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Cash is the Gas and Oil for your Business Engine
Cash Flow! The gas that fuels your business and the oil that keeps your business operating. Business owners must have functioning gauges on their business dashboard to assure proper monitoring of the business performance. Gauges on the dash board in a race car tell the driver how the car is performing. Below optimum and the driver will loose due to the inability to achieve the performance and speed needed to compete, red line and the engine is destroyed and the car out of the race. This same strategy can be used by business owners.
The successful business owner will have gauges or goals that can be measured at any given time. The owner must know how the business machine is performing. When goals are not being met the business may fail, or certainly not achieve the desired results and profits. Red lining on your business gauge can be caused by many factors; sales declines, goods and services incorrectly priced, accounts receivables past due, account payables mismanaged causing missed discounts and interest, overhead too high, cost of goods increases, poor performance by management or associates, etc…Knowing how your business is performing, and why, will provide the opportunity for the owner to make a pit stop, correct the problems, and return to the race. Failing to monitor the gauges or goals is risky at best. If the owner does not monitor the key areas of the business, the opportunity to correct or improve could be missed, leading to poor results and / or business failure.
Many owners fail to monitor their business gauges and goals, and then when the sales decrease their business engine runs out of gas, seizes up, and fails. How and when should the owner set these performance gauges or goals and what should they include?
The How! Put them in writing! Communicate them to everyone; make the desire outcome measurable with both intermediate and long term goals. Then hold yourself and your staff accountable to meet or exceed the goals.
The What! Everything done to run your business must be measured; sales, profits, employee performance, costs, advertising results, new business ventures, overhead, and so on.
When! This should be part of your business plan initially. In addition, the owner and key staff should meet regularly to review the businesses performance against the goals. All businesses should establish an annual date to review and strategize. This should be done prior to the end of the fiscal or calendar year and should include all key management and staff. An outside consultant could help to provide unbiased feedback along with facilitating the meeting. Review the year to date performances against projections and goals. This is critical so that changes can be made and improvements implemented to assure goals are met. Then goals for the next year should be determined. Set a date for the completion of an action plan that outlines the details as to how these goals will be achieved. Then follow up early is the first quarter to review last years results. Celebrate the victories! Determine the reasons for goals not met and create plans to avoid these shortfalls in the future. Communicate current year’s goals and objectives along with the strategies and plans to achieve them. Most owners will not do these things. The excuses are many; what’s the use things will turn out OK, not enough time, waste of time etc…What if NASCAR teams took this attitude? Their cars wouldn’t even qualify and have no chance to win the race.
Winning Race teams analyze everything, then fine tune, that’s why they are called winning race teams!
Winning business owners plan, set goals, track results, correct, change, and fine tune their businesses assuring they meet their goals. That’s why they are successful business owners.
By Chriss A. Knisley Sr.
RISCORE's October Recipe for Small Business Success
SCORE Counselor, Wakefield, RI