Your Business Priorities for 2018

Even as we are going through the final rush of this Christmas season, it is time for us to determine our priorities for 2018. In a recent article from CFO magazine, they listed the top priorities of six CFO’s for some fairly large companies. Each of the companies was in a different industry ((the full article is here).

As I was read the article I began to have this gnawing feeling in the pit of my stomach. It came from my realization that even smaller businesses are faced with these same issues but they may not have a CFO to help them. Here are the priorities of CFO’s from some large companies that are helping flush out the plans of their companies. You may not have a CFO to help you, but you should have some priorities. Have you thought about your priorities for 2018? How will you execute them?

How do the priorities for these larger companies translate to smaller local or independent businesses? Below are the priorities from the article. I have tried to distill the meat of the article to a few words followed by my thoughts and some suggestions for the smaller business owners or managers:

Here are the priorities of those CFO’s:

A) Survive Disruption – they were specifically referring to the “Amazon effect” and balancing the disruption that comes with growing against just keeping the lights on.

My thoughts: If you are able to read this, and by that, I mean alive and breathing, then you have experienced the “Amazon Effect”. Lower priced, quicker delivery times, and yes disrupting markets to the point of competitors, large and small alike, closing down. Before Amazon, it was the Walmart effect. The truth is that small and medium businesses have struggles that some large businesses do not. So, keeping the lights, making payroll, etc. are challenges that always have to be weighed against “possible” growth plans.

Do:

  • create a culture where your customer enjoys shopping your business more than surfing Amazon’s website. It is convenient to surf so you have to compete.
  • be unique in your product offering, your service, and the shopping experience you create.
  • make sure they know you are here, what you offer and why you are a better option.
  • create a better shopping experience for them.

Do Not:

  • give up.
  • assume this is a marketing problem. It is much more than that.
  • assume that you can’t compete.
  • Assume that there is nothing unique about your business, or unique enough about your business to make a difference.

B) Raise Prices –  This is self-explanatory

My thoughts: this should be a priority every year. Price increases go straight to the bottom line (a point they make in the article as well).  Seems pretty straightforward, right? Well, not so fast. It doesn’t matter what type of business you are in, your prices are in direct competition with your customers/ clients common sense. If what you raise your prices to is so much that their common sense alarm goes off, your customers are off to surf the web regardless of the customer experience in your business.

Do:

  • raise prices if you can.
  • price “main” products and “supporting” products differently. Go easy on the main, and squeeze a little more out of the supporting products.
  • research what your competitors are charging.
  • keep prices within reason of your competitor’s known prices unless your service is that much better and adds value.

Do not:

  • raise prices across-the-board
  • cave to the pressure at the first complaint that your prices are too high
  • attempt to “gouge” on any items. Your customers will forgive getting charged a little more than your competitor but they will not forgive pricing abuse.
  • keep prices the same year after year.
  • assume that you can bomb a price and make it up in volume.

C)Drive a “Culture of Data” – the essence of the article is referring to leveraging data to create growth.

My Thoughts: This is hard for some businesses or at least part of it is. In this context I want data to be synonymous with information. You can never have too much information unless it paralyzes you. You should make it a point to know your business/market.

Do:

  • be sure that you have systems in place to make sure that you have the information to make informed decisions in your business.
  • make sure you are getting timely and accurate financial statements, including a cash flow forecast.
  • make sure that you stay up on latest trends in your industry
  • make sure that you know what your competitors are doing
  • make sure you know the source of your customers
  • use technology to gain an edge/stay relevant in your industry

Do not: 

  • buy anything that you do not need. In some cases, information can be acquired without investing in technology. Technology can be costly
  • go out and buy the latest in software without doing the proper research
  • buy all the options in software at the outset unless they are absolutely needed and can’t be added later.
  • don’t try to manage the implementation of an IT project by yourself. Your job is running the business, don’t take your eyes off that ball.

 

D) Execute Crisply – what this CFO is talking about is making decisions quickly. They don’t think it is necessary to wait for every fact or figure to make a decision… they are focused on moving away from the paralysis of analysis.

My Thoughts: Every business can learn this. Get the best information available and make the decision. You do not have to have every little tidbit of information, just the important stuff. This company had also pushed decision making down to its senior managers, along with the accountability for those decisions.

Do:

  • get the necessary information to make decisions
  • make decisions timely and decisively
  • make managers responsible for decisions that are consistent with their job titles and capabilities.

Do Not:

  • wait for every little bit of information to come in
  • procrastinate when making decisions
  • spend more time second-guessing decisions than you spend working on execution

E) Increase Margins – this CFO is looking at increasing revenue by introducing different products to her customers.

My Thoughts: Increasing margins is always a great thought. As you know there are two parts to this equation… Revenue and Costs. You may already be focused on this. Or, as I see sometimes, you may be locked into a “we are as tight as we can be” attitude. You might be, but then again, isn’t it worth taking a second look.

Do:

  • increase prices as the market will allow
  • review all vendor relationships, things change and there may be a better option for supply
  • focus on productivity
  • Incentivise your team for productivity gains with shorter-term incentives based on measurable output and/or cost reduction

Do Not:

  • try to simply squeeze the workforce for more productivity.
  • start and stop incentive plans. Have a clear timetable for the beginning and end of incentive plans.
  • change supplies based solely on price. Make sure that you examine the value proposition for all suppliers
  • change prices flatly across the board.
  • make wholesale cuts in cost (usually translated as headcount) without thorough investigation and a well thought out plan

F) Invest for Growth – this CFO is talking about reinvesting in the business in areas that improve their capabilities. They are only willing to do that if they are able to maintain their margins within a targeted range. This kind of a strategy often requires a thorough look at your processes.

My Thoughts: To really invest in growth you have to know your business. Specifically, you need to know what is driving profitability or what is stealing from your profitability.  If you have this luxury, let your managers manage the day to day operations, with some oversight of course. It is hard to have a vision for the future if you cant see out of the foxhole.

Do:

  • examine your business for opportunities to grow.
  • examine processes with an eye toward making changes that can lead to better productivity
  • examine your processes for ways to improve the customer experience
  • invest in those things that will lead to the growth of your customer base or existing customer purchases
  • thorough research before investing. I have seen many examples in my career where simply asking the right questions could have saved a lot of money and remorse.

Do Not:

  • invest without doing the proper analysis – ROI, cash flow projections, etc.
  • simply rely on the justification that managers provide – their view can be influenced by their beliefs
  • not throw money at a problem and expect it to be miraculously fixed.
  • invest in growth that will take you beyond your capabilities. This will lead to disaster
  • INVEST IN GROWTH WITHOUT A NEAR, SHORT AND LONG-TERM PLAN. I think of this as a “One-Three-Five” plan, viewed in terms of years.

As a final note to business owners: It is Ok to ask for help. There are a number professionals that are focused on providing CFO help to small and medium businesses. I know quite a few of them. They may have even shared this blog with you. Make sure you understand how they work, what the cost might be, and what the deliverables are going to be. They should be someone that you feel comfortable sharing important and sometimes personal information.

I hope that you will find this information useful. However, this is not a how-to guide on how to do these things. Many of them you will be able to do on your own if you can make time. The effect of not doing them because you don’t have time is the same as every other reason for not taking action. It can be devastating to your business. Some of you may want to get some help with flushing out these priorities.  A good CFO should be able to help you with these and will give you value that exceeds their cost. CFO’s with a reasonable amount of experience will be able to help with numerous facets of your business. Financial issues for sure but did you know that many CFO’s can shed light on productivity, insurance costs, legal costs, H/R issues, etc.

Feel free to reach out to me at patrick@concepdyn.com with questions or comments. Due to the number of responses, it may not be possible to answer all of them individually but they may be incorporated in a future blog.

Author: Patrick Cowan, CFO

I have over thirty years experience in Finance, Accounting, HR, and Business Management. Most of this has been at the Senior Management and Executive Level. I believe that small ideas can be big winners if the right dynamics are applied.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s