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Blind Spot Table of Contents
1. You’ve reached your limit, and you know there’s got to be a better way
The Blind Spot
Most successful entrepreneurs got to where they are by digging in, figuring things out, and learning from their mistakes. Those skills are valuable, but as they say… ‘what got you here, won’t get you there.’
To grow and scale your business, you have to figure out where you and your team’s skills provide the highest value to your business. As your business grows, the demands on your time and energy grow, as well. It’s common in the growth stage to find yourself (and your team) consumed with activities that creep beyond your competency. Your scrappy, get-it-done MO was working until all of a sudden, it wasn’t.
Carrying out roles and responsibilities within your business that don’t match your skills and desires is risky. At worst, it will stall your growth. And at best, it’s boring and unfulfilling for you and your team. If someone else wouldn’t pay you to process payroll, keep the books, design your website, or screen resumes, for example, your business probably shouldn’t be paying you to do those things either.
What You Can Do About It
Your greatest contribution to your business is doing what you are best at and most passionate about. The rest should be handled by an appropriate mix of contractors and employees carrying out clearly defined processes and procedures.
Most entrepreneurs thrive on innovation and the words “processes and procedures” trigger disinterest, even nausea. But there’s good news – just because it needs to be done, doesn’t mean it needs to be done by you. That’s kind of the point of this blind spot.
Many business owners use outsourcing as a solution for handling specialized roles such as process improvement, accounting, marketing, human resources, and technology. Outsourcing can also be an effective solution to temporarily supplement your team, expand your capacity, or find an expert to help with a special project.
Look for ways you can increase efficiency, gain access to new expertise, and optimize your processes. Ask yourself, “Am I the best person for this project or task? Do I enjoy the work involved?”
Based on your findings, brainstorm with your team on ways you can:
- Outsource specific functions
- Automate manual processes
- Leverage existing technology applications
- Research software integrations and solutions
- Clarify roles and responsibilities for your team
These conversations are just half of the equation. The real change–and benefits–come from acting on the decisions you make.
Taking action right now might feel overwhelming. You might be thinking to yourself, “I’ve got more than I can handle on my plate right now, and while all of this sounds great, I don’t have the time or bandwidth.”
The good news–you and your team don’t have to figure it all out on your own.
Schedule an appointment with TDT to learn how outsourcing your accounting efforts and optimizing processes can help you say goodbye to operating reactively with the guidance and support you need to scale faster than ever.
2. Your gut feel for what’s happening in your business is no longer accurate
The Blind Spot
Business owners often have, in their minds, an expectation of what the numbers should be. When the financials don’t reflect their expectations, they assume the financials are wrong.
In some cases, that’s true – transactions haven’t been properly recorded, and adjustments are needed. In other cases, the financials are correct; it’s the calculations in the business owner’s head that don’t account for everything that actually occurred.
As your business grows and scales, you can no longer keep all the financial details in your head. You need accurate, relevant financial reports that provide a clear picture of how your company really makes money. Without this information, you can end up with lots of activity, even high gross revenue, but little profitability.
What You Can Do About It
Almost without exception, a business’s accounting system needs to be restructured to provide more meaningful information. You may have started with a simple chart of accounts, and it’s grown and expanded over time. Or, you may still be using a generic chart of accounts provided by your accounting software. Regardless of how you ended up with your current chart of accounts, it will need to be refined as your business grows.
Your accounting system must be set up to gather information at the appropriate level of detail. It can be tempting to think you know this information in your head, but you really need to capture and analyze the data.
Most accounting systems have features for reporting on profit centers so you can run a Profit & Loss (P&L) for each profit center, in addition to your overall P&L. Accounting by profit center requires some discipline on the front end when entering transactions, but it’s well worth the value of the information you end up with to run your business.
When it comes to expense categories, you need certain categories for your annual tax return. Beyond those accounts, it’s up to you to determine what additional expense categories are relevant to you and your business. It’s important to keep things simple and only get more detailed or granular when you really need the information.
Once you have this information, you can focus on growing the revenue streams that are the most profitable, assessing those that are performing at a mediocre level, and stop wasting energy on those that are not producing.
First, make sure you have accurate, timely financial statements. Then, evaluate what changes would need to be made for those reports to be more helpful and relevant.
Do they show you the critical data you need to make decisions?
Do they provide enough detail? Or go into unnecessary detail in any areas?
Next, create financial reports for:
- Sales mix (by customer, industry, geography, etc.)
- Profit margin by product or service
- P&L by profit center (division, location, etc.)
- Relevant expense categories
Without clear, accurate, and timely financial statements, it can feel like you’re operating in the dark. It’s impossible to know what opportunities you’re missing or what money you’re leaving on the table.
But it is possible to get your financial statements in shape.
Schedule an appointment with TDT to discuss how outsourcing your accounting efforts can help you make decisions with confidence, not overwhelm.
3. You are spending a lot of time putting out fires instead of preventing them
The Blind Spot
As your business grows, you can end up spending a lot of time putting out fires instead of working to prevent them. As you add more people and more activities in your business, it becomes harder to identify the underlying issues. Suddenly, it becomes challenging to tell whether you’re fixing symptoms or fixing the underlying causes.
Have you heard the Parable of the River? It tells of a group of campers settling on a riverbank. One camper notices a baby in the river and immediately jumps in and saves the baby. Then, another camper spots another baby in the river. And another. Then another. The campers frantically rescue as many babies as they can, but there are so many. They know they can’t save them all. At one point, one camper gets out of the river and starts walking upstream. The others are outraged and ask – “Where are you going? Look how busy we are! We need you here!” The camper replies, “I’m going upstream to find who keeps throwing all these babies in the river.”
You certainly have to deal with the acute issues in your business – put out the fires, save the babies, etc.; but you also need a way to prevent, or more quickly detect, future issues.
What You Can Do About It
Identify your upstream issues. Financials report the results of all the activity in your business. Those numbers are certainly important. But they only tell you what has already happened. To impact future results, you must also identify Key Performance Indicators (KPIs) to focus on the activities happening right now.
For example, let’s assume the current fire you’re fighting is a tight cash flow. Your sales are high, your margins are strong, but it takes too long for you to collect payment from your customers.
A common financial metric for monitoring customer collections is Receivable Days (the average number of days it takes your company to collect payment). Let’s assume your Receivable Days is 65. Measuring and monitoring this number won’t change your results. It’s a lagging indicator.
You have to identify the underlying activities (leading indicators) that impact your Receivable Days and measure and monitor those. Maybe it’s taking your team too long to get the customer invoices sent out. Or perhaps the invoices often have mistakes, which lead to customers withholding payment until corrected invoices are issued. There are a number of underlying issues that could be contributing to this problem. You have to identify those underlying activities and then measure and monitor them.
Each business is unique, so it’s important to map out the activities that drive your business and then focus on selecting measures around the most critical activities. Identify your primary goals and challenges, determine the underlying activities, and then start measuring and monitoring those KPIs to improve your future results.
Think about the main areas of your business – finance, operations, customers, and people. What fires are raging? What key goals are you striving to accomplish?
- Determine your underlying activities–think upstream, leading indicators
- Narrow down your KPIs carefully based on the size and culture of your business
- Establish your baseline for those KPIs, and then establish your goals
- Develop a process for continuously measuring and monitoring the KPIs
With Key Performance Indicators (KPIs) actively running at your side, you’re able to reduce and put out those fires that currently fill your time and create roadblocks in your business.
As with any new concept you introduce to your organization, it can take time and some testing to get your KPIs up and running. If you want to speed up the process or want step-by-step guidance to make sure you set up the right metrics, schedule a call with TDT.
Don’t waste any more time feeling stuck and overburdened. Instead, let’s work together to help you scale faster by making informed decisions.
4. You have more cash than you’re used to, and you don’t want to waste it
The Blind Spot
Normally when we talk about cash flow problems, the problem is not enough cash to cover obligations. As your business grows and becomes more profitable, you’ll find yourself with a different problem – excess cash.
Is more money really a problem? It certainly can be. When things are going well, it’s easy for costs to creep in. It’s also easy for inefficient processes to become the status quo. The comfort of excess cash can cause you to undermine your own success.
What You Can Do About It
Use your excess cash as an opportunity to plan for the future. Start by creating a budget so you have a plan for what you’ll do with every dollar you make. We often think of budgets as a tool to help stretch our dollars when things are tight. Budgets can certainly be effective in that case, but ultimately, the purpose of a budget is to create a plan for spending your money – whether you have a lot or a little.
Just because you have plenty of cash doesn’t mean you shouldn’t scrutinize your spending habits and look for opportunities to increase revenue or decrease expenses. As you create your budget, evaluate the profitability of your various products or services, and ensure your marketing budget aligns with promoting those that are most profitable.
Take advantage of business credit cards. Utilizing a credit card for purchases you already make allows you to better control the timing of cash outflows and provides rewards or travel points. Cards have different reward categories, sign-up bonuses, and annual fees. So, it’s important to select the right card for your business. The rewards really do add up, and choosing the right card can make a big impact. For example, when we analyzed the rewards of a small business with annual credit card spending of $1.7 million, we found they could earn $19,000 in rewards with one card and $41,000 with another. By using no card, or the wrong card, you’re leaving money on the table and missing an opportunity to streamline your purchasing processes.
Decide on your goals and design your budget to achieve those goals.
Consider the following questions:
- Are you paying yourself appropriately?
- How much should you set aside for cash reserves?
- How much do you want to invest in research and development?
- How much do you want to contribute to your retirement and/or the retirement of your employees?
- Do you need to add additional employees or outsourced relationships?
- Is your marketing budget strategic and intentional?
- Are you maximizing credit card rewards?
A sound budget helps you stay focused so you can turn excess cash into hardworking dollars, and the right credit card earns more rewards for you to maximize within your business.
But how do you know that you’re setting up the best financial guidelines for your business to follow and that you’re using the best credit card for your business?
Schedule a call with TDT to take the first step. In this time of financial gain, know that your budget is prepared to support your vision and that the credit card you use for business expenses allows you to maximize the most rewards.
5. You have a vision for your future, but you’re not sure if it pencils out
The Blind Spot
You have a clear vision for your business. You have focused strategies to get you there. Or, at least that’s what you hope.
Without crunching the numbers, it’s hard to be confident about whether your strategies will actually get the results you’re planning on. You need financial projections to support your strategy. Otherwise, you’re relying on a strategy of hope. Though it’s a wonderful virtue, hope is not an effective strategy.
What You Can Do About It
Don’t let your planning stop with the strategic plan. Take another step to pencil things out.
Entrepreneurs are often visionaries, and creating financial models to see whether an idea or strategy will work, isn’t usually at the forefront of their minds. But without scenario planning and financial forecasts, you and your team can waste time executing strategies that won’t actually get you closer to your goals.
To reach your goals more quickly, start by making sure they are measurable and time keyed. For example, don’t set a generic goal to increase revenue. Instead, set a goal to increase the average revenue per customer from $1,000 to $3,000 within two years.
Then, brainstorm the various strategies you could employ to achieve that goal. Next, do the math and scrutinize the results.
Do the strategies you’re considering actually get you to your goal? Are your assumptions realistic? Have you accounted for the additional costs required to execute? Have you accounted for the ancillary impact on other aspects of your business?
Scenario planning and forecasting allow you to evaluate your options, predict your results, and determine your best moves. Using these tools in your business will help you meet your goals more quickly.
Start incorporating scenario planning and forecasting in your strategic planning process.
Consider spending time on:
- Revenue growth goals
- Profitability goals
- Cash flow projections
- Expense management
- What-if scenarios
Without proper planning in place, you risk leading in the wrong direction.
Without all of your ducks in a row, it’s easy to rely on your gut instead of numbers. Mistakes can be made, introducing unwelcome financial surprises, and your journey to reaching your goals becomes longer.
Schedule a call with TDT to learn how proactive business scenario planning and forecasting can help you stay focused on your path forward so that when it’s time to make a decision, you’re able to evaluate your options, predict results, and determine your best move.
As a leader, you want to move forward strategically. But after learning about the five common blind spots business owners face, you probably realize that one or more of these obstacles stands in your way.
It’s easy to feel stuck. What worked well in the past no longer produces the results you expect, introducing new issues and stress as you operate in new territory.
Maybe you’ve reached your limit, and you know there’s got to be a better way.
Or your gut feeling for what’s happening in your business is no longer accurate.
You might be spending a lot of time putting out fires instead of preventing them.
Perhaps you have more cash than you’re used to, and you don’t want to waste it.
Or you have a vision for the future, but you’re not sure if it pencils out.
At TDT CPAs and Advisors, we believe businesses should be able to thrive without blind spots holding them back.
No matter what stage of business you’re in–start-up, growth-stage, or maturity–we understand the frustration of facing new challenges when your plate is already packed with responsibilities. That’s why we specialize in working with business owners across the nation to identify the issues they face and offer financial and operational guidance and support to overcome them.
Imagine the blind spots you’ve identified as minor speed bumps instead of road closures blocking your progress. Here’s how we can manage them together:
- Schedule a call with TDT
- Identify your challenges and learn about solutions
- Move forward with confidence
Schedule a call with TDT CPAs and Advisors today. Don’t let lurking blind spots hold you back any longer. Instead, let’s set your business up for faster growth and greater success.