Most business owners believe they have Mastery of their business, but let’s not just “hope”, let’s make certain that we do!
The first stage in the Mastery region is FINANCIAL MASTERY. Financial mastery is one of the skills, capabilities and toolsets you must have in your business to be successful. This week, your assignment is to be certain that you have the fundamental financial insights into your business to help you make great decisions.
Financial Mastery begins with having access to your business financial reports on a regular and timely basis. You should be reviewing three critical financial reports on a monthly basis – your Profit & Loss Statement (P&L), your Balance Sheet and your Cash Flow Statement. These three financial documents will tell the story about your business. Together they paint a powerful picture of how well your business is performing, where your opportunities for improvement are hiding and what the near term future outlook is from a financial perspective. It is critical that you are having these prepared on a timely basis and are reviewing them monthly. Are you?
Once you have your monthly financial reports available, you are in a position to track some Key Indicators of Success. These are important ratios and measures that you can lift from your financial statements and track on a regular basis. You not only want to know where your business is at a particular snapshot in time, but you want to know how your business is doing relative to the past months – perhaps even to the same month the prior years. Have you identified your Key Indicators of Success?
These Key Indicators of Success are best viewed on a Dashboard – a visible set of graphs that tell a story of the health and trends in your business. Your dashboard should be updated at least monthly and should be much like the dashboard of a car – allowing you to look forward rather than in the rear-view mirror. Included in your dashboard should be activities that are not found in your financial statements, but rather reflect your lead generation and lead conversion success rates as well as other delivery and customer satisfaction measures. Is your Dashboard up and visible? Are you aware of the trends in your business?
Being successful in Financial Mastery is a great deal about your mindset. You must have the mindset to demand that you have the financial data you need to run your business. How can you know who is winning if you do not know the score? You must be looking at your scorecard on a regular basis and using your scorecard to help you make great decisions in your business. As you gain mastery in this area, you will expect and demand even more. There is so much that can be gained from the financial data in your business once you have the necessary systems and processes in place. You can begin looking at the individual profit margins by product or service type, you can see labor rates and overhead percentages – and many more critical metrics.
Nothing should be a surprise in your business. If you are flying without instruments it is just a matter of time before you crash. There is a saying that “speed kills”. The faster you want to go in your business, the better set of financial indicators you must have. Going fast is good only if you have the financial awareness and can read the financial dashboard.
During this stage of the race, take time to nail down your Financial Mastery. Expect and demand the regular reports, graphs, metrics and indicators that will let you race even faster – without the fear of not knowing where you are headed or whether you have enough gas!