The Pyramid to Success
The truth about entrepreneurship is that the smallest company and the biggest company must be capable of doing three things beautifully:
1. The product or service you want to sell must be fantastic
2. You must have great marketing
3. You must have tremendous financial management
Which reminds me of a quote that I think about every day as I’m working with small businesses:
“No one person can do all three and no one does it alone.”
Entrepreneurial Business Expert
This quote perfectly states what the world is like for entrepreneurs. The goal of most entrepreneurs is to have a successful business. Success will be defined differently for each entrepreneur. Given that success is defined differently, each entrepreneur will still set off on a journey to meet their definition of success.
Before starting this journey, or early on, you need to ask yourself some questions. Questions that need to be asked include:
- What do you do best?
- Can you make it?
- Can you sell it?
- Can you look after the money?
- What is most important role for you in your company and where should you spend your time? Remember Ernesto Sirollo’s quote “No one person can do all three and no one does it alone.”
Now how does one proceed? At FocusCFO, we believe there are four phases that all businesses will move through on their way to being successful: Foundation, Health, Growth and Value®. These areas build upon each other like a pyramid.
This area is the base of the pyramid. This is your internal accounting and administration. Your internal accounting and administration include, but are not limited to, internal processes, procedures / workflows, timely monthly closing, strong internal financial reports, insurance policies, employee benefits, HR policies and contracts. You should consider a good relationship with your banker and CPA as part of the Foundation. Without a solid foundation the pyramid will be unstable and impact your business.
The key items to be addressed in Health are cash flow, finance, and operations. This area includes ongoing operating forecasts and budgets, understanding operating costs/profit margins, meaningful weekly metrics, Key Performance Indicators (KPIs), strong bank agreements and forward-looking cash flow projections with cash flow break-even analysis. These are vital tools. A healthy business allows for successful and profitable growth.
This level of the pyramid addresses revenue and growth. Specific tools that a business needs for Growth are profitability by customer and product line, sales platform, sales growth strategy with pipeline forecasting, a well-documented vision, mission, and values, mid- to longer-term (3- to 5-year) cash flow-based financial projections, defined business goals, SWOT analysis, and a strategic plan. Growth without a solid foundation and health will create serious issues for the business.
The top of the pyramid is Value which can be the continuation of the business or a decision to transition the business on (succession) or exit. The Value level will include defined owner goals, options, and path forward, healthy, growing company with real value, strong internal management team with great systems, a team of advisors to help with your goals. These will generate a higher business valuation. This will also give the owner significant control of their business.
These four phases are critical for your business and build upon each other to make your business successful. However, for most entrepreneurs, their greatest value to the company resides in making and selling their product or service. Utilizing a fractional-CFO will allow the entrepreneur to focus on those roles, while assuring a trusted advisor is gathering and watching the numbers.
Mark Clower is a FocusCFO Area President based in Dayton, OH.
Founded in 2001, FocusCFO is the leading fractional CFO services provider, with more than 100 CFOs and Area Presidents serving clients throughout Ohio, Michigan, Pennsylvania, Kentucky, Indiana, North Carolina,
Tennessee, and West Virginia. FocusCFO works closely with small to medium sized businesses, helping business owners gain control over three key financial and operational areas: increasing cash flow, reducing business risk, and creating a platform for scalable growth. This allows business owners to then realize full financial control and increased value in their businesses. FocusCFO provides services on a fractional basis, meaning clients get all the advantages of a full-time, seasoned CFO under terms that are flexible, affordable and within each client’s budget. What really sets Focus CFO apart is their CFOs work exclusively onsite at the client’s office under a recurring schedule. Typically, engagements range from two days a month to several days per week, and many clients are in the $2 to 10 million revenue range when they initially engage with FocusCFO.