much has been accomplished, yet, it’s clear we still have a long way to go. According to the World Economic Forum, global gender equality is not estimated to be achieved until 2133. So, as we celebrate the great women leaders of yesterday and today, we do so with an understanding that thousands more women will be standing on our shoulders tomorrow. And the forward momentum that is women’s leadership continues on.
Are you a woman founder looking for funding? Are you ready to be a part of that 23% target? Schedule a free 30-minute consultation with this link to my calendar to talk about how we can work toward getting you the investment money you need.
There were more firsts this year than any of us care to count. Some issues, however, have been around for a very long time and aren’t going anywhere. In fact, many are more important than ever before. Financial strategies and solutions, infrastructure, investor relations, and negotiations simply do not quarantine themselves, even during a global pandemic. Rather, the pandemic forced us to be even more diligent when it comes not only to our physical health, but also to our financial health.
Before we start crunching the numbers of 2021, we thought it was a good time to reflect back on the topics we found most crucial in 2020. Click below for some refreshers, as you prepare for the new year:
Getting to Day Zero: The importance of “Day Zero” being top of mind at the beginning of each month for proactive organizations.
Help Investors Spend Their Money: How the amount of money in the hands of Private Equity and Venture Capital firms substantially increased over recent years – the total money raised in 2008 was $392 billion as compared to $740 billion raised in 2019.
Essential Infrastructure: The right infrastructure is critical to generate data about your business during the due diligence process with potential investors.
Negotiate from a Position of Knowledge: Valuation is the value an investor would place on your company if you were to seek investment funding. Your company can be valued based on what someone will pay for it or what the market will bear.
Times Have Changed, or Have They?: With all of the year’s changes, one thing that hasn’t changed is the core fundamentals of business. In order to survive (pre- or post-pandemic), a business must have a product or service that solves a problem and can financially make a profit.
Oh No Not Again: The importance of having a clear vision and financial roadmap for your business through having the right infrastructure in place, including an Enterprise Resource Plan, CRM, General Ledger, Cash, HR System, and Payments.
Stay Safe: Leaders must set priorities that have measurable results with employees, even if the employee is working from home or transitioning back to the office.
If you have any questions about these topics or how to start your new year on the right financial foot, we can help. Let’s set up a time to talk! Use this link to my calendar to choose the best time for your free 30-minute consultation.
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?
How would you respond if someone made a legitimate offer for your business? Would you know if the amount is what the market would pay? Even if the offer sounds like more, or less than you imagined, you want to respond from a position of knowledge, not sticker shock.
Valuation is the value an investor would place on your company if you were to seek investment funding. From a negotiating standpoint, it’s better for the prospective buyer to say a number first so you have an indicator of how serious they are. Prepare yourself – arm yourself with the knowledge of a realistic valuation so you can effectively negotiate.
One measure of the value of your business is what someone will pay for it. Enterprise Value is a real number that investors calculate using your historical financial statements to arrive at a multiple of revenue, or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). Other factors influence the value that could actually be paid for the business.
For example, are you loading your books with personal expenses and other tactics to avoid paying taxes? When investors value your business, such expenses can lower your EBITDA and affect the sale of your company.
On the other hand, EBITDA can be higher when you keep personal and business expenses and bank accounts separate and run your business as a true entrepreneur. Large and small organizations alike are guilty of combining personal and business expenses. C Suite executives in large organizations without governance over their expense account can significantly impact the value of the business by deflating the run rate of profit. Smaller businesses sometimes pay their family members a salary without the family member ever doing any work for the organization. Neither of these examples are proper stewardship over the financial governance of the organization.
Then there is the value that the market will bear. Factors that can influence the actual value paid for your business include how scalable your infrastructure is – the people, processes, and technology. If a new owner wants to focus on growth, is the right infrastructure in place to support that or will the new owner have to invest in infrastructure first? How much debt are you carrying? Someone has to pay off debt when the business changes owners.
On the other hand, your approach to acquiring new capabilities – buy, versus build, versus lease – in some cases can raise the value that the market is willing to pay.
Your role as an entrepreneurial leader can also influence the market value of your business. Employing a strong team who lead and run your company with an eye to the future is much more attractive than a business operating with old, inefficient processes and no new product launches.
My goal with this post is to help you understand the importance of knowing the value of your business. You never know when someone is going to reach out to you with an offer you cannot refuse. Be ready by knowing the valuation of your company so you can speak intelligently – before you get on the emotional roller coaster of discussing a transaction.
Recently I attended the 2019 Florida Early Stage Capital conference, where I gained an impressive and realistic view of the early-stage entrepreneurs in Florida. The Florida Venture Forum does a great job of running these conferences. If you are an early-stage entrepreneur, this is a must-attend event each year. The education and networking opportunities for early-stage entrepreneurs are irreplaceable.
The extensive vetting of Florida-based companies seeking to present their pitch at the event means attendees meet the A-list early-stage entrepreneurs. Hearing from the represented companies about their products or services, and the problems they must solve challenged my understanding but was a great learning experience. Each entrepreneur generally has personal experience with the problem they are solving, which then drives them to develop a solution. The challenge at this stage of the game for these companies is to develop a revenue model and platform that will scale and build a recurring stream of profitable revenue.
Insights I Gained from the Conference
The conference included a strong healthcare solutions representation. As anyone who has dealt with the healthcare system in the USA knows, managing the end-to-end process of undergoing complex medical services and procedures is cumbersome and difficult to manage. A variety of innovative ideas were represented at this year’s conference that can solve each problem you may encounter in the health treatment lifecycle. One of the things that became crystal clear during the pitch contest is that if you want to build a business related to healthcare, you must answer two questions: who is going to pay for it and how will the solution meet HIPAA and other compliance guidelines? Each company in that space was asked these types of questions if they did not address them in their presentation. Given the judges’ interest in these follow-up questions, I recommend if you are pitching to investors in the healthcare space, you include this information in the pitch.
From the panel discussions I attended, I learned:
Early-stage companies have traditionally found it difficult to acquire funding in Florida, as most of the wealth that has been obtained has been tied to the real estate industry. Entrepreneurs who made money from real estate seem to have a difficult time grasping the concept of risks faced by an early stage start-up. Angel groups are addressing this problem – high net worth individuals pool their financial resources and brain power to invest in start-ups.
Several incubators have also been formed in Florida. These incubators are working hard to convert entrepreneurial solutions to sustainable companies.
A theme that was consistent from investors and incubator managers is the frequency with which entrepreneurs approach them with an idea and a solution and who think that an investment of money will help solve any problems their start-up is experiencing. Whether the issues are process-related, growing pains, or personnel, they don’t understand that investors want to know the business model is sustainable and scalable. These entrepreneurs need to be willing to listen to the investors’ advice and show a willingness to adapt if they want to earn the investor’s confidence and investment.
Learning from Experience
My favorite part of the conference was the interview Jennifer
Dunham, Partner with Arsenal Growth, conducted
with Abhi Lokesh, Co-founder of Fracture, pictured here.
It takes guts for a business leader to sit before an
audience and discuss his mistakes along his journey. Abhi’s vulnerability and
honesty about his journey in entrepreneurship and interacting with Arsenal as they
built the business immediately endeared him to me and the rest of the audience.
When asked what the most challenging moment in the journey was, he humorously recalled
a board meeting with Arsenal Growth where it was pointed out to him that he was
not listening to their advice and acting on it. Ironically, Jennifer Dunham was
the Arsenal board member he was meeting with at the time, and she was
frustrated by Abhi’s failure to respond to her recommendations.
He also spoke about a time when the orders were coming in so fast the company was unable to fill them within the time frame the company had committed, and how they strategically addressed the issue. Now when you go to their website https://fractureme.com/, the first thing you see at the top of the page is the expected ship date for orders placed today. Fracture has hit upon a unique and aesthetically pleasing alternative to display digital photos.
And the Winner Is…
the early stage competition. This web and mobile-based security system takes
“if you see something, say something” to a new level by partnering with law
enforcement and first responders to help individuals, schools, corporations and
neighborhoods to raise the level of safety and security within communities. The
app allows individuals to report incidents in real time or to submit tips after
the fact. The presenters successfully demonstrated how they solved a problem
while generating revenue and building a scalable platform to grow their
I receive my education in a variety of ways. I love to learn
from those who are on the ground walking the walk and talking the talk. By
meeting hands-on entrepreneurs and hearing their stories and challenges, I become
a better resource for entrepreneurs as they consider pitching to investors, as
well as to C Suite executives, as they consider making investments in
innovative start-ups that solve a problem with which they are currently dealing.
I also think it provides a platform to understand the world better, which makes
me a better person.
Special Contributor Danielle Moga, Barker Associates
If a picture paints a thousand words, the
charts and graphs being compiled for reporting packages should tell a very
colorful story; however, the dashboards and scorecards being created, though
visually appealing, are lacking a strong story line and worse yet…a plot.
Accounting and financial professionals spend hours compiling data from disparate systems to provide an “at a glance” view of information, but often times the rainbow of colors is the best part of the document. The information is typically flat, one-dimensional, and lacks actionable data to help the audience improve financial and operational goals.
By following these steps, you can create
meaningful visuals that tell a story and provide actionable insights to your
1. Begin with the end in mind
Determine if the time creating visuals is worth the time and money it takes to compile. Most leaders don’t understand the hours it takes to pull data together and create meaningful visuals; rather, they see a pretty cover page leading to traditional financial reports. If the visuals are not connected with actionable goals and socialized with leadership and the teams responsible for the measure, they are a waste of time and add no value to the final product.
2. Define what you want to measure
If leadership wants to use visuals to tell a story, then they should use the correct tool to tell that story. “Dashboard” and “scorecard” are tools used to deliver periodic metrics. The two terms are often used interchangeably, but they are different. A dashboard is typically linked to multiple systems, provides real time data, and has flexibility in design, depending on the person or team using it. A scorecard is a snapshot in time, of a specific measure to a pre-determined goal. Leaders who are actively engaged in selecting the measures to be used and the delivery tool can ensure the measure is tied to a specific organizational goal as well as gain the buy in and support for achievement from their staff.
3. Discuss the strategy
I’ve seen too many organizations go through painstaking efforts creating a strategic plan, only to have the completed document sit on the shelf to collect dust. Strategic initiatives, if designed properly, should propel an organization forward and those are the items that should be measured and reviewed regularly. Ideally, senior leaders should review progress towards goals with internal teams and leadership quarterly; review goals semi-annually with the board.
4. Tie results to performance
“What’s measured improves.”
It doesn’t make much sense to design a measure if you don’t have accountability tied to results. The individuals and the teams responsible for achievement must have the ability to successfully complete goals without barriers that prevent performance. For instance, I’ve seen organizations tie cost savings initiatives to the accounting team without including the purchasing or sales teams that actually spend the money. One of my favorite examples of poor planning and misaligned goals is an organization that had a goal to use new software for the organization; however, no one consulted with the IT team or the project management office to ensure resources were allocated to support and implement the project. All parties that can impact the successful outcome of a project should buy in to the project outcomes and performance goals attached to those outcomes.
5. Enable the change
culture that supports and enables change when introducing changes to repetitive
reporting packages. Initiate change with a concise project plan that includes
metrics and milestones, team accountability and ongoing engagement from
leadership help ensure success. Uncover what measures and milestone leaders
need to make informed decisions and then incorporate them into reporting
packages in visually informative ways.
Leaders who intentionally communicate
with visual measures will have a greater success rate at achieving their goals.
Use the rainbow of ink for visuals that tell a compelling story of your
progress and actionable opportunities.
Barker Associates works with leaders to understand and identify meaningful and actionable goals for their organization. We can design indicators to measure progress and actionable tasks to keep your organization on track for achieving goals and executing successful projects.
Most founders and CEOs are certain their business is a good investment and that others should see it that way. Unfortunately, that is not the case in a high number of instances when we dive deeper into the aspects of a company.
We each have a unique set of characteristics that drives us and puts us in situations where we are comfortable. Every time we make a choice to put ourselves in a situation and stay in it, something about that situation is working for us. Solid self-awareness and emotional intelligence help us make choices in life that work for all aspects of our lives and align with our relationship with money and our core values. A culture is developed around that. In business, the governance over this culture is ultimately driven by the purpose of the investors, shareholders, or founder(s). They determine the “Why” of the organization.
The culture and purpose of an organization can be several things.
It can be a hobby, and you are okay with not making any money. I know many business owners who have built a lifestyle company that provides enough cash to pay their bills; they may also run all personal expenses through the company. They are examples of “Lifers.” This practice is great if they happily accept the annual income they produce and do not have any desire to sell the company one day.
Entrepreneurs who are aware they need to build Enterprise Value will focus on establishing and monitoring metrics with the understanding they are building a business that can survive in the ecosystem of the investor world. They do not commingle their personal and business expenses. They listen to experts and focus on the important aspect of building a business. They may not take a salary from the business in the early years, opting instead to reinvest in the business and build a loyal customer base and revenue.
The problem arises when the Lifer wants to raise money from or sell the business to an investor – which really means they want the investor to fund their lifestyle.
Which Are You?
Before you get ready to pitch to investors, evaluate which type of business owner you are and if pitching to investors is the right thing for you. Do not waste your time and energy if it is not.