As the end of another year is on the horizon, I'm sure you're already well into planning for next year. But before you get too deep into a planning phase, you may want to consider what role your financials will play in your growth next year.
I sat down with two financial professionals to get their best advice for businesses that are planning for a20 high-growth year: Joel G. Block, chief deal maker at Bullseye Capital, a national advisory practice providing strategic services to mid-market companies on growth and revenue initiatives, and Dr. Mary Kelly, a retired Navy veteran, leadership expert and economist at Productive Leaders. (She's ranked as one of the top 100 economists in the U.S. by Rise.)
The two share their advice on how to continue the growth your company has seen in 2016 into 2017.
What are some of the biggest mistakes you see leaders making when it comes to planning for a company's growth?
Joel G. Block: Frequently, smaller- and [midsize] companies have ownership and management that is concentrated in [the] hands of a few family members rather than employing professional managers, as would be common in larger companies.
The people tend to be intuitive rather than highly trained or educated in business principles, which is not necessarily a bad thing, by the way. They may have figured it out as they went along, or there may be a new generation that might not be fully prepared to lead or make decisions. This is the downside of nepotism. For these reasons, the management team may have outgrown its ability to grow its own company. There are consultants who specialize in the issues of family businesses, which is the structure of so many small- and middle-size companies.
Dr. Mary Kelly: They think short run instead of long run. They worry so much about quarterly earnings that they make decisions that sabotage long-term success. Managers are often evaluated on quarterly earnings so they respond to those incentives by thinking short-term.
Next, they are more concerned with their own success, promotions and jobs that they neglect to promote the people who make them successful.
—Dr. Mary Kelly, leadership expert
Finally, they don't connect the dots. They build an organizational system that promotes stovepipes instead of working together to grow overall. Different divisions and departments don't talk to or coordinate with each other.
For example, during Black Friday a friend of mine, who is a retail store manager, had a tough day. The store manager was not aware of the sales promotions that the company was doing. As a result, customers were coming into the store and leaving angry because the store was not honoring the sales promotions. The store manager called HQ several times and received nothing from his boss and team because they didn't have the information either. This is a great example of the marketing department not talking with operations.
What advice would you give to leaders in charge of planning the financial side of a company's growth?
Block: Organizations that are not run by professional managers should engage outside advisors or specialists who may be sensitive to business or financial issues that could either affect the business, or that could be helpful to advance the business.
The company's accountants or attorneys should always be the first resources a business goes to, but they should be the only resources the company calls on for advisement. The company executives should become involved in peer groups within the community. For example, there are CEO support groups such as Vistage.
Though less well known, there are support groups for salespeople, HR managers and financial executives. The benefit of participating in such groups is exposure to new ideas from outside speakers [and] experts who are capable of helping the company execute on various new ideas.
Further, there are consultants who specialize in working with [midsize] businesses, which frequently include family and partnership issues. Companies that I know that provide sounding board, coaching and advisement to leaders of smaller and [midsize] companies include Barry Banther on the East Coast and Robert Grossman on the West Coast.
1. Create a vision that everyone understands and supports. People need to spend more time thinking about where they are going. You need a vision before you start the serious strategic planning. It is like planning a vacation. You explore ideas on where to go, where to stay and what to do, but you cannot start buying tickets and securing reservations until you know where you're going.
Ideally, your team needs to be involved in both the vision exploration and vision development phase. How you effectively get people to craft the vision is about the personalities and talents of your team and how you present the vision planning. Getting your team to spend a full, uninterrupted day on a vision plan may sound to your people like a great opportunity to take a vacation day. You have to structure the day to create valuable outcomes, make it relevant to them and include them in the decision-making process.
2. Create a true team at work. When we work toward a common goal, when we think and move and focus as one powerful body, we increase exponentially what we are able to accomplish. Being part of a team allows us to do more.
For a team to be successful, every member on the team has to truly believe that by working together, we are able to achieve more. Not everyone believes this, especially highly talented individuals who are accustomed to working alone. It falls to the leader to instill in the group the vision that working collaboratively is more effective and more powerful than working alone.
3. Stop [focusing on things that aren't top priority]. We waste huge resources doing really dumb things at work, things that don't matter or things that are the result of miscommunication. If something doesn't look right, it might not be. Ask! Encourage people to ask, "Is this our priority? Is this the right expenditure of time and resources?"
Ask the questions and then clarify the answers to make sure that you and your teams are spending time and money on what is intended instead of what is misunderstood.
How important is it for companies to review their growth goals quarterly?
Block: Without goals, any accomplishment will be good enough—which probably is not good enough at all.
Companies need to take into account the changing environment in which they operate in order to make a reasonable assessment of what could be accomplished. An annual plan with an outlook approximately three years into the future is common and leads to solid and safe planning.
It is a good idea to review the financial progress the company is making each month with a more comprehensive review each quarter. These quarterly reviews are the type that might be made by the advisors suggested above. Should the company notice that it is not making sufficient progress, it can reconsider the allocation of resources to solve problems and to seize opportunities. Further, if circumstances change, the company can review its situation and consider the necessary adjustments.
Kelly: It is important to know the numbers, but a short-term loss for a long-term gain is acceptable. Don't get so immersed in the quarterlies that you cannot see the big picture. Ideally you should be thinking five and 10 and 20 years into the future.
A VP recently told me that he didn't have a strategic picture because he was just trying to get through the day. That is the problem with quarterly mentality.
What are the financial resources you see overlooked most often when it comes to companies needing to fund growth?
Block: There are a limited number of resources available to entrepreneurial companies compared to what might be available to larger or public companies. In addition to banks, which are not accessible by many companies, as well as asset-based lenders who securitize company assets to ensure repayment of a loan, most business owners don't have a large number of additional choices.
But there are many small investment banking firms that companies can look to which may be able to help them to raise capital. Perhaps most significantly, the new investment crowdfunding rules allow for capitalizing debt instruments by offering shares to investors using the internet.
Kelly: Look inward to reduce waste and reward people who are responsible. Many companies don't reward the divisions of the company who are fiscally responsible. The "it is the end of the year so I should spend money" mentality is a huge drain on financial resources. Create positive incentives for people to be fiscally responsible. Most organizations do exactly the opposite.
Another overlooked resource is human capital. Companies send their people to all kinds of training that unfortunately doesn't help them improve, doesn't stimulate creativity, doesn't help them solve problems and is often obsolete. Companies often waste money on training that doesn't matter instead of training that does. When you have extra money, spend it on your people on training that matters.
With this advice and insight in hand, how can you adjust your strategy for financial growth in the year ahead? Maybe it's finding a new consultant. Maybe it's accessing new sources of capital. Maybe it's assessing your existing human capital and seeing who you need to make your goals realities.
Whatever your next step, consider putting these things front-of-mind as you consider where your company is today and what it will take to get it where you know it can go tomorrow.
Read more articles on planning for growth.
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