It’s a given for any growing startup that your numbers are going to look different from month to month. What most CEOs don’t anticipate is that all the planning you did, in the beginning, won’t help you maintain steady cash flow and grow in profitability when those numbers start to fluctuate in ways you never expected.
It’s all too common to plateau and even start to lose money because you’re not growing according to plan, or the opposite problem: you’re growing too quickly and can’t keep up with the volume. Every month the numbers get more unpredictable and chaotic until you call in a business scaling consultant.
I’ve worked with hundreds of companies under 10 Million in revenue; their CEOs seek me out because they’re not scaling as fast as they would like. Once we get to talking about financials, I usually find that they have no process for effectively managing their cash flow and profitability.
Ask yourself the following questions to see if you’re watching your cash flow and profitability closely, or if it’s a blind spot in your business:
- Do you know how to read a P&L and a Balance Sheet?
- Are you reviewing your P&L and Balance Sheet on a regular basis?
- Are you having cash flow and profitability conversations with your executive team or accountant on a regular basis?
- Are you able to spot trends and patterns in your income and expenses?
- Do you have a month/quarterly/yearly profitability goal or target %?
- Do you have monthly/quarterly/yearly revenue targets that are not made up, pie in the sky goals but based on actual sales and marketing metrics and in line with your strategic plan and expected growth?
- Do you know how much cash you want to keep on hand in your operating account as a percentage of monthly expenses?
- Do you have separate business bank accounts to manage how money is allocated for different purposes? For example payroll taxes, savings, profit or distributions, strategic reinvestment.
- Are you making decisions on when to spend or reinvest back into your company based on how much money you have in your bank account or from the money that has been set aside for the purpose of reinvesting back into your business?
These questions just scratch the surface of what a scalable company should have as a foundation for cash flow and profitability management. Managing these two areas is one of the most critical success factors in the long term success or failure of a company. In almost every single successful company I have seen, the internal discipline has been created around cash flow management and profitability.
Can I help you scale this area of your business?
Message me to connect further or book a time with me here www.calendly.com/chriswise/15min to discuss a complimentary scaling strategy session.