Hire a CFO Call us 1300 447 740
Hire a CFO Call us 1300 447 740

Tag: growth

External Funding Options for Your Growing Business

Published: by lauramills
External Funding Options for Your Growing Business

Your Guide to Business Financing and External Funding

Getting external funding to fund your company’s growth will depend on your plans, how willing you are to give away a stake, and, therefore, control in the business, your eligibility, and the short-term or long-term funding you need.

How to finance your business growth

Bank finance

Banks can offer you:

  • Unsecured business loans. These will have fixed repayments (including interest) over a set time frame. The amount and the interest rates will depend on the bank and your circumstances.
  • Secured business loans. To obtain a business equity loan, you’ll need to offer your company collateral or assets as security (for example, property, inventory, or equipment). The amount you can borrow will depend on the value of the assets.
  • Buy-to-let loans and commercial mortgages. These are suitable if you’re looking to buy or remortgage business premises.
  • These are more suitable for short-term financial support when your company has a cash shortfall.
  • Business credit cards. Again, these are probably best for short-term support.
  • Invoice finance. It will mean you can access cash that is otherwise tied up in outstanding invoices. It’s ideal if your company offers long payment terms to customers or if you need to grab growth opportunities.
  • Asset finance. This allows you to make small regular payments for an asset rather than a large, one-off payment. It is ideal If you want to preserve your working capital and generate income from an asset as you pay for it.

Angel investors and venture capitalists

If you’re willing to offer a share of your company or equity, you could approach third party investors such as angel investors or venture capitalists (VCs).

You might not have to repay their investment, but the share they will want in return is likely to be high.

Alternative investment markets

You could also consider alternative external funding options. These include crowdfunding and peer-to-peer funding.

  • Crowdfunding. In return for early access to your products/services, discounts, or an equity stake in your company, you can raise the money you need from a crowd of small investors.
  • Peer-to-peer lending. You can borrow from individual small investors. If your application is successful, you’ll probably be able to borrow more than you would through a bank and access the funds quicker.

The criteria for the loan might not be as stringent as a bank, but the costs might be similar.

Is your company eligible for external funding?

Banks and investors often use what’s known as the CAMPARI method to decide if your company is eligible for funding. That is:

  • C This incorporates everything from your professionalism and brand reputation to your company’s record in repaying loans.
  • A This is about you and your team’s knowledge and expertise and how successful you’re likely to be to generate growth from the financing that investors are being asked to provide.
  • M This is about how well your business is equipped to meet your growth plans. Investors will want to see your Return on Equity (ROE), growth projections, your competitive advantage, detailed financial reports, performance record, and a comprehensive expenditure report.
  • P Investors will want to know how you will use the funds and how they will help to boost the company’s financial situation or generate a profit.

For example,  if you have no liquidity in the business but need it to fulfil an order or if you need a type of machinery to be able to increase your product or service range.

  • A This is about showing investors how you came to decide on the level of funding you’re applying for.
  • R Investors need to be convinced you can afford any repayments. They’ll look in particular at your cash flow and profit margins.
  • I This is all about showing investors you have a fallback position if things go wrong. They’ll need to be convinced you have another source of repayment should you need it.

Get expert help

To make it more likely your company is considered eligible for funding, it is advisable to get expert help.

The CFO Centre have trusted partners within banks and major financial institutions. In addition, they can look at angel investors, VCs, and alternative lending markets for external funding on behalf of their clients.

We can help and guide you through every step of the external funding preparation and application process.

What does a CFO Actually Do?

Published: by lauramills
What does a CFO Actually Do?

Often, we get asked by friends, family and peers: What does a Chief Financial Officer (CFO) actually do?  These are frequently people that have known us for years, that we dine with regularly, share holidays with, stand at the side of the footy pitch with! Yet, they don’t fully understand exactly how we have helped business owners to transform and scale their businesses. So, if the term “part-time CFO” is as alien to you as “UFO”, here’s what we do, in a nutshell:

Whilst a CFO is a qualified accountant, they also have decades of high-level commercial experience, quite often across many industries.

A CFO works alongside you as the business owner/CEO – giving you more time to work on the business instead of in it. The part-time CFO concept is tremendously cost effective as most CFOs pay for themselves with the cost savings they identify in your business.

 In a nutshell, a CFO will typically:
  • Help you strategize, plan and operate your business to maximise on cash, profitability and company value
  • Gain access to funding
  • Ensure you have a solid banking relationship
  • Become the custodian of your internal Finance function.
  • Work with your bookkeeper or Finance Officer and/or external Accountant.
  • Analyse results in the context of the company’s objectives and strategies.
  • Establish clear KPIs (measures that really matter)
  • Ensure you (the owner or CEO) understand the financials, the trends and the issues they identify
  • Assist in growth, expansion (including overseas) and exit strategies
  • Become a trusted sounding board and devil’s advocate

The need for a part-time CFO may appear earlier on your journey than you may expect.  For instance, you may have turnover of over $1million and are experiencing growing pains. Perhaps you would like to grow in a sustainable way, or improve the financial performance of your business. Either way, I would say it’s worth exploring how a CFO can help you in your business.

Our unique 12 box model gives a deep dive into each of the areas that a CFO will assist you with.

 The CFO Centre

The CFO Centre provides part-time CFOs to SMEs, so you get the experience of a high calibre CFO for a fraction of the cost of a full-time resource. We have years of experience as a Senior Finance Executive or CFO for large corporations. They have extensive knowledge and experience to bring to your business.  In addition, with no lock in contracts, we can work with the needs of your business, providing our services 1-2 days a week to as little as one day a month.

As a global company, we have over 850 CFOs in 18 countries, so we really have seen it all!  Therefore, the benefit for you is that no matter what your needs, however complicated, you can tap into that global wealth of knowledge at no extra cost. It’s pretty powerful stuff.

Our video on How it Works sums all of this up, or if you’d like more info you can get in touch with us here.

How to Scale Your Business for Growth

Published: by charlottenoble
How to Scale Your Business for Growth

Scaling your business depends on two factors: your company’s capability and its capacity to deal with growth.

To scale up your business, your company must be capable of dealing with a growing amount of work or sales and of doing it cost-effectively.

You need to know that your company can achieve exponential growth without costs rising as a result. It’s vital too, that performance doesn’t suffer as your company scales up.

You also need to be sure that your business systems, employees, and infrastructure can accommodate growth. For instance, if you get a sudden surge in orders, will your company be able to cope? Will you be still able to manufacture and deliver products or services on time? Do you have enough employees to deal with a surge in work or sales?

Scaling a business requires careful planning and some funding. To be successful, you’ll need to have the right systems, processes, technology, staff, finance, and even partners in place.

Identify process gaps

Audit your business processes (core processes, support processes, and management processes) to find their strengths and weaknesses. Find the process gaps and address them before you start to scale up.

Keep the processes simple and straightforward. Complex processes slow things down and hinder progress.

Boost sales

Decide what your company needs to do to increase sales. How many new customers will you need to meet your scaled-up goals?

Create a sales growth forecast that details the number of new clients you need, the orders, and the revenue you want to generate.

Examine your existing sales structure and decide if it can generate more sales. Can you increase your flow of leads? Do you need to offer different products or services? Is there an untapped market? Do you have a marketing system to track and manage leads? Is your sales team capable of following up and closing more leads?

Make sure you have enough staff to cope with an increase in sales. If you don’t have enough staff, consider hiring new employees, outsourcing tasks, or finding partners that may be able to handle functions more efficiently than your company.

Forecast costs

Once you’ve done the sales growth forecast, create an expense forecast that includes the new technology, employees, infrastructure and systems you’ll need to be able to handle the new sales orders. The more detailed your cost estimates, the more realistic your plan will be.

Get funding

If you need to hire more staff, install new technology, add facilities or equipment, and create new reporting systems, you’ll need funds. Consider how you will fund the company’s growth.

Make delighting customers a priority

To reach your sales forecasts, your company will need loyal customers. You’ll win their loyalty by delivering outstanding products or services and customer service every time you interact with them.

Invest in technology

Invest in technology that will automate tasks. Automation will bring costs down and make production more efficient.

Ensure that your systems are integrated and work smoothly together.

Ask for help

Don’t be afraid to ask for help from experts who have experience in scaling up companies. In an interview, Apple’s co-founder, Steve Jobs, said, “I’ve never found anybody who didn’t want to help me when I’ve asked them for help.

“I’ve never found anyone who’s said no or hung up the phone when I called – I just asked.

“Most people never pick up the phone and call; most people never ask. And that’s what separates, sometimes, the people that do things from the people that just dream about them. You gotta act. And you’ve gotta be willing to fail; you gotta be ready to crash and burn, with people on the phone, with starting a company, with whatever. If you’re afraid of failing, you won’t get very far.”

Plan For Profitable Growth in 7 Easy Steps

Published: by lauramills
Plan For Profitable Growth in 7 Easy Steps

Planning for growth is something every business owner will say they do. However, not all business owners will do this effectively and with a focus that will generate profitable growth.

Many businesses plan for growth, but not profitable growth.  Some businesses focus on growing sales without a focus on margins while others build infrastructures to support sales and growth that never materialize.

Michael Porter said, “If your goal is anything but profitability – if it’s to be big, or to grow fast, or to become a technology leader – you’ll hit problems.”

A business must focus on profitable, scalable and sustainable activities if it is to grow. Profit and the generation of cash to re-invest in your business must be made a priority. It’s an essential part of the financial strategy and structure of a successful business.  Profit and a clear business plan will create a focus and the alignment of the organization. Additionally, it’ll attract investors and other sources of funds to fuel growth – all of which impacts the underlying business value of the business.

CFO Centre has identified:

7 Keys to Profitable Growth:

  1. Define your business goals & objectives
    Produce a formal plan from which you can articulate a vision
  2. Critically review your business
    Identify competitive advantage, scalability & sustainability
  3. Establish a financial plan
    Identify milestones, KPIs & dashboards
  4. Create organisational alignment
    Nurture your culture, hire the right people and communicate the vision
  5. Identify the financial resources required
  6. Support the business with systems & processes to optimize performance
  7. Measure, review, evaluate & course correct
    Be proactive & prepared to be reactive

If you follow these 7 Keys and plan for profitable growth, you will ultimately:

  1. Improve and grow profits
  2. Maximise the scalability of your business
  3. Enhance management team and organizational structure
  4. Attract investors and other sources of funds
  5. Increase business value

To enhance the value of your business and grow successfully, follow the 7 Keys and Plan for Profitable Growth.

How to be More Strategic and Successful in 2023

Published: by lauramills
How to be More Strategic and Successful in 2023

The impacts of covid-19 will stay with us for the rest of our lives.

We’ve seen new businesses birthed with success and others thriving amid chaos. We’ve seen neighbourhood classics tragically lost, and others that struggle to survive day-to-day.

Critical points like these thrust every business owner from acting with strategic intention to reacting to curveballs. As we are coming to the end of 2022, most businesses are settling into one of three camps:

  1. Thriving, but not trusting the success
  2. Reviving but hesitant to make bold moves
  3. Surviving and feeling battered, bruised and disillusioned

No matter which category you fall into, you likely are eyeing the rest of 2022 with caution. You’re optimistic but timid in your approach to making those big visionary goals you’ve made in the past. You may even find it hard to dream of a better future because it feels so out of touch with what is happening globally. You are not alone in those feelings.

Now is the opportunity to rewrite the rules and stop settling for less in your business. It is the opportunity to cast a strategic vision that is different from the past and to create more success and growth in your business and your life. Here are some ways you can make it happen.

1. Accept that change is necessary

Change is difficult, but it is for-ever ongoing for small-business owners. And change is happening at a frightening pace.

You’ve likely noticed that the old reliable ways of getting clients and serving them are faltering. The to-do list of things that need your attention is never ending. It’s time to put them to bed.

If change is already happening in your business, why not get ahead of it? When you are reacting to these changes, you treat the symptoms. The better approach is to embrace change to treat the problem.

By treating the problem, you employ change to work with you, not against you. People are likely to welcome strategic change now—especially if the change makes their lives better too.

One way to bring agility and innovation into your business is to implement a quarterly strategic planning and review process into your business. This planning keeps your efforts focused, actionable and accountable while remaining agile and able to shift as new learnings come to the table.

As part of the process, ask yourself these questions.

  • What would disrupt your business enough to change everything?
  • How can you be on the leading edge of that change?
  • How can the business be relevant and profitable five or even 10 years from now?

 2. What does the customer really want / need?

The old rules of supply and demand have gone. Through issues with manufacturing and distribution, product-based businesses feel the pinch. Changing client needs and social distancing have left recession-proof businesses struggling. Service-based businesses are finding that their services are no longer crucial or needed. No business or business model has been unaffected.

The reason is simple: The customers’ needs and their problems are in a constant state of change.

Engaging in a conversation with your clients to identify opportunities is a perfect strategy moving forward. The strategy could be as simple as asking a probing question at the end of every client interaction. It could also be more involved such as surveys or quarterly client advisory groups, to follow a more formal process.

More than ever, staying in tune with the customers’ needs and the problems you can solve is imperative. It is the gateway for future growth and innovation.

3. Work smarter, not harder

Australian culture is all about hard work. If you have struggled to achieve your goals, you’ve likely heard someone telling you to work harder.

Since the rise of intellectual capital as a commodity in the 1980s, the ability to be successful is less about our ability to work hard. Many business owners have told me how hard they work only to find success seemingly out of their reach. Evidence that success is not about hard work.

Sure, success demands focus, determination and resilience. But I challenge the notion that hard work is one of the requirements. If it were, we would have more success stories to celebrate.

Working smarter is about leveraging the talents of people and collaboration. When you remove hurdles and bottlenecks in your processes, you promote ease. It’s the processes that are often the problem. That which is easy gets accomplished. That means being able to produce more revenue with the resources you have. You likely will see a boost to team morale and stop spending time putting out fires.

It leverages technology and systems to streamline the business, allowing it to run smoothly. According to Gartner Research, by 2024, organizations will lower operational costs by 30% by combining hyper automation technologies with redesigned operational processes.

Consider which elements of your client experience and service could be delivered through automation, saving critical points for human interaction and forward looking strategies for your business. The organisational efficiencies gained can offset growth investments and produce a more efficient team.

4. Profit is the aim, not a reward

One of the most misleading entrepreneurial and inspirational quotes is: “Follow your passion and the money will follow.” If only things were that simple.

If success is a reward of hard work, this quote puts profit on the same unattainable pedestal. Passion for what you do gives you fire in your belly and can bring a sense of contribution. At the end of the day, though, passion doesn’t pay the bills; prolific profit does.

By shifting your mindset around profit and other metrics in your business, a magical change in how you spend your day occurs. You start focusing on initiatives that produce results and impact your bottom line.

A 2018 Cone/Porter Novelli Purpose study found that “78% of Americans believe companies must do more than just make money; they must positively impact society as well.” This marriage of purpose and profit is an instance where everyone wins. Clients love supporting social impact; businesses can be profitable and improve their community and world in the process.

For many of my clients, bringing profit up on the priority list, even with reduced revenue, is the defining element of rebuilding business stability.

5. Be a confident leader who empowers others

The entrepreneurial trials of the economic crisis have shaken the confidence of even the most experienced entrepreneurs. We are questioning everything in our professional and personal lives. Whispered conversations with other entrepreneurs over the year let us know that we are not alone in that journey.

With this period of reassessment, the future feels less certain. That uncertainty erodes our confidence to take risks and make bold moves. Past success, “knowing” and being right are pillars in the old definition of confidence.

Be careful—that shaken faith also seeps into our teams’ bones. They want something to champion.

There is good news that can breathe new life into your confidence. You do not need all the answers. You do not even need to know the “how” beyond “what is the best next step?” And, you don’t even need to be right.

Empowering others is what defines the success of top leaders. What got you here has centered around who you are and what you can accomplish. Those accomplishments won’t fuel the future. Relying on your efforts alone is a limiter when scaling your business — even in strong economic times. The old definition of confidence was about what you could do. Your future confidence needs to be about your team and the belief in what the team can do.

For 2023 to be the beginning of your comeback story, you need to take action differently enough to move the needle in your business. Make bold moves that advance and protect your business. Marry your vision to these tips, and you could be looking at a successful year.

Peter O’Sullivan, The CFO Centre

3 Steps to Scaling Your Business Through Reporting

Published: by lauramills
3 Steps to Scaling Your Business Through Reporting

A client recently said to me: “I want to grow our business and stop the cash burn – how do we do this? When is it the right time to invest and grow?”

What a tough question to answer. Each business is at a different stage.

We spent a day examining his business and determining what the growing pains were. He had started the business a few years ago and it grew from scratch.

It was generating a great turnover and growing but they never had any cash.

“Why?” he asked.

After reviewing the business financials it was quite clear that the internal systems were not in place. He could not possibly understand the profitability of the products they were selling due to these inadequate systems.

Therefore they could not take the next step.

The first question I asked was: “Where do you want to take this business – what’s your goal? To build up the business and exit down the line, or are you looking to exit now? Or is this business a keeper if we can generate a great RoI?”

The response was: “We don’t know the numbers or where this business could get too as we have no clarity on the numbers”.

Something I see very commonly here in the SME businesses I work with – no clarity around the financials.

Next Steps

Step one for this particular client was to build a reporting framework around their products to determine what was profitable and what as not. If there were non profitable products (or those that deliver little profitability), should we dump them or only include them bundles in the online offering?

Step two: Build a fully flexible 3-way financial model (P&L, Cash Flow and Balance Sheet) for the next 3 years. Play around with the assumptions, i.e what other products can we put into the offering to customers?

Step three: Monthly reviews against the plan – what worked, what didn’t work and the whys around both.

The right time for a business to grow is when they can balance new customer demand with their internal systems and processes. Moreover, in the instance of this client, increasing recurring revenue streams. Growing faster generally costs more per customer as they need to engage more expensive channels within the business model.

Scalability is about continuing to engage customers with new offerings, and to engage new customers with your offering to the market.

To scale a business one must consider how the business model will affect the bottom line when you expand operations. If you have low capital expenditure and can grow your business with the same revenue / expense % it is much easier to deliver greater numbers in the long term and provide greater options to your customers.

It is early days working with this client but the potential is endless.

Why Every Business Benefits From a Fractional CFO

Published: by lauramills
Why Every Business Benefits From a Fractional CFO

A typical company finance function can be divided up into 3 areas. However, many businesses believe the finance role is principally to produce accurate accounts.

Ask any bank manager and they will tell you that the bank’s most problematic customers are those who don’t truly understand what is going on in their business. Some customers ask for finance or expect to maintain an overdraft, yet cannot even produce up to date accounts.

Most SME business owners want to focus on the business and not the numbers. The business is their baby and they want it to be their sole focus – not the financials!

The areas which the business owner will seek help in first will be determined by the focus and needs of the business whether in sales, operations, admin or finance. If we look at the finance function, it is traditional to break it down into 3 roles:

3 roles of the finance function

1. Financial direction – the CFO

2. Financial control – the Accountant

3. Book-keeping/basic accounting/ AP & AR – the Finance Department Staff

Many business owners think the finance role is transactional in nature, and so concentrate just on producing accurate accounting records. This is essential in itself, but not enough to manage and develop a growing business. When focusing on the CFO role specifically then, what are the key tasks of this role and what does the fractional CFO bring that the other finance roles do not?  Why would you need a part-time or fractional CFO?

I suggest the following four main areas of expertise and input:

1.Strategic

  • Co-ordinating and developing long term business plans
  • Defining the implementation timetables
  • Assessing the risks involved
  • Seeking the funding required to deliver the proposed plans.

2.Operational

Developing internal controls; managing and developing the reports needed to run the business; improving profit levels; managing cash flows. Does the business owner fully understand the profitability of each product / service they offer? Often the answer is no.

3.Leadership

Instilling a financial approach and mind-set throughout the organisation to help other ​parts of the business perform better ​

4.Support

Tax planning and legal issues; compliance issues; managing external relationships; outsourcing relationships.

The modern CFO needs to be able to develop all this and more. There are many other considerations that go beyond the pure “job description” above.

What’s the difference between an accountant and a CFO?

A CFO looks forward and financial accounting looks backwards. Your accountant plays a vital part in tax, compliance and other essential tasks such as auditing. A fractional CFO will essentially oversee your overall finance function; providing high-level strategic advice and planning, preparing the business for growth or sale, sourcing funding, managing banking relationships and improving the business’ cash flow and profit.

Experience: it is important that a CFO has a wide range of commercial experience, not just financial. Good CFOs do not learn their skills from textbooks alone, in fact they learn very little from textbooks – they learn by doing. Commercial experience means leaving their offices and talking to customers and engaging with the production and operations teams.

Personality: a CFO must be able to communicate at all levels be it the production teams, sales teams, marketing teams to board level. The CFO must be able to relate to people on all levels of a business. We always strive to match the best CFO not just commercially, but culturally for your organisation.

The CFO Centre provides high calibre fractional CFOs to SME businesses who don’t need, don’t want or can’t afford a full time CFO. This allows organisations to benefit from the expertise of a highly experienced Chief Financial Officer without incurring the expense of hiring someone full-time. There’s no recruitment fees and no tie-in contracts.

Whether the business is in fast growth mode and needs more control, or has hit a brick wall and needs survival solutions to get through a tough patch, our CFOs can navigate both ends of the spectrum.

For more information about The CFO Centre’s fractional CFO services see How it Works  or call us on 1300 447 740

 

Article written by Peter O’Sullivan – Regional Director – CFO Centre, Victoria

What is the North Star?

Published: by lauramills
What is the North Star?

In the 1950s, strategic planning was around budgetary planning and control, then we jumped to 1970s which focused on corporate planning; 1980s focussed on strategic positioning, 1990s strategic competitive advantage; 2000s strategic and organisational innovation; 2010 complexity and rapid change.

Now, we are talking about North Star Metrics (NSM). The term has been in around since the 2000s and was used primarily in Silicon Valley. It has taken a while to reach Perth.

Here is our view of what the North Star means for SMEs.

If you are not familiar with North Star, it is another form of goal setting. Remember SMART goals (specific; measurable; achievable; realistic; and time-based)? And what about vision boards, or stepping stone goals or even a more recent fad of bullet journaling?

A North Star goal, in its basic form, has also been referred to as the Big Hairy Audacious Goal. It is a goal so big, so far out there and it is not about the destination but more about the journey.

One article recommends to think of them “the way sailors view the North Star: A way to stay on course, no matter where you are. And if you don’t know where to go or what to do, all it takes is a quick glance to get back on track”.

If that is the basic form, let’s have a look at the metric in more detail.

Key steps for creating a North Star Metric

North Star Metric

1. Start by Understanding How Customers Get Value

And not just any customers, but instead the “must have” customers who say they would be “very disappointed” if they could no longer use the product. Your goal is to expand this “must have value” across your existing and new customers. Your North Star Metric is how you quantify expansion of this value.

2. Should be Possible to Grow NSM “Up and to the Right” Over Time

A good rule of thumb is to choose a metric that can be “up and to the right” over a long period of time. This is why “Daily Active Users” is an example of a good NSM for consumer products like Facebook or online games.

3. Consider the Downsides of a Metric

Think through some scenarios where growing the metric could lead the team to behave in ways that are against the long-term interest of the business. For example, if you made your NSM “average monthly revenue per customer,” then the fastest way to grow this number would be to eliminate all customers that have a relatively low value — even if they are profitable customers. This would likely reduce your overall customer and revenue growth rate.

4. Keep it Simple

Remember that the point of the NSM is to align everyone on your team to work together to grow it. So, it’s important that it is simple enough for everyone to understand it and recall it.

5. Why Not Just Focus on Revenue Growth?

Revenue growth is very important, so this is a natural question that many people, especially business owners, ask. The challenge is that if revenue growth outpaces growth in the aggregate value that your product delivers to customers, it will not be sustainable. Revenue growth will eventually stall and start to decline. But if we can continue to grow aggregate value delivered to customers over time, then it becomes possible to sustainably grow revenue.

For example, let’s take the CFO Centre (CFOC).

How customers get value: CFOC provides highly experienced CFOs to SMEs on a part-time basis.

Grow NSM: the number of active clients

Downsides: CFOC needs to be able to service active clients and this is directly related to number of CFOs

Keep it simple: CFOC wants every SME to have access to a part-time CFO.

This is a big hairy audacious goal. We understand that the number of clients is limited by the number of CFOs but a North Star Metric isn’t necessarily pragmatic or utilitarian. It does, however, provide a direction for the SME and the business owner.

What is the North Star Framework?

In addition to the metric, the North Star Framework includes a set of key inputs that collectively act as factors that produce the metric. Product teams can directly influence these inputs with their day-to-day work.

This combination of metric and inputs serves three critical purposes in any company:

  1. It helps prioritise and accelerate informed, but decentralised, decision-making.
  2. It helps teams align and communicate.
  3. It enables teams to focus on impact and sustainable, product-led growth.

Personally, I would add to this:

Imagine you have your North Star Metric, next you define sub-metrics (break down big goal to smaller goals), define the outputs (key elements of success) of those goals, define how you will achieve those outputs (needs to be measurable) and finally, what are the inputs to reach the outputs.

The CFOC question

At the CFO Centre, we ask our clients: what do you want your business to do for you?

This is an important question as our goal is to build a relationship with a business owner and the questions starts our journey to better understand what is important to them.

The answer to this question can also be the basis of your North Star.

Is the North Star relevant to SMEs?

Overall, I like the concept of setting a North Star for a business but I much prefer the more basic approach: Big Hairy Audacious Goal.

I was in conversation with one business owner who had his North Star, or rather his Big Hairy Audacious Goal. He wants his business to be valued at $1bn by 2029. I thought this was brilliant and I think this is what North Stars are about.

Set your big goal but remember, it is more about the journey than the destination!

Final words

To qualify as a “North Star,” a metric must do three things: lead to revenue, reflect customer value, and measure progress.

Make it bold, tap into your dream and start the journey.

 

Sources:

Types of Goal Setting – From North Star Goals to SMART to Bullet Journals – Leanne Calderwood; The North Star Approach to Goal Setting | by Patrick Ewers | Better Humans; What is a North Star metric? | Mixpanel; About the North Star Framework – Amplitude; North Star Metric: What Is It and How To Find It For Your Company – Kissmetrics; How To Find Your Company’s North Star Metric (forbes.com); Finding the Right North Star Metric | by Sean Ellis | Growth Hackers; What is the North Star Metric? Theory, benefits and examples | toolshero; What is the North Star for your Strategic Planning? | Insigniam Quarterly; Strategic guardrails for digital transformation | Deloitte Insights