Business Financial Planning

The Goal

It’s amazing how deeply ingrained those things are that we’ve been told and practiced, but never spent the time to think about on our own. Don’t give the answers, just ask the questions!…that is how to peal away the wrong ingrained thing. This is true when people are asked what is the goal of their business. The true goal is to “make money” period! You notice I said “make money” and that does not necessarily equate to profit although profit is one way that it is measured. For instance, if the Salvation Army does not “make money”, it would not be able to finance its activities. You can express the goal to “make money” in different ways. How can you express “make money” in terms that fit your business model?

Productivity is meaningless unless you know what your goal is. Every action that does not bring the company closer to its goal is not productive. Doing work and making money are not the same thing. Not all work leads to making money. Making an employee work and profiting from that work are two different things. The manager’s duty is to change the goal financial terms into measurements which express the goal thereby permitting the development of operational rules (KPIs) for running their business area. The manager then leads the team to achieve the KPIs. If the goals for the company are not met, then the core problem in why the business in not meeting its goals must be found and corrected. By core problem, I mean the root that causes the bad effects…not just prioritizing the bad effects, it’s identifying what causes them.  The real constraints may be policies on how to run/stock/schedule a workstation.

ALL BUSINESS IS RISK VERSUS REWARD! The financial planning process will help you assess both. For instance, when it is used as a budget, it can be compared to future actual results.  A GOOD PLAN CAN MINIMIZE COSTLY MISTAKES!  It is important to understand where YOUR money will be allocated & where it will come from…capital diversification of your most important resource…CASH.

Why not just leave the budget planning to the accountant to put it together and monitor?  Well, key input information can only be provided by owners and only owners can evaluate the benchmark variances that will occur when tracking the progress. Check out the Accounting For Managers workshop event on http://www.smallbusinessthoughts.com that details the seven business owner/manager data input areas needed to accurately put together a company financial plan. There are a lot of reasons why you need to participate but the bottom line on why to draft a financial plan for your business is that it will help you figure out how much money you have, how much you need to spend, and how much you need to bring in to meet business goals. But there are other reasons, too. Bankers and other financiers may want to see a budget when you ask for a loan. Employees should also be privy to the plan so that they understand where the business is going and are motivated to work harder. It would be stupid not to share this with employees. Everybody should know what the goal of the company is. It’s a group goal. Don’t expect your staff to meet your goals if they don’t know what they are.

No matter how you define leadership, we say it’s largely dependent on a single key skill: mastering planning enrollment conversations. By the way, enrollment is not about convincing, manipulating, and persuading others. It’s the total opposite. Consider this: you’ve successfully enrolled someone in your strategic plan or vision when you generate a possibility in their listening such that they see or recognize that possibility for themselves. A leader’s sole purpose is to realize a future that was not predictable or going to happen anyway. That’s where management stops and leadership starts. Your main focus should be on getting your team aligned and inspiring coordinated actions throughout your company. To do that, you continuously must have conversations with various business stakeholders each and every day. And each of your interactions will collectively determine the ultimate success you experience as a leader.

Do you think this kind of leadership skill is missing as the real-time strategic plan gets distributed throughout your organization? Imagine what would be possible if your key business leaders invested time to enroll their team in the vision behind the strategic plan (the future they are looking to fulfill ) as opposed to mandating a step-by-step execution plan? If you want people to get on board with your vision, you’re going to need to involve them in the process and enroll them in that future. This small tweak will be a game-changer when it comes to effectively planning for your company’s ultimate performance. View some of the great free business videos.

There is an old business adage that says, “Look at the budget to see the vision of the company.”

Copyright ©John Trenary 2020

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