Is Your Financial Performance Medal Worthy?

 

“Citius – Altius – Fortius” or Faster, Higher, Stronger, it’s the motto of the modern day Olympics. Three words of action, often first taped on a bedroom wall or in a workout room by a young aspiring athlete, with a timeless message that doesn’t expire. Three words and a constant reminder, Your Performance Matters. And, if you want to one day stand on an Olympic podium, you better be working to improve it.

Over the next two weeks we’ll marvel at athletes from all over the world as they run, jump, swim, wrestle, scrum, spike, shoot, row, throw, dive and more; each in their own sport, performing at levels that often leave us, as spectators, speechless. Whether you’re a sports fan or not it is hard not to pull for your country or an athlete delivering a history making performance.

Performance Matters…

In business performance matters too, especially if you’re working to build a long term sustainable company that you one day plan to sell or transition to someone else. Your employees, customers, and vendors are counting on your business to succeed because it impacts their livelihood too.

Olympic Athletes have spent years, sometimes nearly their entire life focused on improving performance. They practice for hours making the smallest of adjustments in their techniques to squeeze a tenth of second off their time, improve the accuracy of shot; get a little better. They measure their progress and set goals for where they plan to be, constantly reaching for that next level of their desired outcomes.

In business one of the key drivers of achieving long term success is producing consistent Financial Performance. That means knowing your numbers and having solid records to back them up. Unfortunately this is an area far too many businesses fail to make a priority. They are unsure of their margins, they aren’t keeping enough money in their business, they don’t project their needs for capital improvements, they have excessive inventory or it is inaccurate, and so on.

M & A Advisors and Business Brokers will tell you that one of the key drivers they use to value a business is its Financial Performance. Companies with a proven track record (Olympic Pun intended) of financial performance are much more valuable than comparable companies with poor record management and planning projections. As a business owner, financially you should be clear on where you started, where you currently are today, and what is realistic for the future.

Which is more likely to succeed?

Would it be realistic for someone who has never trained to wake up one morning and expect to run a marathon that day? No previous record of conditioning, no training, just getting up and attempting to run 26 miles. What percentage would you give this person to even complete the marathon?

What if this same person was training for 3 years and had records that showed not only the dates, but the time and distances of every run? Their records showed where they had forecasted milestones of time and distance and achieved them. The day of the marathon arrives and they not only plan to finish, but give a projected finish time.

Now you not only think they will complete it, but you feel confident in the time it will take!

We hope you are tracking the Financial Performance of your business with a process similar to someone who has been training for 3 years. However, if you think you are somewhere in between the two examples, don’t despair you probably have a lot of company.

Here are a few suggestions for improving your Financial Performance:

• Get Accurate Financials: Balance Sheet, Income Statement, & Cash Flow. Once completed, make sure you understand them.
• Have an audit: Depending on the business and situation, this may be a simple as having a 3rd party review your financials, without doing a formal audit, but it is a way of validating the financial story of your business.
• What are your profit margins, both gross and net? Are they tracking up or down?
• What are your projections for the next 12 months? 2 yrs? 3 yrs?

What about your business? When it comes to tracking the financial performance of your business where do you look first? If it is your business banking account balance, you probably need to spend a little more time working on your Financial Performance.

An outstanding financial performance may never earn you an Olympic medal, but it will help provide you assurance of a fundamentally sound business that can better handle changes in the economy, stability for your employees, and a measurement tool for building a business of value. As always please feel free to leave your thoughts in the space below.

Enjoy the Olympics!

Chris Steinlage Kansas City Business Coach