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Orlando
5971 Brick Court
Suite 100-B
Winter Park, FL 32792
407.679.7600
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2202 N. Westshore Blvd.
Suite 200
Tampa, FL 33607
813.507.3600
South Florida 1451 W. Cypress Creek Rd.
Suite 300
Ft. Lauderdale, FL 33309
954.651.8044
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April 2012
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Success = Focusing on the Right
Areas of Your Business
By David Rosenfeld - CPA, Nperspective CFO Partner
 Business owners and CEOs often must juggle many business issues at one time: a major customer, a key employee, closing a new sale, purchasing capital items, making payroll, changes in the marketplace, and many others. One of the key items to success of any organization is the ability of the business (through the owner/CEO) to focus upon the right issues at the right time. Developing a plan can enable a company to concentrate upon areas of the business that either excel or falter - in relation to the plan.
A business plan is a multi-faceted document that should focus on all areas of the business. The financial reports that are generated from the business plan are a result of the activities of each organization within the company. As such, each organization within a company (sales, production, service, human resources, finance, etc.) contributes inputs into the plan.
Business plans can be put together in a number of ways. Some businesses like to start with a top-down approach, which means the business owner/CEO works with the CFO to establish the growth targets of the business (revenue and profits) and the department executives develop plans to meet those pre-established goals. Other businesses have the department executives develop their initial plans, and then the CFO consolidates these departmental plans into a complete business plan. Either method above can be an effective way of developing your plan. The key is to ensure that the details of the plan work together to achieve the final result.
In preparing your plan, it is essential that you identify the starting point for the company and for each organization within the company. The starting point from a financial perspective would be how the business is currently operating and how much cash is available. The starting point for the production team is how many units are already contracted (how many services for a service organization) and how much capital and people are available to deliver your products and services. From a sales standpoint, you want to identify the size of the market, how you fit into the market, and how you currently address/attack the market. From these starting points, each organization within a company can develop their plan to achieve their goals.
Once the plans have been developed within each department, the CFO then consolidates the plans into an interrelated document. As part of this document, the CFO will evaluate the resources (financial, capital and human) to achieve these targets established in the plan. In performing his/her analysis, the CFO will also identify when/where there may be a mismatch between resources and goals. For example, the sales team believes it will sell double the volume of product next year, but the production team has not included capital and people to deliver double the volume.
Through this analysis, the CFO will work with the department executives to develop a cohesive business plan for the business. This plan not only identifies the direction and goals of the company, but provides the business owner/CEO a way of evaluating progress toward the goals by way of some key performance metrics.
Some of these metrics are business level metrics, such as sales per week/month, units built and shipped per week/month, customer service calls, and profitability. Other metrics should be at a departmental level, such as sales per representative, the number of service calls per service employee, and receivables collection, etc. Companies of all sizes are able to have cost-effective, timely metrics. Key to the success in utilizing metrics is to measure performance toward the metrics frequently (weekly). The timeliness of the measurement point enables any business to quickly address issues as they arise.
The benefits of utilizing metrics are many. Initially, the short term benefit is the knowledge of how the business is performing in relation to your expectations. When there are deviations (positive or negative), you can address the issues so that your business is able to quickly maximize its market position, create efficiencies, identify problems that will negatively impact production and costs, potentially identify a market opportunity before the competition. Secondly, as you begin to utilize these metrics with your management team, and the management team utilizes metrics with their staff, a culture of quality and performance will develop within the company. This culture will permeate itself through new hires and create the focus toward performance that you want all of your team to possess. Lastly, should you desire an exit at some point, the results of this metric driven approach may lead to a higher dollar valuation of your company.
At Nperspective, our CFOs have a razor sharp understanding of how businesses must work as a team to achieve their objectives. Our experience in identifying these metrics, and building systems which provide timely reports on these metrics and proactively responding to this information has enabled many business owners to significantly improve the financial and operational performance of their companies.
Please contact Janet Watson at (813) 317-3460 or jwatson@npcfo.comfor further information or a free consultation. |
| Did You Know? |
Did you know that Nperspective was recently engaged by a privately held company in Central Florida. We will help with the development of cash forecasting tools, completion of the company's first budget and assistance with managing the company to budget. Nperspective will also be helping this client with strategic planning and development of longer term operating and financial goals that will both grow the company and increase shareholder value.
Contact Janet Watson for more information.
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Nperspective, LLC provides interim, part-time, and project CFO and Controller services using a flexible engagement model that is dependent on our clients' unique business needs. Our partners are seasoned CFOs who focus on rolling up their sleeves, are accommodating to client needs and helping create significant value from within their finance organizations.
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