4 Steps to Financial Certainty
Is your P&L and Balance Sheet in good shape? Are you starting to see signs of imbalance in recent months or quarters that are starting to be concerning. Catching new financial trends in your P&L immediately as they occur is the easiest way to identify that something’s off. Usually this happens and it’s a ‘wait and see’ game to make sure it’s not an anomaly. But what happens so often is that one month becomes two, becomes three, becomes six, and then you’re making significant cuts to either your staff or services in a panic mode. As someone who owned a business through the Great Recession, there is no time for half measures when the proverbial ‘stuff hits the fan.’ If you don’t act decisively, you’ll be making changes at the end of the cycle and falling behind competitors who acted immediately. Don’t wait!
Treasures In
Efficiency
If I told you that you could potentially find another 20% of profit in your existing business without adding any revenue, would you be game? I don’t know anyone that would say no. So how’s this possible? Efficiency, or unfortunately the lack there-of. Don’t worry, it’s nearly impossible to build an organization that is “perfect” in all matters, but you can find nuggets of money hidden in your business if you just know how and where to look, or more often than not, just be willing to take the time. You’re already busy, who has the time! I’ll bring you back to that potential 20% of additional profit, we can make the time.
The one thing that most financial executives, managers and bookkeepers don’t have the ability to do well is correlate operations with the P&L in a meaningful way. Don’t get me wrong, they’re absolutely critical in running your business, but they just weren’t trained to think in an operations mindset. When you have someone trained in both operations and finance, you can actually correlate a production process with a financial affect to the P&L. Most often this comes by way of the CFO working with the COO and tackling the problem together. The question becomes do they have the time, work well together as a team, have competing agendas, communicate effectively, or are you just not large enough yet to have separated departments and managers that can tackle this? No matter the answer, this is probably the single highest value initiative you can launch for your company right now.
Accounting &
Operations
Finances &
Bookkeeping
So there’s good news, businesses run on basic math. As long as your organization has someone managing the books that is proficient in all things math, great. Well, that used to be the importance of a bookkeeper anyway, now the software does that vast majority of it. Even complex amortization and depreciation tables are simple tasks now. So this begs the question, what financial software are you using and is it being used to its full capacity to give you real-time insights into your business? If you’re just looking at monthly profit, you’re missing out big time. You need to be creating custom tailored Key Performance Metrics to stay ahead of trends. These don’t come with your software, they have to be custom designed with your business in mind.
It’s time. You’ve grown your company to the point that you’re considering either an exit or a meaningful partnership. Depending on the size of your company and the industry you’re in, this can take anywhere from 6-18 months, unless the economy is in recession, then potentially longer. I can tell you from experience that you don’t want to wait until you arrive at some magic moment in time to make this decision. It needs to be a part of your overall strategy on an on-going basis. It’s the difference between being ready to commit to an exit, and missing an opportunity because you weren’t ready. Financial projections need to be consistently updated, confidential information memorandums designed for success, potential buyer or partner lists curated, and to make sure that your business is as efficient as humanly possible, since your sale price will most likely be a direct result of a Multiple of EBITDA. Is it time for you?
Mergers &
Acquisitions
The Envision Strategies Approach
The Envision Strategies Approach is to work through the Profit & Loss Statement and Balance Sheet line by line, after signing a Non-Disclosure and Confidentiality Agreement. First by verifying the immediate financial well-being of the business to see if there are any obvious flags that stand out in contrast to comparable industry companies, if available. Second, to perform a deep dive into the P&L line by line and compare it to the operations that are responsible. This is where the real work is done, where accounting meets operations, and depending on the complexity of your business, can be the diamond in the rough for additional profit. Let’s go get it!