Avoiding the Pitfalls of Not Having a Financial Plan for the Future
A Financial Strategy That Scales is Essential for Scaling Up
Scaling a business requires a significant amount of cash, which is a challenge many companies face. One common mistake among scaling companies is limiting their financial planning to basic concepts like increasing sales, cutting expenses, and potentially seeking investments. However, it is crucial for these companies to have a forward-thinking financial strategy in place.
Let’s not misunderstand: It’s most likely beneficial to increase sales. It’s crucial to have control over your expenditures. Seeking external funding could potentially bring significant benefits (although that’s a separate topic to discuss). Working towards any of these objectives can enhance your current financial standing. Simply Having money in the bank, however, isn’t enough.
Revamping Your Financial Plan
To begin with, relying on the money in your bank account is not a viable method for expanding your business. While it may be sufficient for meeting your current financial requirements, it is important to consider the implications when you increase production by 2x, 5x, or 10x. Will you have the necessary funds to support the growing demands for supplies, facilities, equipment, machinery, workforce, and distribution? Additionally, it is crucial to baseline projected sales and marketing expenses in order to achieve your desired level of increased sales.
To achieve exponential growth, one must shift their mindset when it comes to planning, production, sales, advertising, and delivery. All of these aspects involve the use of money. Therefore, one must also alter their perspective on managing finances in order to successfully scale up their business. It is not simply about managing cash, but rather having a proactive financial strategy with projected sales, COGS and expenses that give you a roadmap for the future.
A Leadership Gap that Needs to be Addressed
As a certified coach for scaling up, I have noticed a major issue among leaders, which is a lack of financial expertise. In the past, I have emphasized the significance of excellent accounting practices for growing companies. However, having great accounting skills alone is insufficient. While accounting is more focused on tactics, successful scaling companies require leaders with a combination of financial proficiency and visionary thinking. C-level executives are needed to develop a financial plan that aligns with the company’s overall vision, which is a task that most traditional accountants do not provide.
Growing companies require financial experts who understand that strategies and methods that work for smaller companies may not be suitable for a rapidly expanding company. As a specialized coach for scaling businesses, I frequently coach executive leaders and their teams on the significance of hiring the right people for the right job. Finding a proficient individual who can assist in aligning your financial practices and KPI’s with your goals is a significant hurdle in building a strong executive team that can scale your company consistently.
For any company looking to scale, lacking expertise in CFO strategies and practices is a potential pitfall. However, this is just one of the numerous traps that you should be mindful of when planning for the growth of your company. This is why I have authored Avoiding the Growth Traps. This complimentary eBook can assist you in recognizing – and steering clear of – various common errors that growing businesses encounter.
Need help growing your business? With over 35 years of experience and thousands of companies assisted, Chuck Kocher and The Transformation Company can help you scale your business into a truly exceptional business capable of high growth strategies. Businesses are always changing, don’t let yours be left behind. Stand out with our business and executive leadership programs – designed to challenge and improve your business. Your business will thank you for it. Contact me today for a free consultation! 719-339-9505