How Do You Define Success?
It seems like such a simple question. How do you define success? Notice I did not ask how do you define “business” success. For most people those are two different questions with answers that do not often overlap. But for small business owners and owners of family businesses, it’s more complicated. The definition of business success can only be answered through the lens of your personal desires and intergenerational obligations. You may have a business goal of increasing profits by 5% this year, landing that million dollar contract next quarter or just meeting payroll next week. But in the back of your mind there are the longer term goals that have to be addressed. How can my business fund my retirement? Is my business susceptible to changes in the economy or technology? Should I keep the business in the family or sell it for top dollar? Will my children want to take over my business? Will they be qualified to operate it successfully? How will the changing tax laws affect my decision?
In order to answer these questions there are some basic factors that need to be addressed:
Build your Team
Sometimes the biggest question you are faced with is how can you find the time to focus on these long term goals when your days (and sometimes your nights and weekends) are spent making sure that the doors stay open and the lights stay on. Jerry Mills, CEO and founder of B2B CFO, in his book “Avoiding the Danger Zone” talks about the importance of building an infrastructure will enable the business owner to spend their time in the visionary “finding” activities that makes their company unique and successful, rather than in the “minding” and “grinding” functions that are more efficiently performed by administrative and operating staff. Building this infrastructure can take many forms but it usually encompasses two key concepts – a) build a team and b) trust but verify.
Your “success” team should include both your key employees and your outside advisors. Every company needs an attorney, banker, CPA/tax advisor and insurance broker. Likewise, every company, regardless of size needs a Chief Financial Officer. Just as it’s not necessary to have a full time lawyer or insurance agent on your company’s payroll, most small and mid-market businesses do not need a full time CFO. With B2B CFO you get the expertise of a highly compensated Chief Financial Officer but only pay for them as needed.
By building a team that is made up of both company personnel and outside expert advisors the business owner has already put in place some checks and balances that serve to provide the “verify” to the trust.
Take for example your company’s payables. You may have heard your CPA mention the need to further segregate duties when it comes to cutting checks. But to properly segregate those duties would mean adding another headcount to your accounting staff. In the current business environment what small or mid-market business can afford to add a headcount simply to provide another layer of control? One answer is for the business owner to do a complete review and authorization of each payable run. That’s an effective control, but also one that takes the “finder” into a “minding” role. Is it more valuable to your company for those two hours to four hours a month to be spent reviewing payables, or talking to your best customer? That review function could be performed as part of your B2B CFO partner’s on-going engagement. As an outside party, with no signature authority on your account, you have an experienced set of eyes to look for accidental overpayments and investigate potential discrepancies such as vendor checks being sent to two different addresses, or a vendors name put in the system under two different spellings (two frequent ways that fraud is perpetrated).
Set Goals and Monitor Progress
As the owner of a business you need to be the navigator, not necessarily the driver. Take some time to decide where you want your business to go and plan the route that will get you there. The goals can be simple numeric targets such as percentage increases in sales and profits, or more complex measures such as market share or research and development advances. You should have short term and long term goals. The more you can break down your goals into manageable pieces the more successful you will be in helping your team perform and reach those targets.
But setting the goals is only the beginning. A system has to be devised and implemented that can monitor progress toward your goals and keep everyone in the company focused. These systems don’t have to be complicated or expensive. In fact a budget and a monthly analysis of actual to budget are often times most valuable when they are kept simple and concise. The key is to make sure that your accounting infrastructure is able to provide accurate, timely information in order to make the review relevant and actionable. An as-needed relationship with a B2B CFO partner can help in this process. By setting up proper accounting procedures, training your staff on the most efficient ways to accomplish an accurate monthly closing of the books, reviewing the product to ensure that the numbers make sense, and preparing or reviewing the actual to projected analysis a B2B CFO partner allows you to be the strategic leader your company needs – managing and making decisions on what course your business should take based upon complete, accurate information.
Another valuable tool in goal setting is a regular updating of your business plan. Although a business plan does take some work, the benefits received from this exercise are numerous. The planning process forces the business owner to think about and address both strategic and tactical issues. The business plan can be an extremely valuable tool whenever you are educating outside parties about your business and your vision. Whether you are seeking a line of credit, an equipment loan, outside investors, or even the outright sale of your company, an up to date business plan not only gives you a leg up in your management of the company, it conveys a perception of expertise and professionalism that will instantly bring credibility to your discussions. Too busy to complete or update your business plan? Rely on your trusted B2B CFO partner for help. That’s what we are here for.
“Finding the Exit”
You’ve built your team and you’ve put in place an efficient and inexpensive process to monitor your progress toward your goals. So what’s next? It’s time to sit down and determine your definition of success. At some point in time every business owner will exit their business. That may mean that you pass along your business to the next generation. It might mean that you provide for your retirement by selling your business to a strategic buyer, or to your employees through an ESOP.
You’ve worked very hard on your business and you’ve got to get this right. Time to lean on the team you’ve built!
B2B CFO partners have developed the “Finding the Exit”TM program to help. Ideally a business owner will implement the “Finding the Exit”TM program 24 months before an exit is contemplated. In that time your B2B CFO partner will work with you to position your company to be the most valuable entity possible. We will be the coach that works with you to oversee the entire process – from making sure the financials are clean, to addressing issues that could affect valuation (potential liabilities, proper documentation, etc.), to being the “general contractor” that manages all the relationships that will be necessary for an optimal result (legal, tax, CPA, banking, investment bankers etc.).
In summary, as you determine your own criteria for defining success keep in mind some of the key elements that can help you. Set your goals. Design and implement a system to monitor progress toward your goals. Build a team to help you and always consider the end result of how you plan to eventually exit your business.
As you build your team remember that every company needs a Chief Financial Officer, and with B2B CFO, every company can afford one. Please feel free to contact myself or any B2B CFO partner if you would like to discuss any of these issues.