1
CAPITAL
Does your available capital match your growth? You need to understand the amount of capital that will be needed to fund your growth plans. Do not put revenue forecasts forward without considering the cash needs to fund it. Capital can come from several sources, Sales, banking relationships, investors, and others. Consider your company’s needs to ensure the capital source matches.
2
MARGINS
If your margins are thin your company may not be attractive for investors. Understandably, manufacturing margins are typically in the low double digits but compared to high 80% margins for SAAS companies you might have a tough time getting investors interested. What is your industry benchmark and how do you stack up? What have you done to improve margins? They should be monitored weekly or monthly.
3
SCALABILITY
Without scale you will not be able to get the return necessary for a typical investor as they are not interested in lifestyle businesses. They need to garner a large enough return so that overall their portfolio has the returns necessary to offset risk. A typical VC will look for 7X-15X return over a 5-10 year investment. If your growth and scalability do not line up, you may want to consider alternative funding strategies.
4
BUDGETING/FORCASTING
Budgeting is an outline of the direction management wants to take the company. Forecasting is a report showing whether the company is on or off track to reach budget goals and change based on market conditions. Be extremely realistic with both your budget and forecasts. Professional investors rely heavily on the numbers and if they invest, will hold you accountable to those numbers.
5
CASHFLOW MANAGEMENT
Cashflow should be an entrepreneur’s #1 concern and focus. Cashflow can fluctuate more rapidly than any other financial number and yet is very critical to survival. It should be updated and watched daily or weekly and should forecast as many weeks or months into the future as is necessary to avoid running out of cash. A simple budget should help dictate a rough cashflow and actual numbers updated to determine whether on track or off track.
6
SCORECARD METRICS / KPIs
Key Performance Indicators (KPIs) are good indicators of small slices of a business. Do not base business strategies on any single metric. Use them as indicators toward a wholistic view of the business. Think about being on an island and getting a single report on a weekly basis from your company. What are the most important numbers that tell you how your business is performing? Examples include Gross Profit, Accounts Receivable, Customer Service, Orders Per Day Average, Inventory Turn Time, Billable Hours Per Employee, New Contracts Won, etc. Each KPI should have a goal and each person on the team should be responsible for recording and reporting on at least one KPI.
7
LEADERSHIP
Even though you might have founded the company, recognize that you may not be the person that can take it to the level you wish. Do not let your ego be such that you fail to recognize this fact as you will certainly fail in the long run. Good leadership involves giving clear direction, providing the right tools and resources to staff, setting clear expectations, communicating well, rewarding and recognizing, and much more. There are a couple simple tools to help leaders grow as well as many different leadership training resources.
8
RIGHT PEOPLE, RIGHT SEATS
Having specific core values and/or a culture that you hire and fire around is important to attracting people to your company that will mesh with your existing staff. Investing in your staff by Coaching and Leading will ensure you retain RPRS. If it becomes apparent that they are no longer a fit, make the hard decisions to ensure you have the people with the right skills in the right positions. For example, do not let a relative exist in a position that they are not equipped to handle.
9
ACCOUNTABILITY / EXECUTION
Everyone on the team needs to be held accountable for delivering on their promise of their involvement. Otherwise, you need to find the right person to deliver. This includes yourself. Having a good structure around weekly, quarterly, and annual meetings can lend to accountability and therefore execution.
10
ROLES AND RESPONSIBILITIES
The Entrepreneurial Operating System (EOS) can help you define the roles necessary in your company and identify the right people to fill those roles. Being clear with all staff about their defined high-level roles and responsibilities is important and adds clarity to the entire organization. Having an Accountability Chart or Organization Chart that is shared with staff and updated quarterly can help as well.
11
COMMUNICATON PROCESS
How often do meetings happen? Are they the same time, same day, each week? Do they start and end on time? How are decisions communicated to the rest of the company? Are we clear and concise? Again, EOS helps here by providing a structure for informative and accountable meetings and the documentation and follow-up of those meetings.
12
EMPLOYEE FEEDBACK
There should be constant communication between you and your employees. People tend to focus too much on annual reviews while an annual should primarily be used to discuss compensation. Employees should always be aware of what their tasks are and how they are doing on a consistent basis. A weekly or bi-weekly 1 on 1 is a great place to start and a simple agenda of 1) What’s working, 2) What’s not, 3) How can I help, can go along ways.
13
PROCESS(ES)
When a Founder starts their company, they can be successful flying by the seat of their pants. As they grow, they need to create processes and align the people to perform and follow those processes. These processes need to be documented at a high level and followed by all people in the organization. When a KPI goes off track, it can often be that a process was broken. Many companies fail because they do not implement processes as they grow, and havoc ensues.
14
ISSUE SOLVING
Solve issues when they arise and solves them equitably. Do not let any issues fester as the result will always be worse than if addressed when they appear. Employees will lose faith in management if the same issues arise and are never dealt with. They also need an environment where they can bring issues to the table in a safe environment, with the goal of bettering the whole.
15
MEETING EFFECTIVENESS
No one likes meeting for meeting’s sake. Effective meetings are well organized, follow a set pattern, and are documented and hold people accountable for deliverables. EOS can help here tremendously. Ensuring that the right people are in the room for a meeting, that there is a clearly stated reason for the meeting, following an agenda, and re-capping to-dos and takeaways before adjourning can help.
16
STRATEGY
Having a clear strategy is important to reaching goals. If you are walking through the forest without a map or GPS, you could walk for days and be going in a circle. But if you stop every so often to climb a tree and look for your destination, you can recalibrate and make better headway. The same applies to business and assists in creating a good strategy that involves your team, setting long term goals, and then pausing to get yourself out of the business to look at your progress and ensure you are still tracking to reach your goals.
17
ACCESS TO COACHING/MENTORSHIP/NETWORK
There is nothing better than being able to get help and advice from people that have been there before you. It is easy to be aware of what you know, it is a little harder to be aware of what you don’t know, but it is near impossible to be aware of what you don’t know that you don’t know. This is where advisors become invaluable.
18
MARKET SIZE/DEFINED TARGET MARKET
Make sure to identify a market that you will actually do business in. Do not portend to have market potential for your company that is a superset of the market you can actually serve. Investors will look at that as a negative when they are trying to understand your business potential. Market Size also lends to Scalability as the two are closely connected.
19
COMPETITIVE ADVANTAGE/DIFFERENTIATION
Be very realistic here. Do not fool yourself by convincing yourself of false advantages. You will fail if your differentiators are not real. Figure out what makes your company unique by asking your team, your customers, and possibly the market. Make sure that your marketing speaks to these uniques so that all potential customers know why they should do business with you.
20
CUSTOMER SATISFACTION MEASUREMENT
Make sure you understand what the customer actually values and not what you “think” the customer values. This might give you a false indication of customer satisfaction. Determine the correct way to ask them whether they are satisfied, and whether they would recommend your company. Use this feedback as training for staff. And remember, a customer will just leave you for your competitor. They typically will not let you know “why” they have left.
