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North Bay Business Journal

Monday, October 22, 2012, 6:21 am

Returning to foundation of your business

OK, you’ve survived the last five years, but now what

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    As business advisers, we have the occasion – the pleasure – to speak with business owners every day. By in large, this is an extraordinary group of individuals. Consider what they have done, what they started, what they have built. It’s the true American Dream, is it not? To create something that one is uniquely qualified to create, to manage the minefields that have presented themselves, and to ultimately be left standing with titles that can’t just be printed on business cards: owner, proprietor, creator, founder. These accomplishments have taken a striking combination of intelligence, courage, strategy and passion.

    However, there has been an undeniable trend that we have found over the past couple of years. It is likely that if you are a business owner reading the previous paragraph, the words might have helped recall how you once felt, but those ideals seem more distant now than ever. It’s not that your business is failing, but you know that just because you are not failing doesn’t mean you are succeeding – at least not at the level for which you once strove. Rather, the trend that we see every day among business owners is that everything – everything – seems to be a little bit more difficult now than it was five years ago. While there is a sense that we are through the worst of the economic challenges, the bigger challenge is the lowering horizon of what best-case scenario has become. Things are a little better, but the problem is that they are only a little better – and the “smart money” is that they will continue to get just a little better.

    The key to strategic planning in today’s business environment is to initially focus less on the environment and more on you and your business. Go back in time – not five years to the “good ol’ days”, but to those gloriously sleepless nights when you were so excited about that idea that you were formulating. Go back to the “you know, I think this could work” moment – to your peaks of professional passion. Force yourself to not ask the question “why am I doing this?” in the negative sense, but ask it in the reinvigorating, inspirational sense. (By the way, the answer is not “to make money” – that is a result, not the foundation and inspiration that gets you out of bed every day).Remind yourself. You might find that through dozens of individually small and seemingly inconsequential decisions and movements you have veered off of the course that you set for yourself, and it’s time to get back. You may find that while you are still on course your goals are now different, so some change in course is required. Regardless, the first question absolutely has to be “why am I doing this?” From here, the specifics of the planning process can start to take shape.

    Going through this process will take the focus off of where we see many business owners initially tend: Sales. Very often we hear an owner suggest some version of: “if we could just increase sales, then everything would fall into place.” Clearly, there is almost always so much more that goes into the equation. The most important financial factors and metrics are not based on how much you sell, but how much you keep. Far too often success is measured by the growth of top-line sales. While this metric may very well be indicative of positive performance and trends, it simply is not the metric or indicator of financial health of sustainability. Said another way, what is most important is not how much you sell, but how efficiently you can sell that amount.

    This is where we tend to spend most of our time in a strategic forecasting engagement – delving into the drivers of sales, of profit, of cash. Looking at the business through various lenses and from various angles to assess how – in the context of the owner’s passions and goals – to achieve the most efficient results.

    One word of caution here related to industry benchmarks – a highly sought after data point from which one can measure relative success, adding context to their own results. In doing this, one must make the distinction between a benchmark and an average. These terms are typically used interchangeably when talking about “benchmarks” (read: how my competitors are doing … on average). In this way, the risk is that benchmarks start to the race to the average. The industry average should not be your goal (you would likely never overtly aim to be average). When possible, determine how the top-performing companies in your industry are performing – this is a much more positive goal.

    The final point in the ongoing strategic planning process for small businesses is to always start with the end in mind. Where do you want to be in three years, in five years? Again, do not default to just sales targets, but where do you really want to be? Perhaps you would like to sell the company externally, or to employees, or to your children or family members. Regardless of the goals, each step from here to there should be intentional progress towards that end. Do not let another year go by without making a year’s worth of progress.

    The proverbial hamster wheel has a way of making time fly by, of robbing owners of their passions, and of graying the horizons that was once so intrigued. Strategic planning is not some ethereal process that requires incense and results in some overly massaged “sounded important at the time” mission statement. Rather, strategic planning is a practical roadmap – the “how” follow-up to our initial “why.” Ultimately this process is a return to the passionate foundation of “why am I doing this,” reinvigorating those unique qualities that allowed you to start your business in the first place. It is only from those tenets that you can have a business that you will truly deem successful.

    Steve Jannicelli, CPA, MBA is a senior manager in the Santa Rosa office of Burr Pilger Mayer (BPM). Mr. Jannicelli is a skilled strategist whose practice focuses on business financial advisory services from growth strategy to turnaround management. Specifics include cash-flow forecast modeling, financial management and planning, operational assessments and profitability improvements, strategic planning and M&A advisory services. Steve can be reached at 707-524-6560 or sjannicelli@bpmcpa.com.

     

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