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Is This Essential Element Missing From Your Business Plan?

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In building your business, do you ever:

Feel out of control – you’re getting by, dealing with one crisis after another, but just barely hanging on?
Find that your longstanding products and services just aren’t selling like they used to, but you can’t find time to develop new offerings?
Think about retiring after selling out to a group of your employees, but you know that they (and you) are nowhere near to making that possible? (see our post on exiting your business for more on that)

A big step towards resolving these issues, and many others, is to have a business plan – an effective business plan.

Many businesses get by without one. “It’s in my head,” you might say. Or, it could be a document you put together years ago, maybe because your bank required it to extend financing, and you haven’t looked at it since.

According to a survey by business and finance software provider Exact, companies that have a business plan in place were more than twice as successful at achieving their goals than those that did not (a 69% success rate versus 31%).

What’s wrong with many business plans?

If having a business plan is so important, how can your company get the best possible benefit out of the work that goes into preparing one?

Our work here at the CFO Centre has found that while having a business plan helps, there are some important elements to success (many of these are presented in more detail in the e-book).

One is that the plan must be a living document – it needs to be something that you review frequently, updating it as circumstances change, and using it to provide guidance on what your daily, monthly and yearly priorities should be.

Another aspect of success, believe it or not, involves packaging. You may be aware that a business plan that is used as a finance-obtaining tool will succeed more if it features attractive layout and design. But having a document that’s pleasant to look at – not just text on a page – will work better even if it’s just used internally. That’s because the people who read it, including you, will have a greater sense of confidence that the ideas in it can be made to happen.

How a timeline helps make it all happen

But the one important aspect, that many business plans miss, is the element of time. Without a clear picture of what is to happen by what time, a business plan is just a wish-list.

The best way to help make sure that the business plan stays alive – and more importantly so that what’s in it comes to pass – is through including a timeline.

A timeline (or timetable, if you prefer) sets out the milestones of your business plan – the number of employees, number of locations, sales targets, net revenue expected and other targets – and indicates what date they are expected to be reached.

For example, let’s say you have a winning retail concept that you want to turn into a franchise. Maybe even a national franchise.

To do that, you need to determine what processes need to be implemented in order to manage a store like yours effectively. That, in turn, leads to a set of written procedures – such as the steps to be taken upon opening the store or on closing, how to make each of the products that are sold, and other aspects of success. Maybe then you need to establish a time by which you expect to have that first satellite operation running, maybe as a corporate-owned location, just to see what happens when you’re not on site to trouble-shoot all the time.

It could be that this sounds so complicated and intimidating that you never actually get your franchising idea off the ground.

Here’s how a timeline helps make your business plan happen:

It breaks down big, scary projects into smaller, bite-sized chunks you can actually do
It reassures you by pointing out that you don’t need to do everything right now
It moves you along because you see a deadline for one of those “chunks” coming up, so you can get working on it

Start with the end in mind, then work backward

This involves a 5 step process.

Get a firm image of your goal. Established business wisdom says to consider first where you want to be (say, 20 franchise outlets across the country, ten years from now) and then spell out in detail what that will look like. Going into detail gives you a more clear idea of what needs to be in place for that to happen. Set a date for that to happen.

Determine the big milestones along the way. This might include writing out the elements of success in your current business, creating written procedures, testing those procedures to see if they cover all reasonable contingencies, opening a second outlet to further test those procedures, selling your first franchise to someone you know already, and onwards.

Think of the resources you’ll need. For example, at some point, you’ll need to engage a franchise lawyer to consult and help in the preparation of a franchise agreement. Think of the finance you’ll need to have in place, maybe from a bank or friend-or-family source, to make the rest happen (to learn more about how to avoid cash-flow problems that might drag you down, see our post here).

Write out your timeline. It might be on paper, on a computerized document, on a calendar program that will remind you about deadlines, or whatever works for you. Maybe multiple formats will be a good way to keep you on track.

Implement. The rest is up to you and your team. Delegate tasks, outsource, do it yourself – but be sure to stay with your timeline.

The difference between a CFO and a Controller

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If you’ve ever looked through a storage box holding clothes you wore as a child, you may have wondered, “How did I ever fit into something that small?”

Your company may be in the same situation. The equipment, personnel, and premises that fitted well when the company was starting out, may be constraining its growth as it matures.

One of the most pressing areas for change may not be your production system, office space or loading dock. If you find that cash shortages are constraining your business, if you don’t know if you can afford to expand your product offering, or you have no real idea which of your products are the most profitable, you may have outgrown your finance function.

Child-sized clothing might have fitted you well when you were small, and it could be that the financial system you had when your company was young, did what you needed it to do. Most companies start out with the founder keeping track of everything, maybe with the help of a bookkeeper or accountant, later growing into a department with a controller at the head.

But there is a world of difference between the “controller” mindset and the benefits available through someone who is able to help you take your company to a higher level – a Chief Financial Officer, or CFO.

Having access to those skills is important. A CFO brings enormous practical financial and strategic skills and knowledge to your company.

A report by the International Federation of Accountants[1] quotes James Riley, Group Finance Director and Executive Director, Jardine Matheson Holdings Ltd.:

A good CFO should be at the elbow of the CEO, ready to support and challenge them in leading the business. The CFO should, above all, be a good communicator — to the board on the performance of the business and the issues it is facing; to his/her peers in getting across key information and concepts to facilitate discussion and decision making; and to subordinates so that they are both efficient and motivated.

In this post, you’ll learn about the difference between a controller and a CFO, and why it may be time you made the change – and how you can do that without putting an undue cost burden on your company.

The controller mindset: accuracy, compliance, tactics

All companies need someone with a controller mindset, even if they don’t have that specific title on their business card. The controller watches the details, so you don’t have to. The controller focuses on making sure that financial records are accurate, prepares monthly financial reports, ensures payroll is made on time, invoices are issued and collected and ensures compliance with regulations.

Essentially, the controller manages the company’s books and records and is responsible for the transaction processing in a company and reporting on those transactions. With the focus on recording and reporting on past events, the controller’s role is mainly backward-looking.

And just to repeat – you need someone who makes sure all of these issues are covered.

But your company, even if it’s small, also needs someone able to watch the big picture. And as it grows, that need becomes more acute.

By comparison, the role of the CFO is to provide forward-looking financial management. It’s a proactive role since it is concerned with the company’s future financial success.

What are the signs that you may need more than what a controller mindset can provide? Maybe — if you need to understand the risks your company is facing, or you need to know which of several possible ways forward is best to improve performance or help you grow profitability, or it could be that you need to someone to help align the organization by establishing performance metrics and mindset throughout the organization, or perhaps you need to know how to finance your growth.

In short, you don’t just need someone to provide a utility function – you need a combination of coach/advisor regarding the resources you need to make your intended future happen.

The CFO mindset: big-picture, advisor, strategy

The role and responsibilities of a CFO have expanded in the past two decades, according to the International Federation of Accountants. That expansion it says has been driven by complexity as a result of globalized capital and markets, regulatory and business drivers, a growth in information and communications, and changing expectations of the CFO’s role. Whereas the CFO was once seen as a company’s ‘gatekeeper’, he or she is now expected to participate in driving an organization towards its goals.

The CFO still has the responsibilities for overseeing the Controllers role in record keeping to safeguard the company’s assets and reporting on financial performance

By contrast with a controller, the CFO expands that role to focus on improving the operating performance of a company, analyzing the numbers and presenting solutions on how to make those numbers better. This can include higher sales, lower costs or greater margins.

A CFO will focus on strategy, helping to shape the company’s overall strategy and direction, as well as a catalyst, instilling a financial approach and mindset throughout the organization to help other parts of the business perform better[2].

The controller looks to the short term, the CFO is long-term. The controller helps make sure your company is compliant with issues such as environmental reporting and taxes; the CFO helps you design and implement a strategy. The controller seeks to maintain what you have; the CFO helps you expand.

If your company is in a growth phase – or you want it to be in a growth phase, the controller has your back – and the CFO helps you move forward. It means together you can achieve better results, faster.

Feel free to reach out to us here at the CFO Centre. We’ll sit down and have a talk, even if it’s phone or video call, to get an idea of where you want to take your company, and what your options might be to support the growth you want.

Many of the issues in this post are covered in the CFO Centre’s e-book “Financial Reporting,” which goes into detail about the insights that you can gain from a CFO’s strategic view of your company’s financials.

[1] THE ROLE AND EXPECTATIONS OF A FD: A Global Debate on Preparing Accountants for Finance Leadership, the International Federation of Accountants (IFAC), October 2013, www.ifac.org

[2] ‘Four Faces of the FD’, Perspectives, Deloitte, http://www2.deloitte.com

Don’t Call it Your Dream, Call it Your Plan

Published: by bethfarnham

Life through a lens

One of the toughest challenges for owners of SMEs is to be able to stand back, to look at their business through a wide-angle lens and identify what it is they really have.

Because quite often, the day-to-day distractions and diversions that inevitably surround the running of a successful business – particularly when there’s a global pandemic pulling the rug from under everyone’s feet – get in the way of sensible, objective evaluation and strategic decision-making. Crucially, that can mean that really important opportunities to grow and develop go at best un-exploited and at worst, un-noticed.

This is where the role of Chief Financial Officer becomes so vital. And where the specific advantages of joining forces with a part time (and often virtual) CFO are brought sharply into focus.

Allow yourself to dream…

What does your CFO do for you as the owner of an SME? Hopefully, they’ll make sure that everyone gets paid the right amount at the right time; sort out your internal reporting, compliance and tax planning, and probably run your relationship with your bank.

While that (along with a few other bits and pieces) is probably enough to keep a business ticking over, it’s not a reasonable platform on which to base a sound growth strategy.

Of course, things look even worse if you don’t have a CFO on your team. Whatever your business and whatever your own specific talent, it’s almost certain that you didn’t get into business to spend your life doing cashflow projections or dealing with taxes! No dreaming for you – you’re more likely to be waking up at 3 am in cold sweats.

A CFO Centre CFO can help make your dreams come true

When you started your company, you almost certainly allowed yourself to dream – every successful business operator needs ambition. But as we’ve seen, all too often those aspirations become bogged down in the everyday grind of keeping a business afloat.

The CFO Centre team provides CFO expertise of a very high caliber – the top 1% of talent in the marketplace. These are people who know their stuff – the operational finance stuff, which keeps the wheels in motion and the strategic finance stuff, which brings the dream to life.

In many cases they’re able to draw on their own business success to guide others.

A CFO Centre CFO will help decode the dream and turn it into a plan and be the one to hold you to account to make it happen. He or she will bring forward the target by showing you how to come at it from a different angle. Great CFOs are catalysts and can help you break the pattern of linear growth and get you what you really want on an expedited timetable. And that’s essential if the dream is still to come true.

The CFO Centre ‘Entrepreneur Journey’: our ‘secret sauce’

All CFO Centre CFOs operate within an environment that provides comprehensive support and expertise. The CFO Centre has a global network – a Collective Intelligence Engine – of more than 700 individuals, each of whom has achieved success as a CFO and often as an MD or CEO, themselves. What’s more, they are uniquely able to access and deploy the limitless potential locked up in your business model. And they talk to each other, share expertise, experiences, and contacts.

In brief, a CFO Centre CFO will guide the entrepreneur on a three-stage journey to achieve clarity about what it is they really want from their business. To take them from where they are now, to where they want to be.

And to be clear: ‘where they want to be’ is an individual choice for the business owner. It might involve scaling up significantly; it could mean launching new products in new markets around the world; perhaps it means ratcheting up your multiple as you prepare for exit. Whatever form it takes, it’s invariably about making that dream a reality by refashioning the plan and making sure it actually happens.

Stage One on the journey covers the process of achieving operational excellence. In other words enabling an organisation to do what it does best, to the best extent possible.

Stage Two, strategic opportunity, involves preparing the springboard. This is where the strategy to achieve those dreams is forged. Perhaps it’s a question of entering new markets; evaluating risk, raising new funds. Whatever the strategy, it’s based on sound experience and, yes, that ‘secret sauce’ that blends the logic with a little magic and know how.

Stage Three, game-changing performance is, simply, what happens when stages one and two are complete.

The dream is achieved by developing a concise roadmap based on what the business owner wants to achieve. The role of the CFO Centre CFO is to identify and unlock that potential – thus freeing the dream and making it a reality.

Fly like a bird

Of course, this is not to suggest that success comes easily. Business challenges are usually complicated and risky. That’s another reason why potential isn’t always realised; why many business owners end up working late nights on mundane tasks.

So, one of the first conversations a CFO Centre CFO will have with a client is to understand what it is that motivates them to be in business, and what they want to achieve from it. What really matters to them. There are numbers, many numbers, in the life of a CFO, but it’s identifying and understanding the numbers that really matter in the client’s life that is crucial.

A CFO Centre CFO aims to unlock that potential and give wings to the dream.

7 Keys to Profitable Growth

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Planning for growth is something every business owner will say they do, but 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, as it is 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, as well as 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:

Define your business goals & objectives
Produce a formal plan from which you can articulate a vision
Critically review your business
Identify competitive advantage, scalability & sustainability
Establish a financial plan
Identify milestones, KPIs & dashboards
Create organizational alignment
Nurture your culture, hire the right people & communicate the vision
Identify the financial resources required
Support the business with systems & processes to optimize performance
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:

Improve and grow profits
Maximize the scalability of your business
Enhance management team and organizational structure
Attract investors and other sources of funds
Increase business value

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

Is your business idea disruptive enough?

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Maybe you see ride-hailing services like Uber and Lyft as arrogant bullies. Or, to you, they’re a breath of fresh air in a world held victim by over-regulated dinosaurs.

But whatever your view, you can’t deny that ride-hailing upended an entire industry. Some taxi companies have tried to compete with the upstarts through rideshare-like mobile apps allowing customers to choose vehicle options, pre-book rides, and pay by smartphone.

Why have ride-sharing services succeeded against well-entrenched opposition? They’re a new idea – but more importantly, they offer real benefits over the traditional taxicab. In short, they’re disruptive.

As we’ll see later, just being disruptive isn’t enough on its own, but it’s an essential part of success.

Disrupt your way to a better customer experience

To see how being “disruptive” works, consider one of the world’s oldest skills – what some parts of the world call “joinery” and others “cabinetry.” It’s about making furniture, cabinets for kitchens and bathrooms, and other fine woodwork. It’s a slow, meticulous process in which skilled people use tools that have changed little in centuries.

That is until someone crashed into this tradition-bound environment with a radical new approach to the business. As entrepreneur Alex Craster recounts in The CFO Centre’s book “Scale Up”, he’d already helped disrupt one industry – travel agencies, with the then-new idea of people booking their own travel online.

Craster talks of how he’d been pulled into managing his father’s failing joinery business. But he came to see opportunities for the firm to provide better services and meet new needs. He started using suppliers in Eastern Europe who were able to do highly skilled work at a fraction of the cost of UK suppliers. He also switched the focus of the firm, from making products into providing solutions to customer problems.

The result has been spectacular growth and even an invitation to supply services to Buckingham Palace.

Why is disruption like this such an important part of business success today? It has to do with two concepts – something that’s new, and something that’s better.

Grab the attention of people you want to attract

Let’s start with “new.”

One well-made kitchen cabinet is pretty much like any other well-made kitchen cabinet. In some ways, cabinetry is a commodity – it’s hard for a customer to tell one company’s offering from another’s. So it becomes a race to the bottom regarding prices.

To catch the attention of potential customers, Alex Craster’s company had to offer something that was new to the market – providing a service in which company representatives sat down with potential customers to get an idea of their problems. That might involve a hotel that wanted to attract a higher level of clientele. This approach made the company newsworthy, so it gained more word-of-mouth publicity.

The company’s approach made it more attractive to the traditional media. But it also had the potential to attract what is becoming a more important kind of attention, from social media including bloggers and Instagrammers.

This meant that just having a new approach put the company’s name in front of potential customers.

Holding the attention of prospective customers

Once you have the attention of the people you want to attract, how do you hold them? By offering something they will value – something that’s not just new, but demonstrably better than what they have now.

Alex Craster’s approach, which included a consultation and understanding customers’ business objectives, was a big step towards helping a hotel meet its goals. Those may have included being able to charge a higher room rate and improving the hotel’s all-important RevPAR (Revenue Per Available Room) metric.

So too, you need to be sure that your business idea offers real benefit to the people you want to serve.

Start by understanding their situation – some of the most pressing problems they are facing. That matters, because unless you can present them with a solution to one of their most pressing problems, or a step towards a solution, they’re not going to pay attention.

Then, instead of choosing a service or product to offer, you choose a problem to work on – such as increasing a hotel’s RevPAR.

Your approach must then revolve around solving that problem, with your product or service being part of that solution. If you’re offering something that is distinctly better than the solutions your prospective customers have on hand, you’ll have a much greater chance of success.

Planning is essential

All of this – finding something new and better – doesn’t just happen. You need to think it through. It takes time to match the assets you have – your skills, the skills of the people you work with, experience, and other factors – to the needs of potential customers.

A big part of that is the financial resources you have access to. With a good understanding of your financial picture, you can understand your financial strengths and limitations, so you know how much you can spend and still pay your rent and your staff.

Many growing companies find that the best way to make sure they have the financial resources they need is through a skilled finance professional – a Chief Financial Officer – who can help them understand their financial picture, and if necessary, get access to other financing that can help to seize on the opportunities to grow in a “disruptive” way.

For many companies, their best option is to have an experienced CFO available to them, on a long-term basis, but without the need to pay the compensation that a full-time professional would expect. By utilizing a part-time CFO, they have the skill set they need available to them, but in a much more cost-effective manner.

To make sure you’re being disruptive within your market, planning is key. Failing to plan is like planning to fail. To learn more about how you can take your business to the next level, please download our e-book, “Business planning & strategy implementation,” which will walk you through the steps involved in business planning.

Tag: scale up