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How To Work “on” Your Business Instead of “in” Your Business

Business team discussing strategic decisions during a meeting in office

When running a business, it’s easy to get caught up in day-to-day tasks. For this reason, many owners find themselves reacting to developments instead of proactively steering their business’s trajectory. If your business has upcoming plans to make major moves, like launching new products or services, hitting significant growth goals, building a sales team, attracting investors, etc., it’s crucial to shift your focus away from daily work and toward your business’s strategy and financials. This way you’ll know whether your business is ready for a major change or if other priorities need to come first.

As a business advisor, I have the opportunity to regularly work with clients who are looking to make new business enhancements. In our conversations, I typically advise them to consider the following steps before making any big strategic decisions.

Craft a cash flow forecast and conduct shock tests.

Based on your current financials, estimate what your cash flow will look like in the near future. Our team typically recommends creating a 24-month cash flow forecast to give you a suitable amount of data and a clearer picture of what your business may look like down the road.

After you’ve created your 24-month cash flow forecast, you can then test that data against a multitude of “what if” scenarios, commonly called shock tests. With thorough analysis and the right reporting tools, you can use shock tests to see how your cash flow may be impacted by certain business changes, such as an acquisition or opening a new office, to better inform your strategic planning and help you make decisions on hiring and capital purchases

Using data to predict how future events may influence your business may seem surreal, but it’s all possible with today’s technology — and many businesses are already taking advantage of it.

Assess your current advisory team.

You can’t manage every aspect of your business’s success on your own. Having the right advisory team in place is essential for making your business’s strategic goals a reality.

For example, if you’re wanting to explore acquisitions as a potential growth strategy, you’re going to need a wide range of expertise on your side to help you determine what company is a good fit and seamlessly close the deal. Do you already have a legal team to assist you through the intricacies of the deal or technology advisors who can tell you which systems integrate well?

There are many key players needed for something like an acquisition, so it’s important to have a deep bench of talent you can tap into when you need them most. If you have in-house teams with the expertise you need to move forward on your goals, great; if not, you may want to hire the advisors you need or consider outsourced help.

Evaluate financial statements for potential opportunities.

When it comes to informing your business’s strategic decisions, turning to your financial statements may not seem like the go-to answer. But financial statements are powerful tools that can provide you with more insights than you may think.

In my engagements with clients, I encourage them to take a closer look at their financial statements to gauge where their business is excelling and where there are opportunities to improve or add value. How are sales performing? Is your cost of goods sold low or high? Does your current target market align with your product or service, or does another make more sense? How is your business performing against your peers in the industry?

This information can help you determine how your business is currently positioned and what changes you need to make to take it where you want it to be.

You’ve put an immense amount of time and effort into your business, so it’s understandable to want to be as involved in it as possible. However, if you have strategic goals on the horizon, you need to entrust your daily work to your team so that you have the capacity to properly plan and execute those goals.

Not sure you have the time or resources to put your daily tasks to the side? Creative Planning Business Services can help. We have a range of business advisory services designed to help businesses reduce risk, maintain compliance and maximize profitability. Contact us today to explore our services and learn more about how we can help you reach your business’s unique goals.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

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