Tuesday, August 31, 2010
Wednesday, August 25, 2010
The ability to take action and self mastery come from within, but the proper tools can come from a good CFO.
Your CFO needs to use tools that:
1. How much cash they will have or need at any point in the future.
2. Allows business owner to choose multiple scenarios to see what can happen if:
* Sales/revenues change up or down.
* Expenses change up or down.
* Inventory changes up or down.
* Debt structure increases or decreases.
* Capital Expenditures increase or decrease.
* Headcounts increase or decrease.
3. Determines optimum inventory levels.
4. Determines optimum timing of making trade and expense payables and determines
how much to pay.
5. Determines a company's ability to make capital expenditures.
6. Determines whether a company should lease or buy capital equipment.
7. Determines when a business owner can retire and still pull out a paycheck from the
8. Determines how much debt you will have at any particular point in time.
9. Determines what the business owner has to do to increase cash flow.
10. Determines Break even points.
11. Determines optimum inventory receipts or manufacturing output.
12. Determines optimum expense levels.
13. Helps develop operating budgets.
14. Helps determine optimum headcount.
15. Assists in determining Business Valuation.
16. Helps Determine key operating metrics.
17. Determines the effect of adding or eliminating a product line or business segment.
18. Determines the effect of adding or eliminating a store location.
With the proper tools from the CFO the tripod of success can be completed and success will be achieved.
Sunday, August 22, 2010
With this difficult economy still continuing, businesses are still looking to cut expenses which is a good thing and cutting expenses should be an ongoing practice no matter what economic condition we find ourselves in. However as this current economic difficulty continues I see businesses now cutting into their advertising and marketing budgets. Like other expenses, a review and analysis of advertising and marketing expenses should be ongoing no matter what economic condition we are in. When this analysis is done and certain advertising is determined to be ineffective then it should be cut. I am fine with that. However, what I am seeing is that business owners are starting to cut more effective advertising and putting off new promotions that they believe will be effective and in my view this should not be done. Cut elsewhere but not advertising and marketing unless said advertising and marketing is determined to be totally ineffective. As a CFO, I am well aware of the risks involved in advertising and marketing. However, I am also aware that businesses owners cannot retreat forever or they will retreat right into bankruptcy court.
I am also well aware that in difficult economic times your most effective form of advertising isn't as effective in difficult economic conditions as it is in peak economic conditions, but it is still your most effective form of advertising and cannot be cut. Making the decision to keep more effective advertising going and making the decision to take on new advertising and marketing opportunities that you believe will work is where the risk of entrepreneurship in its most precious and sacrosanct form comes to the front. This is what separates the good business people from the not so good business people. More importantly this is what separates you from your competitors because your competition is retreating!
When someone either cuts more effective advertising and marketing or passes on a new advertising and marketing idea that they really like, I am reminded about the story of the Hot Dog Vendor.
A Man lived by the side of the road...and sold hot dogs.
He was hard of hearing, so he had no radio. He had trouble with his eyes, so he had no newspaper. But he sold good hot dogs.
He put up a sign on the highway, telling how good they were. He stood by the side of the road and cried, "Buy a hot dog, mister!" And People bought.
He increased his meat and bun order, and he bought a bigger stove to take care of his trade. He got his son home from college to help him. But then something happened. His son said, "Father, haven't you been listening to the radio? There's a big Depression on. The international situation is terrible, and the domestic situation is even worse."
Whereupon the father thought, "Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know." So, the father cut down on the bun order, took down his advertising sign, and no longer bothered to stand on the highway to sell hot dogs.
His hot dog sales fell almost overnight. "You were right, son", the father said to the boy. "We are certainly in the middle of a Great Depression."
If the business is cutting into advertising and marketing because the advertising and marketing is ineffective that is one thing, but if the business is cutting more effective advertising and taking a pass on new advertising and marketing opportunities that they believe will be effective, I think they need to re-think that!
Friday, August 13, 2010
• What if a new hire is only a sub par performer on the job? Here you are risking all this money and the productivity isn’t even there. This employee who you interviewed multiple times and had your current employee’s interview multiple times who all giving this prospective employee rave reviews isn’t working out. Now you have to lay off this employee adding to your unemployment insurance contributions.
• The risk of rising health care costs and the latest health care plan providing much uncertainly among many business leaders and small business entrepreneurs.
• Take a look at existing employees. Can you really afford to have sub par performers?
• The risk of laying off or firing an employee is another burden of having an employee. One never knows when they layoff or fire an employee what legal action awaits. Even if you win the case you lose as you lose the legal costs to defend!
In the final analysis, subcontracting work and responsibilities has got to be a more viable option than ever before. Today’s business owner needs to take a look at this option. Subcontractors can be interchanging movable parts and if they do not work out it is easy to let them go. When you let go a sub contractor there is virtually no risk of legal action especially when compared to the risk of letting go an employee. With subcontractors there are no health costs and no benefits. Keep in mind that I am talking about Sub Contractors, not independent contractors who in the eyes of the taxing authorities could be employees in disguise. Hiring people as independent contractors could get you into a lot of trouble. Subcontractors are real businesses that can do work for you and other customers that needs to be done within your business. Independent contractors are individuals who are looking for work and really do not operate a business in their field and come and go as an employee would. For IRS distinction click here.
A reputable Part Time CFO who is a subcontractor and not an employee or independent contractor can help you assess the risk associated with your current or proposed employees. A good CFO will also help you identify, assess and mitigate other risks in your business.
Sunday, August 8, 2010
Saturday, August 7, 2010
Wednesday, August 4, 2010
Monday, August 2, 2010
Sunday, August 1, 2010
When you are a business owner, risk is all over the place. The critical element that keeps your sanity is your assessment of that risk. What should be going through your mind is whether the risk you are assessing is mild, concerning or severe. Just by opening up for business and putting the lights on there is risk. Every single day you are likely to encounter at least one (likely more than one) of the following risks:
Not Buying Equipment
Not Leasing Equipment
Not purchasing inventory
Not hiring employees
Not incurring debt
Do you see where I am going with this? Every decision you make whether you do something or you do not do something carries risk. This is by no means a complete list! I could go on and on with inventory mix, collections of accounts receivable, choosing suppliers and so on. This is why it is so challenging to be a business owner. This is why it takes a certain mentality, a certain make up and a certain mindset to be a business owner. The job of the business owner and CFO is to assess each and every one of these risks. If the risk is severe or cannot be tolerated then the risk must be mitigated.
Do you see why the business owner needs help with this? Do you see why the Chief Financial Officer can play such an important role no matter what the size of the business is? Even in the smallest of businesses these risks need to be assessed and mitigated if severe.