We talk to business executives all the time about planning for the future and one thing is evident: too many of them are mired in the here and now (crisis management), doing very little towards effectuating change that will drive their business forward. While it is important to listen and learn from the past and deal with the day-to-day issues that arise in every business, it is critical for executives to strategically focus on where they are looking to take their organization and implement strategies that will get them there. Below are some tips for looking at your past, dealing with your present and planning for the future.
The Past: It has been said that those that do not learn from the past are destined to relive it. This holds true for businesses too. We are firm believers that you need to perform analysis of your past financial information so that you can implement changes that will drive better results. Look at the following data to help judge your business performance:
- Budget to actual comparisons;
- Referral patterns to your products and services;
- Lost revenue and opportunities;
- Staffing levels;
- Industry benchmarks (Margins, cost of goods sold, overheads, ancillary revenue streams, costs, rent, labor etc.) as a percentage of sales
There is so much information available to you through the internet, that it is fairly easy to gather the information necessary to do a deep dive on your past performance to find profitability leakage that you can stop. In order for this to be effective, however, you must ensure that you have strong, timely and relevant internal financial information. Analysis of your past can help guide your actions in the present.
The Present: What is the key financial information that drives your business results? You need to determine the 4 to 6 key business measures that are important predictors for your business and measure them and track them on a daily basis similar to a patient in the hospital. When you’re in the hospital, the nurses are constantly taking your temperature, checking your blood pressure, and monitoring your vitals. You need to do the same for your business. By regularly monitoring your businesses vital statistics (dashboards) you will be able to determine early on if there are issues you need to be cognizant of and be in a better position to take action when the opportunity arises. Such dashboards should include information from your past (above) and your future (below).
Now is also when you want to start implementing change within your organization, which needs to take place at all levels. Utilize the information you learned from the past to create course corrections that will get you to the future you envision for your organization. If you develop a roadmap as to where you are looking to go, and install a good tracking system to monitor progress, you can more effectively run your day-to-day operations rather than have them run you. And, if you are on cruise control, it leaves you more time to focus on the future.
The Future: Successful executives know that the key to their success is strategic thinking and planning. Many businesses go through a “strategic planning process,” but then take the results of this process and relegate them to a file draw or book shelf, while they once again get sucked into the day-to-day crisis management that runs their business and their life. It is the rare few that understand that if you have a plan and work that plan, results will come. This is not an easy process … change never is. Who really likes starting a new exercise regimen (there’s always tomorrow to get into shape)? As we all know, though, tomorrow never comes as the complacency of the couch and TV remote call out to us. It’s time you take control of your business. Start strategic thinking using some of the following ideas:
- Consider developing an advisory committee made up of your key stakeholders (important customers, clients, donors, vendors) who can provide insight into your strengths and weaknesses.
- Set aside time with key staff members and other advisors (you know, like your accountant), and develop real, definable goals that you would like to achieve for your business.
- Determine who will be responsible for these goals and what steps will need to be implemented to achieve these goals.
- Create dashboards that will help you to monitor the key indicators that drive your business, so that regular course corrections can be made.
- Develop methods to continuously review your strategies for effectiveness. It takes time for new strategies to take hold.
- Don’t be impatient and pull the plug too quickly, but also don’t throw good money after bad if a strategy was truly ineffective. Develop appropriate financial and operational reporting so that you can see the results you are having.
In an effective business, your past and present need to come together to help shape your future. Are you on the right path?
Kenneth R. Cerini, CPA, CFP, FABFA
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.