As a business owner, you're the chief architect of your company's culture.

And it's probably the thing you've put the least amount of time and energy into developing.

For many owners I know, culture isn't one of their top priorities despite the fact that "people issues" take up a considerable amount of their time.

Thankfully, it's never too early and you're never too small to be purposeful about designing your company's culture.

Even small teams and solopreneurs have challenges because humans are humans.

If we agree that culture is the combination of shared beliefs and behaviors about how owners, managers, and employees interact and make decisions, then we can understand how important culture is to the success of our company.

And we can get intentional about

• WHAT our purpose and values are
• WHO shares a commitment to our purpose and alignment with our beliefs
• HOW we want those people to work together
• WHAT we’re going to do to create an environment where everyone can do their best as individual performers and as a team

It all starts with you.

1. Start with the core: get super clear about your purpose and make sure anyone working with you knows

• Why you exist
• Who you serve and how you serve them
• Your vision for the impact your business will have in the world
• The values you think are most important when making business decisions and choosing how to act
• What it looks like when your living your values

Rachel D'Souza Siebert normalized bringing her kids to work meetings and events from the very beginning. As her team grew, so did this practice. If you do work with Gladiator Consulting as a client, employee or contractor, don’t be surprised if some small co-workers join your next Zoom call.

2. Be clear about who does what and how: explicitly communicate (in writing and through direct conversation, training and coaching)

• Your expectations regarding core competencies, responsibilities and expectations for specific jobs and roles in your company
• Document your processes so everyone can follow standard operating procedures
• Use tools like peer agreements and team charters to make working norms explicit and clear
• Overshare. Don't hoard information or share on a need to know basis.

Stephanie Haenchen has a mix of seasoned and young professionals on her team. Her focus has been on clearly communicating the core competencies everyone needs to demonstrate and providing coaching, technology and documented SOPs to support them in working optimally with each other and on behalf of Pace Marketing’s clients.

3. Get to know your people: In addition to technical skills, professional experience, and unique talents, employees and contractors have hopes and dreams, as well as wounds, fears, and basic emotional needs.

• Find out what people care about, what drives them, and what inspires them
• Understand what they want to learn, how they learn best, and the ways they want to grow
• Ask how people want to receive feedback and be recognized for their contributions and accomplishments

Amy Mills is heiress to the legendary 17th Street Barbecue legacy. With two restaurants, a factory, catering, mail order, and new cafe operations to lead, she knows her company is only as strong as her team. When we started working together one of the many things we did was facilitate a conversation with her leadership team about vision and values. They set ambitious 5-year goals that have helped energize the team after a very hard two years dealing with COVID’s impact on the business.

4. Make the "people piece" a priority: Managing people can't be an ancillary activity. People are the heart of your business and need to be treated accordingly.

• Set annual goals for everyone on your team - including yourself
• Schedule regular meetings (bi-monthly or quarterly) to have 1:1s with each person on your team
• Have weekly team meetings - with agendas - to maintain clarity and open lines of communication
• Use communication tools like Slack and/or project management tools like Asana to improve work flow and communication
• Expect to spend the majority of your time providing the people on your team with the guidance, coaching, training, and support they need to perform at their best so your company can grow and be sustainably profitable

Having doubled the size of Roanoke Construction, Kevin Buchek and Mike Duffy found themselves with exponentially more people needing their time and attention. This year has been about investing in their infrastructure through a combination of a mission/vision/values reset, process and procedure documentation, improved use of technology, core competencies alignment, and intentional career pathing to empower their team to work toward common goals as efficiently and collaboratively as possible.

I've lost my car in a parking lot.

I've tried to open the door of a car that wasn't mine.

Each time this happens, it’s because I've failed to pay attention to what was going on around me.

Situational awareness is an underrated and hugely important skill  - especially in a world of distractions.

It allows you to find your car after exiting a store.

And stay safe when walking from the store to the car.

It also allows you to make meaning out of what you're observing and predict what might happen next. 

Psychologist Mica Endsley developed a situational awareness model that explains how we perceive what's going on, make meaning of that information, and then anticipate what will happen next so we can make decisions and take action.

Situational awareness is a common term and concept in the military where honing these skills can mean the difference between life and death.

It's much less common in business circles. We may talk about running scenarios and strategic planning, but we also rely heavily on dashboard metrics that often tell us about what happened (past tense) using lagging indicators. We're not often challenged to make real-time observations, predictions, and decisions unless we're in crisis.

What if you, your leadership team, and your staff all honed your own situational awareness skills and applied them on a daily basis? What would that mean?

First, we all have to agree on what deserves our attention.

What is our situation and what does it mean to be aware? That starts with everyone having a common understanding of the company's purpose, vision, values, and current strategic priorities.

This information alone should give most employees the context they need to make real-time decisions aligned with company goals and culture.

Add this shared context and clarity about one's individual role in achieving company goals to the regular practice of noticing what is happening around them (internal and external to the organization and industry) and you enhance everyone's ability to avoid mistakes, reduce rework, improve efficiency, lower costs, control financial and reputational risk, and to head off potential problems before they occur.

For leaders, it's especially important to hone your situational awareness so you can make meaning out of all the data that's available and use it to make decisions and take action. Making decisions and directing your team on how to take action is your primary job. The better you get at cultivating your future-focus by being intensely aware of what's going on in the present the more likely it is that you're company will be prepared to create opportunities while your competitors react to disruptions and crises.

Situational awareness requires ongoing practice.

You can start by doing the following:

1. Noticing - Make it a regular happen to ask yourself "what's going on here?" Things aren't always what they seem and without getting properly oriented to your surroundings you might try to solve the wrong problem.
2. Grappling - This requires you to wrestle with the information you're receiving and what your analysis is telling you about what might happen next or what you can create moving forward. This is where thinking is doing.
3. Predicting - The idea of prediction puts business owners in the role of creator vs. problem solver. Run the scenarios. Which one do you prefer? What future do you desire and are willing to create? What decisions and actions will that require?
4. Deciding - Action that occurs without intentional decision making obscures what we believe to be true about the situation, what decision is underlying the action, or what decision the action implies. Without focused attention on decision making, you may fail to decide or act, act without intention, or act without first considering what unintended consequences may occur. Make a clear decision and provide the rationale for that choice. Then share it with your team.
5. Acting - Now everyone has the clarity they need to act in focused, purposeful ways to produce the results you desire. These actions will change the situation in some way. As a result, your situational awareness will change too.
6. Reassessing - Your actions have changed the situation, so it's time to reassess. What changes do you notice? What new meaning and understanding do you have? What are you noticing?

Repeat.

Now, where's my car?

Change is constant, so it should be no surprise that despite your best efforts to predict the future, things aren't going exactly as planned.  I'm sure something has/is happening in Q1 that you had not anticipated.

Since we can't stop change, we have to look at how best to manage our reactions to it. Planning gives us an anchor, a touchstone to come back to that reminds us of what we hope to accomplish even if the methods need to change due to new circumstances and conditions.

Perhaps your Q1 brought a slew of new qualified leads and new business. This may have accelerated your plans to add staff or technology and tabled some of your prospecting and marketing efforts.

Or maybe supply chain slow downs are making it hard to hit fulfillment goals and you are spending more time on client relationship management and procurement at the expense of documenting policies and procedures.

Most of us would think of scenario A as a "good" change in plans and scenario B as a "bad" one. In fact, they're neither good nor bad, they’re simply the circumstances at hand.

Both create disruptions.

Both can take focus off the areas of your business where you have determined need attention.

Both can distract you for longer term goals if you let them.

I can't tell you how many times I've heard, "we had a marketing and sales plan but then we got a new client and it got tabled." I hear this when the owner is now looking at an empty prospect pipeline and wishes they hadn't put off business development efforts yet again.

Or I talk to an owner when a crises like supply change delays is resolved and how they have to ramp up operations to manage a backlog of work only to find that their imperfect, idiosyncratic processes and workflows are causing the same old problems now at a larger scale.

Changes in circumstances may alter how your plan is executed. But it can’t be an excuse to throw your plan out the window.

Because change can also create opportunities.

Cue your creativity: You’ve been handed a great opportunity to use your plan as a lens for shaping your response to change and a guide for creating new paths forward.

As you wrap up Q1 it's a great time to revisit your goals and update your plan based on real-time information.

• Acknowledge how the unforeseeable is impacting business as usual and decide how best to leverage the circumstances to stay aligned to your vision.
• Focus on the things you can control.
• Stay committed to projects you know will make your business stronger and more profitable over time.
• Bring together your trusted staff and advisors to give you new perspectives.
• Give yourself and others grace.
• Slow is better than stopped.

Remember, your job as owner is to see beyond and motivate an aligned team toward a shared vision. That can be harder to do when things aren't going as planned.

But it's not impossible.

Stay the course.

..well it turns out to have been a popular topic and one worth revisiting.

For their February issue, the St. Louis Small Business Monthly asked me to share my thoughts on the biggest challenges business owners face and to offer my best advice for owners.

TL;DR

I think the biggest challenge business owners face is clarity - getting clear about what they’re building, what the business needs to do for them and their family/community, and communicating that vision to their team.

So many other challenges in finance, sales, marketing, operations, personnel, can be traced back to the lack of a clear vision that aligns people toward a common purpose and defined business outcomes.

My best advice: take time to plan and work on your business. Invest in becoming a better leader so the you can give your people the vision, inspiration, support, and resources they need to do great things.

So many business challenges/roadblocks are predicable. That’s why I wanted to give owners a resource that not only lays out what they are but offers practical strategies to overcome what is in your way. You can download the full article here to help you start moving obstacles out of your way to clear the path to sustainable growth.

The other day my client said they didn't see the need to meet about sales strategy.

I chuckled. But they weren’t kidding.

From their perspective the two lead sales people (the owners) were aligned in their approach and since the lead generation/qualification process was so fluid and unpredictable, they saw no point in reading the other management team members into their thinking.

There are lots of reasons I think this is a bad idea.

Which is why I thought they were joking.

To start with, these plans and ideas about which the owners are aligned only exist in one place.

Their heads.

And although they may seem to share a brain, they don't.

It's not like their business development activities don't impact other members of the leadership team and staff. Other people are brought into the process all the time. It's on a case-by-case basis, without any understanding of the unspoken, unwritten plan for how this one opportunity might fit together with current and future projects, sales goals, or desired customer mix.

Not to mention, because the opportunities are coming from far and wide, it's nearly impossible to play out all the scenarios in your head and know which ones are truly aligned with current revenue and profitability goals. Depending on which ones come to fruition, it could mean very different growth trajectories.

Fundamentally, it goes back to the owners defining what long-term revenue and profitability goals they want to achieve AND how they will achieve them. The decision about HOW to achieve your goals in STRATEGY. Or as stated in Good Strategy, Bad Strategy, "strategy is a cohesive response [plausible and feasible immediate actions] to an important challenge."

A clear picture of success - which itself can and usually does change in some ways over time - includes ideas about things like your product and service mix, customer types, geography served, and staffing. These ideas hinge on defining what an ideal client looks like, the criteria for new product and service development, who/what opportunities are a "good fit" , what different growth scenarios will require in terms of adding staff and other resources, and which of those paths you're willing to take at this time.

You can't possibly keep all of that in your head!

Nor can you expect the other people on your team to be able to contribute their best work to achieving your business goals without clarity about where you're headed, the analysis you've done, the decisions you've made, and the variables at play.

Whether it's your overall vision for your company, specific ideas about how to increase sales, or what new products to develop, in most cases the hard work is usually already done. You've already thought it all through.

Now you have to put it down on paper. Then share it with and be open to feedback from your team.

One reason you might be hesitating to put your thoughts on paper is because you feel like it commits you to one path and one path only.

The act of writing things down doesn't tie your hands. It frees your mind.

It captures your best thinking, decisions, and strategic next steps based on what you know today. This includes the other options or scenarios that exist and either why you haven't chosen them or what it will require for you to choose them (pivot) as you move forward. This then gives you a filter through which to make decisions as new information becomes available. You always get to choose how to build the business that fulfills your dreams and desires.

Perhaps you’re resistant to writing things down because you believe your ideas are hard to explain.

Don't worry about making sense in your first draft. Get it on paper then edit and rearrange. Fill in the blanks. See where more thinking is needed or a key decision needs to be made. Make sure your "if this, then that" train of thought is on track.

If it's too vague to explain, more thought is needed. Probably with a trusted team member or advisor.

If it's just too complicated to write down, it's probably too complicated to actually do.

The other reason I often hear is that people don't want to slow down to write a plan. They don't have time. There are too many things to do.

It's hard to know if what you and your team are doing is impactful if you don't have a shared understanding of what you're trying to accomplish. Many busy people have exhausted themselves treading water, going down rabbit holes, and chasing shiny objects.

Planning IS doing.

Ready to give this a try?

Get started by:

• Having someone interview you and write up your responses, then you can edit and refine
• Using a whiteboard exercise to get your ideas out of your head before you start writing or typing
• Grabbing a notebook and writing whatever comes to mind
• Using voice to text to dictate your ideas
• Recording team meetings where you're talking about strategy and have them transcribed
• Engaging a professional facilitator to help you arrange your thoughts and align your team

Did you know, that most small business owners ask for help with:

• Startup and formation
• Navigating government regulations
• Access to capital

And the most commonly offered business services by coaches, consultants, and entrepreneur support organizations are:

• Business planning
• Marketing assistance
• Understanding financials
• Accessing capital

The two are seemingly not quite aligned. Why?

Getting and giving business owners what they want and need is hard. Because it’s complicated. What we need and what we want are often different things in life and in business. In my experience, the most successful business owners are open to new ideas, willing to test their assumptions, and willing to listen to experienced advisors.

Formation: Why It’s More Than Checking Boxes

When starting up, the business owner has an idea, something they love to do, a valuable product or service that others want, a vision for the company they want to build.

Yet, incorporating, getting a name, EIN, tax registration, business license, professional license, and so on are necessary but uninteresting. These are often time-consuming parts of the process. People can get distracted and discouraged before doing all that’s required. Or they make choices that are not well researched on the front end when caught up in the excitement of getting started. Worse yet is that, even with assistance, there are still way too many agencies, offices, and decision-making points to make the process easy or convenient.

Often, the mechanics of formation, registration, licensure, and certification, while tedious and unnecessarily complicated by bureaucracy, are not what will ultimately help the small business owner succeed. Ideally, we would restructure the legal, regulatory, and compliance processes to be streamlined and efficient, available from centralized locations that make additional technical assistance unnecessary.

If business owners don’t have to worry about those foundational pieces, their time and energy can be refocused on planning and processes—the real keys to success.

This leads us to the broader concept of what it means to assist someone with starting a business. Formation and compliance are one thing. Business model validation and planning are another. And those of us in the business of providing coaching and advisory services know that we can help clients improve their likelihood for success if we help business owners avoid common pitfalls when starting a new venture.

It’s All About Your Plan—Yes, You Need A Plan

As a strategic advisor, I consider business planning, marketing strategy, and financial management to be essential components of starting up, formation, and capital preparedness. My job is to help founders and owners do small, fast, inexpensive experiments to test their business ideas. Essentially, we work together to help them de-risk their venture as much as possible and position them to make good choices as they grow and build.

In practical terms, the goal is to avoid things like launching a new product that no one wants to buy, getting stuck with a lease they can’t afford, or offering services that cost more to provide than they can charge. That requires planning and financial projections. That initially slows things down so they can move faster later.

This can be frustrating for business owners who sought help so they could move faster. They can become discouraged when the process of starting and running their own business is harder and more complicated than they expected. Some look for shortcuts. Others expect to be the exception to the rule. They will point to lots of people who (as far as they can tell) didn’t have a plan and are successful. They will ask what is absolutely necessary vs. nice to have/do.

Honestly, some people can get by with less planning and preparation. That’s because the system is designed to unfairly favor those who start with more experience and resources (education, relationships, networks, money). They will recover faster from mistakes, setbacks will be less devastating, and failures will seed new beginnings.

For the rest of us—especially women and BIPOC owners—service providers, coaches, and consultants are trying to close the experience, capital, wealth, relationship, and knowledge gaps so our clients can have a fighting chance beyond formation. We know clients need more than checklists and money. Preparedness is the key differentiator and sometimes the best and only tool available.

Money Matters: How You Manage It As Well As How Much You Have

Money. All business owners want more money. Fast, easy, free, money.

The thing is, not everyone needs more capital. You may need tighter controls on cash flow management, a line of credit, and/or a better marketing and sales strategy.

For those who do need capital, that typically means a loan. There are very few grants for small businesses and in order for a business advisor, coach, or assistance provider to help you access market-rate capital, you need to be prepared. Most money isn’t easy, fast, or free to obtain.

Some of us are actively working to create new capital products like low and no-interest loans, grants, friends and family funds, mutual aid programs, and microloans. Others try to help owners explore earned revenue options to finance their growth. Hence, marketing strategies are one of the main points of discussion. Programs designed to increase the capacity of small businesses to price, market, and sell their products and services are a direct response to the desire of most business owners to access capital and the reality that most won’t qualify to do so. Helping you be better at managing cash flow and marketing and selling your product/service may be the best way an advisor can help you grow.

As for accessing the capital that exists—loans, investments, and a small number of grants—it requires business owners to be prepared to compete for and obtain that funding. Access to capital isn’t an introduction or application. It’s a process.

Accessing capital = relationships and preparedness.

Preparedness = having a plan and understanding your financials, knowing what you need, what capital is available, and the terms and conditions for getting it.

Obtaining capital = demonstrating that you know how to use the money to make more (or at least pay it back), jumping through hoops, and playing the game.

Using capital = investing in people, technology, systems, professional services, etc. that will help you make more money.

The keys to unlocking capital include business planning and understanding your financials, and the ability to communicate that knowledge to others the way they want to hear it. Period.

This isn’t about financial literacy. Bootstrapping business owners know how to manage finances. What they typically lack is knowledge of and access to financial tools and planning that translate their experience into actionable plans and experience communicating their plan in the language of loan officers and investors.

The Value of an Advisor

Knowledgeable advisors know how the game is played and can help you play it. The more you put on paper in advance, the better. Otherwise, the conversation you want to have about money will quickly become one about writing a plan, creating financial projections, and practicing your pitch. Every advisor I know has heard clients say that planning takes too much time, it’s too hard or unnecessary if you just listen to my story and believe in me and my vision, work ethic, passion… that’s not a thing if you want capital.

Some owners know that the system is not designed to make it easy for them to get money so they opt out of the process, choosing instead to grow organically or stay small. I’ve also met owners who are so discouraged by the odds that they don’t have the energy to try, convinced their planning efforts will be for naught. Those who do the hard work to make a plan that allows them to run their business in more sophisticated and sustainable ways always reap the rewards before and after securing capital.

Bottom-line: business owners, advisors, coaches, counselors, and entrepreneur support organizations want the same thing: to build strong, sustainable, profitable companies. In order to show you the money you’ve gotta show us the plan.

No one wants you to succeed more than business coaches and advisors. Entrepreneur support organizations and small business centers exist to help you succeed. Perhaps if we talked more often and frankly about what business owners want and what it really takes to start and grow a business, there would be less confusion about what services are offered and why.

Business owners: ask for what you need and be open to the possibility that the support and assistance might look different than you expect.

Coaches, advisors, and support organizations: explain why and how you have designed specific services to optimize business owner success, think about how to streamline your processes, and when possible, change the system to make it better for everyone.

I’m very fortunate to work with an amazing number of creators—entrepreneurs and small business owners who work every day to manifest the companies and lives of their dreams. Our work together typically begins by delving into their vision and getting a deep and clear understanding of what success looks like for them. Only when you know where you are headed can you find and invent ways to get there. Planning is an important part of growing your business, but there are ways to take your planning to a whole other level. Here’s how I help others supercharge their annual planning.

Start with a Vision

Regardless of the words you use—strategic planning, goal setting, business planning—they all start with a future state in mind, a vision for how the world will look, feel, be different as a result of making specific, intentional choices. Feeling overwhelmed? Not sure where to start? Or what the next step should be? Take time to think about and write down your vision. Then, of all the things you can do, ask yourself which ones will get you closer to your goal, closer to building the business you want. You can use this as a guide:

1. Vision/Goal – The What: Define and describe your passion, desire, vision for your business.
2. Strategy – The How (directionally): A specific plan for achieving your vision/goal (often broken down in years, quarters, months, weeks). Pro Tip: Spend some time brainstorming all the possible ways to create your visions (crazy, unrealistic—all of them), then commit to the 3-5 approaches that will do the most to get you where you want to be.
3. Rationale – The Why: Of the many ways you can achieve your vision/goal (see above) you have selected this strategy because… if you can’t explain why you have chosen the approaches you identified above, it will be hard to execute.
4. Tactics – The How: Specific actions (tasks) that need to be completed in order to turn the planning into action and results.
5. Sequencing – The When: Deciding the order to do things in to get the best result.
6. Measurement – The How Well: We will know we are successful by measuring these leading and lagging indicators (specific to your business) and evaluate whether any changes are needed to our planning, strategy, or tactics.

*Pro Tip: If you have a team (anyone other than you with how you are working to execute on this plan to create your vision), make sure you have shared definitions of these terms. It’s important to speak the same language to avoid confusion. And don’t forget to share your vision and plan with them so they understand how best to help you succeed.

Want to talk through some examples of this thinking in action or what it might look like for your business? Email me to schedule a 30-minute introductory call.

Supercharge Your Planning Process

Pretty standard stuff, right? (Even though doing it is sometimes harder than it looks!) So what will supercharge the planning process?

Believe it or not—numbers. Words + Numbers = supercharged

Even a simple, quick and dirty forecasting exercise, that turns your strategy and tactics into financial end results, takes the whole process to another level.

Why? This isn’t just about aligning your budget to your plan to make sure you have the resources you need to execute. It’s also not just about testing your gut to see if the numbers make sense. It’s about seeing your vision manifest in terms of revenue and profits—dollars and cents.

A budget or forecast makes your vision real. It makes the tedious, incremental tasks that have to get done mean something. It lets you visualize the reward that your hard work (and sacrifices) will make possible. It makes the abstract real.

Financial projections capture your thinking in numbers:

If I do this (my plan: strategy and tactics), I anticipate that the end result will be this (revenue, expenses, and profitability) which will give me more resources with which to create this (my big vision).

One of the coolest things about being an owner is that you get to decide what to do with profits. Reinvest into the company. Support your community. Take care of your family. Give it all away. The choice is yours.

Profits = possibility and potential = motivation and inspiration.

In addition to helping you get and stay motivated and inspired, a simple financial model is critical when things don’t go according to plan. When the situation changes, your ability to evaluate the circumstances and reorient to act depends on 1) whether you’re in the habit of regularly running “what if” scenarios and 2) if you have decision-making tools that help you quickly evaluate options. Your plan (strategy and tactics) plus your numbers (tangible outcomes of strategies and tactics) are part of that toolkit.

Your Vision + Numbers = Supercharged Planning

Clarity of purpose (your vision) helps you focus on the long game. Long and near-term plans broken down by years, quarters, months, weeks, and days help you adjust tactics in real-time. As days and weeks unfold, you may need to make new choices, take new actions to stay on track toward your goal.

Having trouble staying focused or feeling pulled in too many directions? Ask yourself if the incomplete tasks are mission-critical. If so, can someone else do them? If not, take them off the list and ask yourself what next steps you can take right now that will get you closer to your vision.

Hitting your goals faster than you anticipated? You might ask yourself if your vision is big enough. Or what the next best steps are to maintain your momentum.

Feeling pulled to do something new that’s not part of your plan? Not sure if it’s a distraction or a new path forward? Ask yourself if you’re acting from a place of fear or an abundance mindset. Consider the opportunity costs.

And in all cases, run the numbers to see what the impact will be on the top and bottom lines.

Ready to supercharge your business planning?

Purpose First Advisors supports small businesses, growth-stage companies, and organizations by providing strategic business consulting and coaching. Contact us to learn more or to book a consultation with our team.

I am obsessed with building cash flow projections and financial scenario planning. Seriously.

I’ve spent the last several months working with small businesses in industries hit hardest by COVID, including personal services (i.e. salons), daycare providers, and specialty retailers. In addition to providing technical assistance to support them in applying for grants and loans, I’ve been talking with owners about the business of their business.

We’ve explored marketing and sales strategies, ways to retain current clients, techniques for identifying and reaching new target markets, e-commerce implementation, re-engaging former clients, pricing, payment terms/collection, developing new products and services, using new distribution channels, and so on. Some of these things are feasible with the resources on hand. Other changes and pivots require capital—money not all businesses have to invest in new strategies and tactics.

Very quickly, the conversation turns to cash flow—how they are managing the flow of money in and out of the business, including cash and cash equivalents from operating activities, investment activities, and financing activities. The ability to manage cash flow is a critical business skill (not an accounting function). Cash flow statements help owners measure the relative strength, profitability, and long-term future outlook for their company. They also reflect the positive and negative impact of business decisions on the bottom line.

The Value of Cash Flow Projections

In addition to providing insight to the current and future profitability and sustainability of the business, cash flow statements and projections are tools that help us get a sense of how hard the business has been impacted by the COVID-19 recession, how leadership is feeling about Q4 of 2020, and what they think 2021 might look like—because these feelings and beliefs manifest as implicit and explicit business decisions.

More often than not, my clients only have a vague sense of these things. They know revenue is down and that they have cut expenses. They know what their bank balance is. They have a hard time imagining what the future—a few weeks to several months—might hold. They want to make decisions and act but are struggling to figure out the next best step.

Frankly, it can be scary to run the numbers and turn vague impressions into hard realities. And yet, I promise, it really is the best thing you can do to get and maintain control over your business. A lot of things are out of our control. We can’t force people to buy, or reduce many of our fixed costs. We can’t predict another lockdown or whether someone on our team will get sick. So we have to control what we can.

Cash flow projections for 2020 and scenarios for 2021 give us ways to identify the most important things to pay attention to and build plans for getting the outcomes we want.

For example:

I work with a specialty promotional product maker. Much of their business is driven by special events such as walks, runs, bike rides, family reunions, conferences, and other nonprofit and corporate events. They have a strong base of local small business clients and when companies started temporary closures, shifted to work from home, and canceled events, their business slowed down considerably.

They immediately looked at ways to save money (supplies, materials, reducing staff size and hours), pursued loan and grant opportunities, and brainstormed ways to keep sales coming in. Each strategy helped in different ways but until they plotted the actual revenue, expenses, and capital investments in Q1, Q2, and Q3, they really could not assess whether they had saved and earned enough or what it would take to break even by year’s end.

By doing the cash flow analysis and projections, they could very clearly see their current financial position, as well as what the remainder of the year would require in terms of sales and cost-control. It helped them set goals—targets for revenue and expenses—around which to build focused strategies and monitor results in real-time. They can look several months ahead, then develop and implement a plan now that has the best potential to maximize revenue from existing and new customers in the coming months.

This is key: doing projections helps you create a plan, take actions that you can monitor and measure, and reduce variability, and increase the predictability of success. If you need to renew 30% of prior year customers and bring in two new orders totaling $20K in order to make your desired revenue goal for November, the sooner you know that and the more time you have to make that happen the more likely you are to succeed.

While the outcomes can’t be guaranteed, without a plan failure is inevitable. With a plan, you can do everything reasonable and feasible to make your financial assumptions a reality.

Building Cash Flow Scenarios

The next step is to take what you know about how your business is performing in 2020 and run scenarios for 2021 using that information and the data you have from prior years. Like my clients, there are several things that will factor into your scenarios:

• Your knowledge of your industry
• Understanding of your clients and their needs
• Ability to position your company as a preferred solutions provider for existing and prospective clients
• Capacity to be creative in attracting and retaining customers
• Cost management strategies

The goal is to think about best, worst, and likely scenarios so you can do your best to anticipate what resources you will need and what actions will be required to tip the scales in favor of success.

Why Build Scenarios?

Like me and my clients, you have people counting on you. Your family, the employees, and contractors you hire, the vendors you buy from, the clients you serve. That’s a lot of responsibility. Even for those small businesses that have seen an increased demand for their goods and services during this time, success is not a forgone conclusion. Increased revenue doesn’t automatically and inevitably lead to increased profitability. While we can’t predict the future, we can look at what we know, make educated assumptions, think through possible futures, and use that information to plan, act, evaluate, reorient, and repeat on an ongoing basis.

Here’s the thing: knowing what the future could look like gives us the opportunity to think through what we can do to try and create the future we want. That’s the art of business management and strategy—planning and execution to create desired financial results. It’s time to practice your futurism skills.

Cash Flow Scenario Examples

Worst case: Let’s say you have seen a drop in revenue this year. Perhaps your worst-case scenario is another drop of comparable size in year over year revenue for 2021. Or a delayed recovery with revenue returning to pre-COVID levels in Q3 or Q4 of 2021. Maybe revenue stays steady but your cost of raw materials or shipping costs increase. The idea is to look at What if X happens and think through what impact it may have on the bottom line and what sources of capital (savings, lines of credit, loans, grants, investors) might you have or need to make it through times when net revenue is down.

Best case: This is your most optimistic outlook for 2021. Perhaps expenses remain relatively constant with no new cuts needed and revenue declines stop or revenue starts to slowly rise. Or you may have entered a new market or launched a new product/service at the end of 2020 that helps accelerate revenue growth in 2021. It might be that your current customers have decided to invest in things that will accelerate their own growth and are ready to buy again. This scenario looks at how things might improve—return to pre-COVID levels or even better—and the reasons you believe that can happen. It may also prompt you to think about how you will eventually reinvest your profits to maintain growth and increase profitability moving forward.

Likely case: Somewhere between the best case and the worst case is what is likely to happen. It is neither overly optimistic nor conservative. It blends the most likely revenue, expense, and access to capital scenarios.

You may have several best, worst, and likely scenarios. This is when it pays to work with a professional who can help you build spreadsheets that allow you to change and test different variables with minimal inputs and edits, and where getting down to granular levels of detail can really matter.

In the end, the cash flow scenarios you build will give an important tool for making immediate decisions regarding strategy and tactics, as well as a way to monitor those assumptions and compare them to actuals over time.

Remember, what we are talking about is financial planning, not accounting. You may use some data and reports from your accounting system to inform this work. However, the bulk of this knowledge will come from you and what you know about your business and your industry. Businesses coaches and strategic business advisors can help you tap into and unlock this way of thinking.

Over the past several weeks, I, like you, have received countless statements of “solidarity” from big corporations, nonprofits, and small businesses. I’ve even helped edit a few such statements. 

While those statements are an important part of the process, many of us have also been down this road before. A statement is made, actions are suggested for others, no action is pledged by the institution, and/or what is offered are surface-level activities that reinforce the idea that solutions can be easy, instant, and consistent with the current worldview. Others may not have felt compelled to address institutionalized racism and White supremacy before or have exerted the privilege White people have to disengage from the conversation (a privilege not extended to our colleagues who are Black and Indigenous People of Color (BIPOC). 

Often in my role as an employee, business owner, board member, consultant, and sector leader working to advance racial and gender equity, I’ve been told to stay in my lane. The idea being that my lane is entrepreneurship, and entrepreneurship is about making money and creating wealth—not dismantling racism. Nevermind that businesses that have diverse leadership teams and build diverse, inclusive, and equitable corporate cultures actually outperform their competitors or that untold millions are left on the table every day by investors unwilling to invest in women and BIPOC founders. 

Advancing equity and dismantling systems of oppression is our job as human beings, especially in “our lanes” where we have the greatest potential to influence change. 

I believe we can affect tremendous change in whatever places and roles we find ourselves. So I looked at my lane and, starting back in 2016, began to apply a racial equity lens to my work. 

At the time, it was to look at how my two-person team could codify our commitment to racial equity by documenting our process (creating a racial equity rubric) so that we could be more intentional in our work and leave a roadmap for others in the organization to follow. 

Today, part of that work is helping small business owners—solopreneurs and owners with small teams—understand the role they can play in creating anti-racist business practices.

The Role of Culture

Regardless of the size or age of your company, it has a culture. Cultures don’t simply happen, they are created—intentionally or unintentionally. Every decision we don’t make has as much impact on our company culture as the ones we do. And how we choose to engage in that decision-making or act in alignment with our values, impacts everyone with whom we do business. 

Our contractors, employees, vendors, and customers are looking for real commitments and deserve our authentic allyship. This means going beyond statements and taking action in practical, measurable, ongoing ways. 

Based on my personal practice to become anti-racist, I’ve thought about what I can do as a business owner, and how other solopreneurs and small business owners can build anti-racist companies. 

Taking Action

• Be clear about and publicly state your values. If you are considering making a “solidarity” statement, start with your values and commit to actions that make those values real and actionable through everyday business decisions.
• Commit to doing the personal work you need to do to understand systemic racism. This requires us to evaluate the ways we are complicit and what it means to engage in the work of anti-racism and systems change. Stop anxious fixing and challenge yourself. The system has been designed to make White people feel good, comfortable, and safe. If you’re White and not feeling uncomfortable then you’re not actively learning to be anti-racist.
• Accept that nothing absolves us from recognizing our role and responsibilities as business owners. This work can’t wait until you hit specific revenue or profitability goals, add another employee, or land another client the time is now.
• Make anti-racist education part of your own professional development plan.
• Create a list of questions, specific to your business and industry, that you use to build and operate your business. They may include:
• How does systemic racism show up in my industry (be specific) and in what ways can I challenge the status quo?
  
  1. Whose voices are elevated and celebrated in my industry? Whose voices are marginalized or non-existent?
  2. What experts and thought leaders do I follow and why? Do they include any BIPOC entrepreneurs or business leaders? Why? Why not?
  3. When I have the opportunity to make a referral, do I have BIPOC in my network to who I can and do refer? We typically meet new people through the people we already know. How can you be intentional about expanding your network? This includes going to events where you may be in the minority, where your voice and expertise are not centered, and where you may need to be invited. You should probably feel somewhat uncomfortable in these settings as that is one sign that you are stepping outside your sphere of influence.
  4. When I have the opportunity to collaborate on a project, do I have BIPOC business partners or consultants with whom I can work?
  5. When I have the opportunity to make a direct hire, how do I write the job description? Source talent? Screen resumes? Set compensation? And what impact does that have on attracting and selecting candidates? Our implicit bias can manifest in how we define job requirements (like requiring a bachelor’s degree), where we post the job, the screening questions we ask, the referrals and references we trust, the assumptions we make about people’s names, alma mater, work history, etc. How can you actively interrupt your default thoughts and behaviors?
  6. When I am given an opportunity to speak or present do I think of how to include BIPOC colleagues on the stage?
  7. When I select conferences to attend, am I aware of the centering of White expertise and make that known to organizers?
  8. When I make business purchases, do I make a point to source goods and services from BIPOC owned companies? Do the vendors I work with have an explicit commitment to racial equity? Think broadly: banking, office supplies, tech services, coaching, facility management/maintenance, outsourced services like accounting and legal, graphic design, digital media services, website design, equipment, office or co-working space, catering, event planning, meeting facilitation, raw materials, etc. Where we spend our money is a reflection of our values. Yes, sourcing some of these relationships may take more time. Being intentional usually does.
  9. Are there any BIPOC on the Board of my professional association?
  10. Do I use my White privilege in professional settings to address implicit and explicit bias? Do I speak up when BIPOC are not looking?
  11. Do I use my privilege to open doors, create new opportunities, and otherwise interrupt the status quo?
  12. When I do business with BIPOC colleagues will my thoughts, words, and actions align with my public statements of solidarity?
  13. Who in my industry, network, and community is willing to work with me on building an anti-racist company? This is not an invitation to ask your Black or Brown colleagues to share their experiences and tell you what to do. It is about connecting with a community of practice.

Developing anti-racist business practices is an ongoing process. You will make mistakes, need to apologize, and to try again. I have and do. In this process, you will need to be vulnerable and authentic. You will always be learning—you will never arrive. I can think of no better way to build your capacity as a leader in business and your community. Welcome to the journey.