Habits Of High Impact Business Leaders - Focus On Costs, Schedule And Financial Viability

Revenue and profits don't just happen without some very conscious decisions by management

. This process has been labeled by some as "profit engineering," and the same concept applies to a NewCo just building and bring product(s) to market. I am amazed at how many entrepreneurs have no systems for monitoring the health and progress of their new and evolving business.

It is referred by many as "keeping score." In my view it is about more than just keeping score -- it is about driving, managing and maintaining the financial data about the results of your business' operations at every step and stage of the company life to enable you to make informed and timely decisions about the current status and future direction of your business from you very first business plan to on-going operations. Many owners don't know they are headed for trouble until it is too late. Investors and other stakeholders demand accurate snapshots and data even more today than a few years ago; in part, federal laws demand it, and good business practices dictate it.

A report entitled "Why Businesses Fail" was issued many years ago, and it is as true today as then, and the core findings have been repeated over and over in different reports in the past decade. The primary reasons for business failure are:

Inadequate financial planning

Miscalculation of the risk/return tradeoff

Emphasis on sales volume rather than cash flow and return on investment

High fixed costs

High Impact existing company business leaders know the key metrics of their business without having to rely on their CFO or accountants for that information. That is a lesson for NewCo entrepreneurs as well. You need to plan and implement monitoring systems that effectively give you that snapshot of your firm in real-time whether you are in product development or active product-in-market sales mode. Lack of such as system is a keystone for failure, not success. It may be even more critical for established firms launching a new business segment, such as service-centric company building a product for a new market.

Each functional area of the business should have 3-5 such metrics or key indicators. A key indicator is the fact or collection of facts about each of the functions of your business that is or are essential to the success of your business regardless of state or status of the firm, from active and on-going to start-up. Key metrics include, among others, development costs/schedule, product / manufacturing costs, sales costs, project status, hiring costs, and new to the mix, attrition costs. These are but a sample.

Take a close look at your business and identify your metrics. Then track them weekly or even daily if necessary. It's a great way to course correct before you get blindsided by unpleasant trends or negative events. No matter what stage of business you are in, key indicators are something that you should -- must -- identify, implement, and use regularly.

by: Tyrone Grigsby

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