B2B CFO^®    (877) 4-B2B CFO

        David Olson, President of Walton Consulting, Inc. (www.walton-consulting.com) recently provided me with the following 10 rules a CEO should follow to help reduce growing pains.  David's company provides consulting and coaching to company leaders on business strategy, leadership recruiting and corporate culture.

1)    Have a good partner.  It is extremely difficult for a CEO to sustain impacting change on an organization without a good no. 2 by their side.  It is like being a single parent, it can be done, but having a complimenting partner most often increase and assure effectiveness and success.  Lock up a good partner who thrives on being a no. 2. 

2)    Become aware.  “Awareness” is one of the most important words in the English language.  Every monumental change, personally and corporately, stems from a moment of awareness.  We should set our course on a constant journey of discovery.

3)    Hire well.  Faulty hires truly have a profound negative financial and directional impact on an organization.  Be methodical, slow and purposeful when hiring your leadership team.  The same due diligence applied to a business acquisition should be considered with an executive leader acquisition.

4)    Find leaders.  Leaders are not trained, they are cultivated.  Leadership is a deep intrinsic trait that can not be taught, only mined.  Too much time and money is expended trying to make leaders out of non-leaders. 

5)    Focused execution.  Most strategic initiatives fail not because they were not good ideas, but because they were not executed properly.  Organizations reorganize too quickly when an initiative falls short instead of regrouping, adjusting their approach, and re-executing well.

6)    Good communication.  Organizations rarely communicate effectively and often enough.  Corporate communication is more critical then leaders realize.  In the world of sports, botched plays are typically a result of miscommunication.  Teams win because they have an internal communication strategy.  Organizations are no different – they need one too.

7)    Marketing matters.  Unfortunately, marketing is a haphazard practice.  It is a critical strategic initiative and the lack of it causes stunted growth.  Marketing defines an organization’s ideal customer and then establishes a multi-pronged strategy for connecting them to their products.  Marketing is the epitome of delayed gratification. 

8)    Develop executors.  Organizational leaders need to surround themselves with and invest in “company-minded executors.”  They are recognized by both their results and their character.  These employees are the company’s greatest asset.

9)    People before profits.  Profits are the means by which you take care of people.  That does not mean people are exempt from being sacrificed for the sake of profits.  However, organizations that practice an unhealthy appetite for profits will erode their culture and eventually their profits.

10) Teams win.  Organizations do not win because they have good players; they win because they have a good team.  It is imperative to build a corporate culture that feels like a team.  This takes time, energy, and persistence, but will pay real dividends.   

 

 

* When it comes to cash flow, there's no time for a Top 10 list!

Why do you need to concentrate on Cash Flow? Simply put, especially for a small to mid-sized business, cash flow equals life, growth, prosperity . . . and survival.

You, as the Owner or CEO of the business, need to free yourself to focus your unique talents and abilities on growing your business rather than fighting the constant cash flow fires. Remember . . . you are the only one who really cares about the ongoing viability of your company. It's your future that you are most concerned about but, if your company is not successful, none of your employees will have a job.

Here are the Top 5 Cash Flow Rules you can implement immediately that will transform the way you manage your business from this point forward. But first, remember the two cardinal rules of managing a business:

• Never run out of cash. Make the commitment to do what it takes so that it does not happen to you.
• Cash Is King. Cash is what keeps your business alive. Manage it with the attention it deserves. Without cash, you have no business.

Now, the Top 5 Cash Flow Rules . . .

Rule #1:  Know the cash balance right now. Even the most intelligent and experienced person will fail if business decisions are being made using inaccurate or incomplete cash balances. 

Rule #2:  Do today's work today. The key to keeping an accurate cash balance in your accounting system is to do today's work today. When you do this, you will have the numbers you need--when you need them.

Rule #3:  Either you do the work or have someone else do it. Those are the only two choices you have. The work must be done. So, either you do it or have someone else do it. (See Rule 3a.)

Rule #3a: If you are doing the work of determining the cash balance, you may not have the right people working for you. Unless you are a start-up business without any accounting staff, you must be sure that the financial people know that you need and demand that they focus their efforts on monitoring the cash balance, and keep you aware of what's happening with your cash.

Rule #4:  You absolutely, positively must have cash flow projections. Cash flow projections are the key to make wise and profitable business decisions. It's impossible to run your business properly without them.

Rule #5:  Eliminate your cash flow worries so you are free to do what you do best--take care of customers and make more money. This is the real key to your success in business. The reason you have to make sure you have the cash flow of your business under control is so that you are free to focus all your time and talents where you can make the most difference in your business.

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B2B CFO^® specializes in helping business owners and CEOs manage their cash flow. Give me a call (at 551 486-4381) for a no-cost / no-obligation Phase I analysis of your business. It's a call worth making.

 

Randy Suttles stands out as the best CFO with whom I have worked during the 35 years that I have provided investment banking services to mid-sized companies. I have found Randy to be extremely knowledgeable about financial matters, to have excellent judgment in assessing financial issues, and to be decisive in taking the appropriate course of action. I highly recommend Randy to any company seeking effective financial counsel.

Peter W. Mattingly
Managing Director
P. W. Mattingly & Co. Inc.

My thought after meeting B2B CFO's Barbara Floyd was "I just hit a home run!"  Now, after two months of working with her I've changed my mind.  Now I say "I just hit a GRAND SLAM!" She's key to our corporate success!

Thanks to Barbara we now have accurate and timely financial statement reporting, a budget and are close to obtaining a needed larger line of credit. Soon we will be DCAA compliant with Barbara's implementation of a job/cost accounting system. With our rapid growth, cash flow has been an issue, but with Barbara's help, we have the issue under control and soon expect to ramp up our rapid growth plans again! I would recommend Barbara and her partners to any business!

 

A natural disaster such as a hurricane, flood or earthquake can have a monumental effect on the life of a business.  Statistics reveal that even a time as short as 48 hours of inability to operate can put a company out of business.  This checklist can facilitate the discussion by business owners and managers in planning for continuity and disaster recovery. 

A checklist to help small businesses prepare for both large and small incidents:

1) Develop a business continuity / disaster recovery plan
- Establish a disaster-recovery team of employees who know your business best, and assign responsibilities for specific tasks.
- Identify your risks (kinds of disasters you're most likely to experience).
- Prioritize critical business functions and how quickly these must be recovered.
- Establish a disaster recovery location where employees may work off-site and access critical back-up systems, records and supplies.
- Obtain temporary housing for key employees, their families and pets.
- Update and test your plan at least annually.

2) Alternative operational locations
Determine which alternatives are available. For example:
- A satellite or branch office of your business.
- The office of a business partner or even an employee.
- Home or hotel.

3) Backup site
Equip your backup operations site with critical equipment, data files and supplies:
- Power generators.
- Computers and software.
- Critical computer data files (payroll, accounts payable and receivable, customer orders, and inventory).
- Phones/radios/TVs.
- Equipment and spare parts.
- Vehicles, boats and spare parts.
- Digital cameras.
- Common supplies.
- Supplies unique to your business (order forms, contracts, etc.).
- Basic first aid/sanitary supplies, potable water and food.

4) Safeguard your property
Review your property insurance coverage to insure your contents are properly valued.  .  Is your property prepared to survive a hurricane or other disaster:
- Your building?
- Your equipment?
- Your computer systems?
- Your company vehicles?
- Your company records?
- Other company assets?

5) Contact information
Do you have current and multiple contact information (e.g., home and cell phone numbers, personal e-mail addresses) for:
- Employees?
- Key customers?
- Important vendors, suppliers, business partners?
- Insurance companies?
- Is contact information accessible electronically for fast access by all employees?

6) Communications
Do you have access to multiple and reliable methods of communicating with your employees:
- Emergency toll-free hotline?
- Website?
- Cell phones?
- Satellite phones?
- Pagers?
- BlackBerry(TM)?
- Two-way radios?
- Internet?
- E-mail?

7) Employee preparation
Make sure your employees know:
- Company emergency plan.
- Where they should relocate to work.
- How to use and have access to reliable methods of communication, such as satellite/cell phones, e-mail, voice mail, Internet, text messages, BlackBerry(TM), PDAs.
- How they will be notified to return to work.
- Benefits of direct deposit of payroll and subscribe to direct deposit.
- Emergency company housing options available for them and their family.

8) Customer preparation
Make sure your key customers know:
- Your emergency contact information for sales and service support (publish on your website).
- Your backup business or store locations (publish on your website).
- What to expect from your company in the event of a prolonged disaster displacement.
- Alternate methods for placing orders.
- Alternate methods for sending invoice payments in the event of mail disruption.

9) Evacuation order
When a mandatory evacuation is issued be prepared to grab and leave with critical office records and equipment:
- Company business continuity / disaster recovery plan and checklist.
- Insurance policies and company contracts.
- Company checks, plus a list of all bank accounts, credit cards, ATM cards.
- Employee payroll and contact information.
- Desktop/laptop computers.
- Customer records, including orders in progress.
- Photographs/digital images of your business property.
- Post disaster contact information inside your business to alert emergency workers how to reach you.
- Secure your building and property.

10) Cash management
be prepared to meet emergency cash-flow needs:
- Take your checkbook and credit cards in the event of an evacuation.
- Keep enough cash on hand to handle immediate needs.
- Use Internet banking services to monitor account activity, manage cash flow, initiate wires, pay bills.
- Issue corporate cards to essential personnel to cover emergency business expenses.
- Reduce dependency on paper checks and postal service to send and receive payments (consider using electronic payment and remote deposit banking services).

11) Post-disaster recovery procedures
- Consider how your post-disaster business may differ from today.
- Plan whom you will want to contact and when.
- Assign specific tasks to responsible employees.
- Track progress and effectiveness.
- Document lessons learned and best practices.

 

How does a company monitor and measure its financial goals and performance? Generally the answer to this question is through its financial statements. However, monthly financial statements are not enough once your business becomes large in size. There is too much going on within the business that impacts cash and will need to be tracked and watched. Hence, the use of key operating indicators. Over the years we have learned that companies that do not use them are generally in trouble.

What is a key operating indicator? A key operating indicator (KOI) is a measurement that allows you to evaluate whether you are meeting certain goals or criteria. KOIs should be the key factors that will ensure the success of your company. These numbers will be compared to budgets and/or industry standards.

How do you pick key operating indicators? Key operating indicators will be different for the most part from company to company. Usually KOIs revolve around company goals and plans. Examples of KOIs would be daily production units, scrap units, units sold, inventory turns, day sales outstanding, etc. KOIs should be specific, measurable, timely, and easy to read and understand.

How can KOIs be used to improve efficiency? KOIs are used in many companies to evaluate and improve efficiency, which will ultimately generate more cash and profits. The nursery industry for example uses KOIs to monitor crop production. How long will it take to make containers of plants? How much material was used to make a container? The nursery industry knows what needs to be accomplished to meet its goals and it has identified metrics to make sure it happens.

When should a company monitor KOIs? The urgency and magnitude of the metrics will determine how often you look at indicators. Some KOIs will need to be reviewed daily and others weekly. If your business is strapped for cash and you have pressure from your lenders or investors, you will need to look at them more frequently. It is never a bad idea to have a daily report to scan that shows you where you are, i.e., A/R, sales, cash, A/P, inventory dollars on hand, production statistics.

 

Who generates key operating reports? Generally information is sent to a designated person in accounting who compiles and reviews the data for reasonableness before being distributed. However, it can be done by various individuals as long as the information is done timely and accurately.

How long do we keep key operating indicators? There is no set time frame to keep KOIs. However, the longer the better, as they will provide historical trends to go back and refer to. It will also be helpful to look at a KOI when there has been a change in the business operations or processes. It is nice to go back and see if the changes being made had a positive or negative impact.

Do small companies need KOIs? All companies need KOIs. While they may not have as many, it is critical for early stage companies to monitor their progress. Cash, payroll, inventory are some of the standard ones small companies need to watch. Especially cash!

Should KOIs be changed? It is a good idea to review KOIs on an annual basis. However, if there is something new to be added or if a KOI that does not make sense then make the change as deemed necessary. Remember, the purpose is to use KOIs as a management tool. They need to be relevant and useful to monitor and obtain certain goals. They must be looked at by management and more importantly, action must be done if a KOI is out of balance.

The service we have received has been quick, painless and professional. We appreciate and would recommend Scott's services and the B2B CFO group.

Tim and Jenn Lynn Woods, owners
i-Fortuity LLC
www.i-fortuity.com

 

Do you know what your margins are?  If you search long enough, you will find several different definitions for "margin" - but they should all have roughly the same meaning.  Margin is the ratio of gross profit to gross revenue for the products and services you sell.  Said another way: gross profit is the amount of money you have left after production to cover operating expenses and net profit.   Thus, gross profit is a measure of a company's efficiency in turning raw materials into income.  Those raw materials may be people and/or physical materials.  For retailers, gross profit measures their markup over wholesale.      

Gross Revenue - Direct Costs = Gross Profit

Margin = Gross Profit/Gross Revenue

All companies need to be concerned with their margins.  It may sound simple, yet many companies do not know how to calculate margin and don't track it on a regular basis.  Why is it important?  If your margins aren't high enough to cover operating expenses, you are losing money and you will need to raise your selling prices or cut your direct costs to increase your margins sufficiently to achieve a net profit.

You may say that raising your prices is not possible because you are in a competitive situation.  Are you sure?  You need to review your pricing strategy often and determine if you want to be the low-cost provider, the most-expensive provider or somewhere in the middle of the pack.  You need to try to predict your customers' behavior with each scenario.  Will your existing customers switch providers if you raise your prices or is it too much trouble for them to do so?  What new customers might you attract if your raise your prices?  Are they better and more valuable customers?  Will they spend more with you?

All companies should strive to cut their direct costs and improve their margins on a continuous basis.  Here are just a few ideas:

• Negotiate better contracts with your suppliers...all of them!
• Cut your shipping costs...these are often huge expenses
• Substitute parts that cost less as long as you can maintain quality
• Determine if it is cheaper for you to outsource some or all of your production...should you use subcontractors?
• Are there ways to reduce the amount of scrap or supplies used during the manufacturing process?

And don't forget to:

• Carefully build incentive compensation into everyone's pay...you will pay more for high performance/production, but you will make higher margins if you do this well
• Pay your sales commissions based on margins, NOT gross revenue. Give the salespeople incentive to sell at full price and avoid discounting!
• Ask your employees for ideas...they are closest to the process

If you don't know what your margins should be, do a little research on your industry, see what your competitors are reporting and set a goal that beats the competition!  It will make a big difference to your bottom line!

 

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"Jane was initially requested to help Photovac resolve several problems with our inventory and Cost of Goods Sold. She quickly mastered our MRP system and has been able to efficiently determine the causes for most of our problems and recommend solutions both for the short term and long term as well. Jane has been an excellent resource and, once our problems are resolved, we plan to engage her on a 2-day per month basis to periodically review our financial and materials operations."

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Thomas A. Smith, CEO

Photovac, Inc.