ELEVATE YOUR BUSINESS'S GROWTH POTENTIAL WITH A FRACTIONAL CFO

Navigating Business Growth with Strategic Financial Planning

Scaling a business requires more than sheer determination. Ultimately, your success at elevating your company’s growth potential demands strategic planning and hinges on three crucial pillars:

1. A Culture Anchored in Your Vision and Values: Your company’s culture should be in sync with your vision and values. If your employees don’t resonate with your culture, you might experience high staff turnover, leading to increased recruitment and training costs. This can be a recurrent expense on your profit & loss statements. Low morale can also affect productivity, leading to extended project timelines and reduced billable hours, impacting your revenue.

2. Optimal Resources: Having the right staffing and efficient systems and procedures is vital. Over-staffing can result in higher payroll expenses relative to the revenue generated by a project, while Under-staffing can lead to increased overtime costs and potential penalties or refunds for delayed deliveries, all of which negatively affect your profit margins.

3. Aligned Business Finances: The financial aspect of your business is the culmination of all your actions and strategies. It’s the canvas where every element of your business reveals its impact. Consider the following scenarios:

• If your company is using outdated software, tasks will take longer than they should, resulting in higher man-hour costs. Frequent system downtimes or manual errors due to inefficient systems could lead to increased operational expenses without a corresponding rise in revenue.
• Misjudging manpower needs can also impact your financial metrics. Billing a client for more hours than necessary can lead to disputes or contract termination, causing a sudden drop in revenue. On the manpower side, initial understaffing can result in higher wage expenses and project inefficiencies, leading to potential delays and reduced profitability.

Dysfunctions, when they occur, should prompt a careful review of your financial metrics, highlighting areas that need attention and rectification to clear the path for company growth.

How to Position Your Company for Financial Growth

Want to make sure that your company can withstand a growth spurt? Review your 10 financial numbers that every CEO should know and ensure that they confidently predict two things:

• Profitability: Businesses exist to produce a profit. The profit margin is a tried-and-true measure of your growth pace.

When forecasting profitability, the best place to start is an analysis your position. Compare your current metrics against industry benchmarks, as well as against the metrics you were trying to achieve.

Note: Your aspirational metrics and industry benchmarks might be different. For instance, if your goal is to be disruptive, your metrics and KPIs should reflect your unique approach and not be aligned with industry benchmarks.

At Evolve CFO Services, we start this analysis with the Breakthrough Financial Roadmap, an analytical tool that compares a company’s current financials with industry metrics. This assessment helps business owners keep track of operational expenses and confidently manage cash flow.

• Cash Flow or Accessible Financing: Growing your business will require investment. How will you pay for your growth plans?

Start by assessing your existing financials in relation to all aspects of your business. Include areas such as vision and values, systems and procedures, human resources, technology resources, etc.

Then, formulate a financial projection starting from where you are today. Factor in all variables, including changes that are planned, when those changes will happen, projected metrics at various stages, bottom-line impact, and the need for cash.

You will likely determine that you’ll need financing to pay for your improvements and investments. If that’s the case, identify the optimal source of financing. Choices may include venture capital, a business partnership, or savings set aside for this purpose. Establish a clear intention and strategy for this financial infusion.

Craft a Financial Strategic Plan to Guide Business Growth

Your final step is to capture your ideas in a financial strategic plan. Just as builders use blueprints to guide their efforts when erecting buildings, a financial strategic plan is the blueprint for your business growth. It outlines the vision and measures progress against benchmarks.

At Evolve CFO Services, we use the following steps when crafting financial strategic plans for clients:

• Analyze revenue streams and identify necessary shifts.
• Calculate Cost of Goods Sold and personnel costs (direct and external).
• Predict net profit and cash flow scenarios. To protect your company’s stability and survival, it’s critical to understand the ebb and flow of cash during growth stages.
• Integrate a financial forecast into the strategic plan. This plan evaluates every aspect of the business against industry standards.
• Ensure that the strategic plan identifies tangible metrics for every milestone. Compare your metrics against industry benchmarks, as well as the specific targets you set.

Business changes quickly, which means a 5-year forecast may seem too far out. However, you should be forecasting at least 3 years in advance so that you may anticipate the company’s growth trajectory and properly prepare for upcoming changes.

Paving the Way for Your Vision of Growth

At Evolve CFO Services, our approach is built on the goal of guiding our clients towards their unique growth objectives. Your company’s vision is your compass. Whether your vision entails rapid, exponential expansion or a more gradual ascent, the crucial element is a well-crafted strategic plan supported by a robust financial forecast, both of which are essential in charting your course to success. When you’re deeply committed to scaling your business, it’s essential to recognize that the strategies that brought you to your current position may need to evolve. Embrace the philosophy that “What got you here can’t get you there,” and leverage your strategic financial plan to illuminate the path to your company’s next phase.