Most business owners believe they have (or might have) mastery of their business, but let's not just hope, let's make certain that we do!
The first stage in the Mastery region is Financial Mastery. Financial mastery is a skill, capability, and toolset you must have to succeed in your business. This week, your assignment is to ensure that you have the fundamental financial insights into your business to help you make great decisions.
Financial mastery begins with accessing your business financial reports regularly and routinely. You should review three critical financial reports every month: your Profit & Loss Statement (P&L), your Balance Sheet, and your Cash Flow Statement. These three financial documents tell the story about your business. Together, they paint a powerful picture of how well your business is performing, where your opportunities for improvement are hiding, and what the near-term outlook is from a financial perspective. It is critical that you prepare these on a schedule and review them monthly. Are you?
After your monthly financial reports are available, you are in a position to track some Key Indicators of Success. You can pull these important ratios and measures from your financial statements and regularly track them. You not only want to know the state of your business a particular moment in time, but you want to know how your business is doing relative to the past months (or maybe to the same month the prior years). Have you identified your Key Indicators of Success?
A dashboard is the best place to view these Key Indicators of Success–a visible set of graphs that tell a story of the health and trends in your business. You should update your dashboard at least monthly, and it should be much like the dashboard of a car, enabling you to look forward rather than in the rear-view mirror. Your dashboard should include activities not found in your financial statements that reflect your lead generation, lead conversion success rates, and other delivery and customer satisfaction measures. Is your dashboard up and visible? Are you aware of the trends in your business?
Being a successful financial master depends fundamentally on your mindset. You must have the mindset to demand the financial data you need to run your business. How can you know who is winning if you do not know the score? You must review your scorecard regularly and use your scorecard to help you make great decisions in your business. As you gain mastery in this area, you should expect and demand even more. You can gain so much information from your financial business data when you have the necessary systems and processes in place. You can begin looking at the individual profit margins by product or service type, and you can see labor rates, overhead percentages, and many more critical metrics.
Nothing should be a surprise in your business. If you are flying without instruments, it is just a matter of time before you crash. Have you heard this saying? Speed kills. The faster you want to go in your business, the better your set of financial indicators must be. Going fast is good only if you have financial awareness and can interpret your financial dashboard.
During this stage of the race, take time to nail down your financial mastery. Expect and demand the regular reports, graphs, metrics, and indicators that let you race even faster–without the fear of not knowing where you are headed or whether you have enough gas!
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