The Process of Keeping Your Business HealthyChia-Li Chien, Ph.D., CFP®, PMP®, CPBC
Chia-Li Chien | Nov. 04, 2011
Monitor results. Get regular check-ups
Good Business Health Builds Good Business ValueIn my recent article “Is Your Business Healthy?” I talked about getting a health check-up for your business on a regular basis. In my experience in working with many successful businesses, each one seems to follow a process similar to these steps below to maintain good business health:
1) Select and apply the right combinations of tools.
2) Follow the process that works consistently.
3) Monitor results regularly and make proper adjustments to either tools or process.
I help my clients look for 1) a profitable business performing above industry benchmarks 2) consistent marketing and sales processes that continuously generate profitable customers and products (including services) and, 3) a system to regularly monitor financials and KPI activities and make adjustments along the way.
I have to tell you, I got a lot of questions after I published that article. Many of you may not have considered working with a CFO (chief financial officer) either on a part-time or full-time basis. Perhaps you don’t know what to look for. However, now may be time to explore your CFO options.
Joanna (not her real name) owns a niched financial service firm that has a very long sales cycle, requiring intensive labor to produce their product. Although she is in the financial services field, she has her fair share of cash flow issues due to the nature of how she structures her client payment. Sometimes, she misses her monthly or quarterly projections. It may then take a few months just to catch-up to where she planned to be. However, like most small businesses, there are certain investments that must be made and simply can’t wait.
Joanna found herself in this very predicament. Her office lease was going to expire in 90 days and she was unhappy with her landlord. She found another building nearby, and without giving it enough thought, made a down payment for the deposit on the new space and started packing.
Meanwhile, her cash flow was about 25% behind projections. Around the same time, she got a large contract from a very high-profile client and needed to invest in her ecommerce infrastructure to accommodate some new services contracted with this particular client.
She found herself stuck between a rock and a hard place. With the new space, she would be paying 30% more rent than before and now the new business would require an additional 25% cash flow for the ecommerce upgrade. She was faced with the sudden need to use the line of credit or her business credit card for this 5-month investment. This further put her in arrears on her available cash position in the business.
Joanne found herself also under added pressure and stress because of this cash flow issue. She became very agitated, even at home with her own family. This, of course, caused unwanted friction in her family.
Please don’t sabotage your own business!
There are many investments to be made in your business. Sometimes they come unexpectedly in the form of good news from a client’s request. Sometimes it is planned. But no matter what, you must have a process to regularly check how healthy your business is.
Joanne decided to follow my PROFITS MATTER® process. PROFITS MATTER® is not a quick fix—it’s a process. But within three months time, Joanne was back on track and her cash flow met the expected KPI (Key Performance Indicator). She continues to work with many different tools to ensure her business health stays on track.