Want To Stand On Solid Financial Ground?…Follow These 9 Key Strategies

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Don’t shoot yourself in the financial foot.  Stay clear of common financial mistakes by following these 9 financial concepts.

  • Cash is “king” so keep a handle on your cash by reviewing your cash flow statements, your weekly cash receipts, and weekly or daily cash balance.
  • Understand what would be the right mix of debt vs. equity in your business.  Each business has its own “speed limit” and growing too fast can cause you to pile on debt and thereby, risk to the business.
  • Have a written plan even if it’s a short one page which I prefer.  The lack of a plan is the plan to failure.
  • Know how to read your financial statements, and not just you profit and loss statement but also your balance sheet and cash flow statement.  Otherwise it will be hard for you to make good decisions for the business.
  • Know your costs.  This is especially true to understand at what point of your growth will you need to add more fixed cost to the business in order to go the next level.
  • Keep up good relationships with your bank and vendors.  These are your key stakeholders who can make the difference between success and failure.
  • Missing the “forest” because you are only looking at the “trees”.  You are missing the bigger picture of your business and industry.  Understand the trends and be able to step back from the business to see if you are driving in the right direction.
  • The absence of timely data from operations and finance.  If you are waiting 30 days or more to review this data, its most likely too late for good corrective action and rather you will be more in a reactive mode.
  • Lack of understanding the cause of the results.  Get to know the drivers of your business including your financial drivers.  These metrics will provide insight into the direction you are heading.

Follow these 9 key strategies and you will get the financial results that you want. Here’s to achieving your financial goals!

Mike

3 Tips For Better Business Planning

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Planning is a critical part of making sure your business is focused and on track.  Here are six important elements for long term planning.

  • Define the outcome.  Each planning session should have a desired outcome in mind that you define at the beginning of it and then circle back at the end and ask yourself the question if you actually addressed it.
  • SMART goals need to be the prepared and documented.  Your management team should come up with what they feel from their perspective the goal or goals should be so that you can see where the common ground is and where your team is thinking the business should go.
  • Have a specific written agenda prepared ahead of any planning session and stick to it.  Don’t let meetings drag on without keeping people on time which means on track.

Follow these 3 guidelines for your next business planning session and create a better road map to your success!

Mike

Do You Have A Red Flag In Your Business?

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Small emerging growth companies often have limited resources and limited staff performing critical functions in accounting/finance.  Below is a list of tips that might indicate a closer look at your records for accuracy or the opportunity for fraud.

  • A spike in payroll expense without a reasonable explanation
  • Accounts receivable is growing but your sales are flat or down
  • Vendors who are being paid but you are not familiar with them
  • Human Resource records are minimal or non-existent for employee pay changes
  • Expense actual vs. budget shows a variance that is not reasonably explained
  • Prepaid expenses are growing consistently month to month but most expenses are flat or down in your income statement

I read an article recently where the same accountant who posted and deposited customer receipts had embezzled $126,000.  How?

The employee deposited customer checks to their ATM which is not always checked thoroughly the banking system.  The accountant then marked the corresponding invoice as “paid” and used the subsequent checks that came in for newer invoices.  This process could only go on for so long because the accounts receivable would grow from a larger pool of unpaid invoices.  Just as the accountant was about to leave the job, the embezzlement was discovered.

It was discovered by auditors checking on the cycle of a paid invoice; from receipt of check, to posting payment to the invoice, to depositing the check at the bank.  Some invoices shown as “paid” did not have a corresponding deposit.  Getting a copy of the deposited check from the customer revealed a different account number from the company’s account and discovered it was a personal account of the employee.

Here’s to a system of processes and activities that represents the phrase “trust but verify” to help you mitigate any circumstances where the health of your business is compromised!

Mike

The 7 P’s of Evergreen Companies

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I read an article recently by Bo Burlingham an INC magazine writer, about what he described as an evergreen company.  The definition is described as a “private, profitable, market- leading businesses that are designed to remain unsold and independent for a long, long time.”   It was interesting to read about entrepreneurs who had decided that it was not about how high the could get their valuation, how much money they raised, or how big they would grow, but rather looking for a meaningful experience building their companies.

Here are seven tips on building an evergreen company.

  • Purpose

Passion driven organization from its vision/mission.  It’s not about the money.

  • Perseverance

The resiliency to keep pushing forward and overcome obstacles

  • People First

Have an engaged workforce aligned with its culture.  Team members who are taken care of will in turn take care of your customers, suppliers, community, and stockholders

  • Private

Taking advantage of the long-term view as a private enterprise

  • Profit

Success is measured and that includes the bottom line

  • Paced Growth

The discipline to focus on growth that is steady and consistent.  Every company has a speed limit to profitable growth

  • Pragmatic Innovation

Embrace the mantra of continuous improvement and be willing to take calculated risks that don’t jeopardize the company

Here’s to knowing how you can drive your evergreen company to the results that you want!

Mike

Want the Secrets to Building a Great Company?

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I enjoy reading books of all types, both fiction and nonfiction.  Lately, several books captured my attention more than others, one of which is The Traveler’s Gifts, by Andy Andrews.  Its written as a story about principles that to me seem timeless.

Here are the gifts (tips) that I came away with.

  • The buck stops here.  We are responsible for the past, present, and future
  • I will seek wisdom and be a servant to others.  My experiences become the collective body of wisdom that can be shared
  • I am a person of action.  Seize the moment and choose now
  • My destiny comes from a decided heart.  Have a clear vision
  • It’s a choice to be happy and possess the spirit of gratefulness
  • Greet the day with a forgiving spirit, which most of all means to forgive yourself
  • I will persist without exception, great leaders like Churchill persist through adversity.

These are a few gifts that can provide the foundation to building a great business from your passion.

Here’s to all the gifts that you will share to aid in the health of your business!

Mike

Want More Creativity?

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Business owners often talk about the desire to bring more creativity to their company and their personal life.  Creativity certainly will have different meaning for each person, however, a common denominator in a business context is coming up with creative solutions for your customers or processes.

How does someone unlock creativity?  Is there a way to increase the likelihood of getting your creativity quotient higher?

I recently read an article that quoted Deanna Berg and Chuck Dymer, who have been speakers at various Vistage events, on ways to unlock creativity.  Here are a few tips.

Business Creativity

  • Brainstorm session with your team where the session has the following principles.
    • Defer judgement…criticism derails creativity.
    • Freewheeling…no idea is a bad one.
    • Quantity not quality…get the ideas out there.
    • Speed is important…impose a time limit on the session.

Personal Creativity

  • Consider the following for personal creativity boost.
    • Change a habit…change the time you work out.
    • Experiment with something new…. learn a new hobby.
    • Find a new path…. take a different route to work.
    • Change an attitude…. take something that annoys you and change your attitude about it.

Carve out time on a regular basis to get creative.  It can be the best time spent to build your business.

Here’s how taking time for creativity can propel your business to new levels!

Mike

What Drives Innovation?

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We hear a lot about how companies need to innovate to stay relevant in their market.  Innovation can have a different meaning for each of us, however, it is helpful to understand what is the characteristics that can cause a leader to have the “innovation gene”.  Researchers at the Harvard Business School (Gregersen and Christensen) surveyed over 3,000 executives who had not started a business vs. responses from over 500 people who had created thriving companies.

What are the characteristics of an innovator?

  • They ask a lot of questions and challenge the status quo
  • Spend at least 15 minutes writing down what questions would challenge the current state of the company
  • Study other people and cultures.  Live in another country for a period.
  • Be an observer.  Watching how people do their activities, however mundane can inspire ideas to improve the activity.
  • They network well to connect themselves to resources that will test their ideas and get feedback.

What’s your innovation DNA?  While some of it is hard wired in people and others must work at it intentionally.  However, knowing what concepts could help you down this road can be half the battle to win the war of innovation for your company.

Here’s to innovating!

Mike

Building Your Financial Plan

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Any competent financial executive will say “a business needs a sound financial plan” to tie the numbers to a business owner’s strategy. But what does that really mean? It’s time to demystify this statement.

  • Define your objective.  Why do you run your business?  Your reason could be any of the following or something else, but it’s important to start with the end in mind:
    •    “I want a good, stable life style maintaining business.”
    •     “I want to increase my net worth so I can retire early and enjoy the good life.”
    •     “I’ll start a ground breaking business, grow it quickly and sell it so I can move on to the next adventure. I don’t want to get bored!”
    •     “I want to create a legacy for my family.”
  • Create a business plan.
    • Now that you have your objective in mind, the plan is simply the day-to-day activities that will help you achieve it.  This can be as simple as determining how many new clients you will need at X dollars per month, or more detailed with specific key performance indicators for all areas of the business (finance, operations, sales and marketing, HR, etc.)
    • It is easy to think of the plan as the tool. And it is – a well developed plan helps you manage to your expectations. It provides business measures to keep things on track. (And as we all know, if you don’t measure it you can’t manage it.)  But often overlooked is the value gained in going through the planning process – whether it’s a simple two-page plan or a full-blown book with multiple chapters. The business idea will be refined and honed, and valuable insights achieved during planning.
  • Execute.
    • Now it’s time to put the plan into action.  Without this step, a plan is just a piece of paper.  Start acting on your plan, find someone to keep you accountable to sticking with it, and celebrate your progress along the way.

Let me know how I can help you build your blueprint.  

Here’s to planning a successful year!   

Mike

Buffet’s Advice for Financial Success

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The “Oracle of Omaha” has created an impressive following of people and his investing results have proven the test of time.  Below are 10 simple bits of wisdom that I believe are timeless:

Never lose money.  Buffet’s rule # 1 is to not lose money.  And his rule #2 is to remember rule #1.  Keep in mind if you lose 50% of your investment, then it takes 100% return to get back to even.

Get high value for low price.  What he means is value is what you pay for.  Make sure that you are paying the right price for the value in the product, business or investment that you are buying.

Build healthy money habits.  Habits are what drive our behavior.  It’s been said that finance is 80% behavior and 20% math.  If we don’t change poor behaviors with our wallet then we can’t expect to find success with money or building a business.

Avoid debt and, more specifically, avoid credit card debt.  Credit card interest rates can be as high as 18% and more.  If you have to roll over your credit card balance regularly, then you can’t afford spending on it.  In effect, you are trading your future for your present satisfaction.

Keep cash on hand.  Come up with what your minimum cash balance needs to be.  Is it 3 months or 6 months of expenses?  “Cash is to a business as oxygen is to an individual: Never think about it when it is present, the only thing in mind when it is absent,” said Buffet.

Invest in yourself.  Your biggest income producing asset is yourself.  Improve your skills to make yourself more valuable to the market.  Unlike other assets and investments, “Nobody can tax it away and they can’t steal it away,” said Buffet.

Learn about how to manage money as a part of the investment in yourself.  Not everyone enjoys this subject, however, there are simple methods to follow that help you win with money.  Spend less than you make. . . save 15% into a low cost index mutual fund. . . it’s not how much you make, it’s how much you decide to spend.

Trust a low cost index fund. Expenses matter when it comes to returns on your investments.  Consistently adding to your investments each month or quarter exercises an important “money muscle.”

Give back on a regular basis.  Giving of our “time, talents, and treasure” to our community and nonprofits is a natural law of human nature where we want to help others in need.  Giving produces psychic benefits for the giver and it helps society move forward.

Invest for the long term.  Investing not only with dollars but in ourselves is a long term game.  Building true financial security takes time.  Buffet said, “someone’s sitting in the shade today because someone planted a tree a long time ago.”

Together these pieces of advice can help take us on the journey to financial security.  The advice is simple and timeless.

Here’s to reaching your financial goals! Mike

How to be Successful the Second Time Around

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I recently read an article about a study conducted on over 65,000 Swedish earlier stage start-up companies and their owners who successfully exited one company and moved on to their next company.  It pointed out that the second time around for the entrepreneur was not always a success.     Most business owners after they exit from their business seem ready soon after to start another venture.  This includes business owners that transition to the buyer company, but find out that they can’t work for anyone else anymore.

The second business often under-performs compared to the first one.  Why?  There is no one reason why the same skills and leadership that got them a first successful company exit does not work the second time around.     In some cases, the entrepreneur fails to understand the significance of timing and those “make-or-break” moments where their intuition helped lead the first company to its success.  They sometimes forget or underestimate how much effort it takes and the chance events that got their first company the results needed to succeed.

So what are the ingredients for a happy exit?  It depends on the person; however, some common strategies included: The business owner visualizes what life looks like after exit.  They don’t wait for the exit to happen and then decide, rather they are proactive about it before exiting. Test driving the next venture prior to exiting the first one Setting clear goals, deadlines, and amount of capital that will be committed These are just a few of the ideas that can help a business owner avoid moving onto a second or third business venture that ends up disappointing.

Here’s to your next venture! Mike

What’s the Deal with Working Capital?

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A Unique Look at Asset Based Lending
by Marc Smith

“Cash is King.”  We’ve all heard the expression, but if you haven’t owned your own business, you likely haven’t given it serious thought.

When a business is for sale, most people first want to know about the total revenue (sales) and the net income (profit).  These two factors are extremely important, but any business owner would argue that there is another factor that is even more important than these two:  Operating Cash Flow or Working Capital.  Profits are great, but no matter how much money is coming in the future, a business can’t continue to operate if it doesn’t have enough cash to cover this week’s payroll.

Let’s use an example of a recent business acquisition: 

XYZ Company is acquired by an eager buyer who uses an SBA Loan to finance the transaction.  Everything starts out great for the new owner:  their new business is growing, sales are up and they are enjoying the rewards of self-employment.  XYZ Company has many new orders to fulfill or new contracts to service as a result of this growth.  The working capital associated with this expansion are typically paid up front while the company won’t receive the benefits until the customer remits payment (sometimes months down the road).  As the new opportunities develop, the up-front costs associated with these opportunities keep increasing.  Before long the owner is looking at a significant cash gap from what is owed to suppliers now versus the cash that customers will not remit for another 30-45 days or more.

The owner realizes that with the recent growth, there is a need for a line of credit.  Obtaining additional funds or refinancing with the SBA Lender typically isn’t an option, so they inquire with their local bank for conventional financing.  This presents a problem:  all business assets are already collateralized with the SBA Loan, leaving the bank with no collateral.  Therefore, the bank is not willing to extend the company a line of credit.  This leaves the owner in quite a predicament:  sales are up and the future looks bright; however, the short term cash flow constraints are keeping the company from taking advantage of that growth.

Profits are great, but no matter how much money is coming in the future, a business can’t continue to operate if it doesn’t have enough cash to cover this week’s payroll.

– Marc Smith

It is this type of situation that can potentially be resolved with an Asset Based Loan.  Typically secured by Accounts Receivable, an Asset Based Loan provides working capital to a business.  It does not add cash to the business, it simply accelerates cash flow by allowing a business to borrow against the future value of its receivables that are expected to become cash in the near term.

The SBA Lender is many times willing to “release” the Accounts Receivable to the Asset Based Lender because this provides the company with additional liquidity.  By working with the Asset Based Lender, the company now has the capital it needs for growth without worrying about how it will meet its short term cash demands.

Marc Smith is a Vice President with Magnolia Financial, Inc., an Asset Based Lender that provides Accounts Receivable Financing and Management to growing companies that are typically unable to obtain traditional bank loans.  He can be reached at msmith@magfinancial.com or (404) 664-7037.

Numbers Coach Eases the Pain of Financial Management for Medical Practice

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The Company

Pain Care, LLC (formerly Georgia Pain and Spine Care) is a leading pain management medical services firm that provides comprehensive solutions to help restore each patient to their original lifestyle. The company uses progressive approaches to pain management with education, counseling, and minimally invasive procedures. Their mission is to relieve pain, increase productivity, and improve the quality of life for its patients using technologically advanced treatment regimens through its various metro Atlanta offices.

Situation

In 2020, the Pain Care team wanted to enhance their financial management and reporting capabilities. They wanted to create a platform to communicate the company’s key performance indicators (“KPI”) and help educate its key team members on what drives its company’s financial results. In addition, the Pain Care team wanted a “road map” that could guide them as they made financial decisions impacting strategies for growth.

Solution:  Numbers Coach Leadership and Numbers Navigator™ Services

The Numbers Coach (“NC”) financial leadership services were an ideal fit for developing Pain Care’s performance metrics. NC developed a financial scorecard to focus on the financial measurements that drive company profits and cash flow critical to sustained profitable growth. The scorecard offers an “at a glance” view of results. NC developed a financial model from its proprietary software, the Numbers Navigator™ . The software provides a road map for the Pain Care team to see where they are headed with profits and cash flow. The software’s rolling financial forecast provides the Pain Care team with a tool to make critical decisions “on the go” to achieve their desired results.

Results

NC pulled together financial and non-financial data to complete a scorecard and financial model. Each month NC meets with the Pain Care team to methodically review results and provide the input and analysis from NC’s Numbers Navigator™ financial software. From the monthly financial coaching meetings, the Pain Care team can take actions on activities that improve the company’s bottom line results.

For more information on Pain Care, LLC visit www.georgiapaincare.com

To learn more about the Numbers Coach financial leadership services, click here

“Mike has become an important part of our team.  His understanding of financial processes, cash flow, and approach to educating us on our results gives our team the right tools to help us understand how to navigate our finances successfully and stay focused on our financial goals.”  

Dr. Charles Brownlow, Founder / Medical Director