Running a company is a constant source of new challenges. This is true regardless of how successful your company appears from the outside.
Here are five of the top financial leadership lessons for business owners.
1. Know Your Numbers
Know which numbers drive your business and stay on top of those metrics. This could include something as basic as your cash balance in the bank or more complicated calculations and forecasts. Create weekly and monthly scorecards to track those metrics. If you don’t have enough finance background to determine the right metrics for your business and how to track them, engage someone like a part-time CFO who can help you.
2. Be As Open-Book As You Can
Once you know your numbers, the next step is making sure your people know the numbers. By sharing the metrics that drive your growth and profit, you empower your people to improve your company’s performance. And when a company is more successful financially, it can invest in more for its employees. Whether it is expanded benefits, bonuses or office amenities, a more profitable company can do more for its people.
3. Understand What Your Customers Value and Invest in Those Things
This sounds simple. But in the heat of trying to improve your product and service offerings, please customers and grow sales, it is easy to try to please too many different people by trying to build too many different features and services. You can lose sight of what your customers really value and are willing to pay for, which increases your costs by trying to deliver things that customers don’t really want to pay for. Understand what really generates your profit and invest in those areas. Accept mediocrity in areas which don’t matter much to your customers and which don’t drive profit for your business.
4. Employees are Motivated by More Than Money
Many small businesses will struggle financially if they try to offer the same salary levels as larger companies, especially in their early years. However, smaller businesses have other advantages. Before trying to match the salaries of larger companies, consider what other advantages you can offer. One of those advantages is the ability for employees to make an impact. Many employees will buy into a purpose and work incredibly hard for that purpose. They might not buy into you and they definitely won’t buy into the cause of making you money. Your purpose – why you’re working and what you’re working for – must be clear.
5. Be Genuine and Acknowledge Bad News
Expressing genuineness and vulnerability goes a long way toward building trusting relationships. Here’s a great way to lose credibility: Claim things are great all the time. No one expects perfection. It’s better to be realistic and acknowledge wins as well as losses, strengths as well as weaknesses. When you hit an inevitable bump in the road and need to cut spending, lay off staff or take other potentially unpopular actions, your people will be more understanding and supportive if they truly understand the reasons.
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