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Too Many Hats – Tracking the Work

In most instances, we find that small Business owners really enjoy the technical aspects of their job. They are passionate about “Doing the Work” – getting their hands dirty. Many also like the thrill of the hunt – “Getting the Work.” Consequently, these are the areas where most small business owners tend to focus their time and energy. A majority of small business owners I encounter dislike tracking the work – the financial controls of the operation. In fact, I would venture a guess that if you were to talk to ten entrepreneurs, eight (if not nine) out of the ten would tell you office work is the part of the business they enjoy least. As a result, many tend to avoid doing it. We find this typically trips them up and stifles their growth.

In the previous two articles of this series, we looked at a couple of the hats an emerging entrepreneur must wear to grow their company – getting the work and doing the work. As previously stated, somewhere between $1.5 and $3.0 million small businesses typically stall out because there are not enough hours in a day, or days in a week for the owner to wear all the hats. To keep growing, they must delegate someone to wear the hats.

More Profitable

In this article, we talk about tracking the work – the remaining hat an owner must effectively delegate to grow beyond the initial plateau. Unlike the other two, hats which most owners are reluctant to delegate, small business owners frequently have no problem handing this hat to someone else. Many entrepreneurs feel that getting the work and doing the work are where a company makes its money. While those aspects are essential to a company’s success, we find that keeping track of the work is equally important. The tighter the financial controls, the more profitable the company. The looser the controls, the more bad things can happen.

By turning this hat over to someone else in the company, they are turning over the control of the company. More often than not, we find that person is undertrained, and there are no real systems in place for them to do their job effectively. This can cause a variety of issues to surface in the business – from reduced profitability to poor cash flow, to low productivity and lack of accountability, to name just a few.

Financial Controls

We find that if an entrepreneur is to grow their company to the next level, they must have robust financial controls in place. If you can’t measure it, you can’t manage it. As a company grows and picks up velocity, finding out if they made a profit at the end of year when they do their taxes, is too late. To move to the next level, an owner needs a clear and accurate understanding of their financial performance on a day by day, week by week basis. By installing an operating budget and management dashboards, we help our clients proactively manage their company for a predetermined profit. We typically find it is necessary to help install a more robust cash management tool so owners can know their cash needs 6 – 12 months out. In addition to the financial management systems, we find somewhere between $1.5 and $3.0 million a business can typically cost justify a full-time controller, someone to manage the numbers.

Manufacturing Case Study

For example, several years ago, Cogent worked a pre-cast concrete manufacturer who had stalled out and was struggling. They weren’t as profitable as they would have liked to be, and weren’t exactly sure why. The owner tried to keep up the financial performance but readily admitted to their lack of experience. They didn’t know their true costs and as a result weren’t pricing their products correctly. Tracking materials and labor was like chasing vapor. Plus, as the company had grown and taken on larger and larger projects, cash flow became a killer.

Cogent was able to help them identify their true costs to come up with more accurate pricing which included a predetermined profit. We then set up an operating budget and management dashboards to help them better control their manufacturing costs. We installed project tracking tools to help better manage the production process. We also helped implement a twelve-month cash management tool to help the owner better anticipate and manage cash demands. Once the financial management systems were in place, Cogent helped them hire a full-time CPA to wear the financial management hat. This alleviated a lot of stress on the owner and freed up his time to focus on things he enjoyed doing and was better suited for. As a result of these efforts, the company has increased their bottom line by over 20% and boosted their top line by over $1 million.

Each company is different and this is just one example. However, to effectively grow a company beyond the initial plateau, we typically find owners must start to build a true organizational structure and delegate the responsibility of who wears the hats.

Cogent Analytics is a small business consulting firm based in Greensboro, North Carolina holding an A+ Rating with the Better Business Bureau that provides professional, ethical management services nationally to owners looking to identify areas of opportunity, improve organizational efficiencies, and accelerate leadership goals. Visit www.CogentAnalytics.com or email [email protected] for more information.

Bret Tubergen covers the Midwest and South Central regions in his role as Regional Vice President for Cogent Analytics. Reach him at [email protected]

Series Overview – The “Too Many Hats” series looks at the three primary hats a small business owner finds themselves wearing when just getting started. It describes how by attempting to wear all the hats, an owner can stifle company growth. The series cites compelling examples of real world business owners that Cogent Analytics helped get to the next level.

The post Too Many Hats – Tracking the Work appeared first on Business Management Advisors & Consultants | Cogent Analytics.



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Too Many Hats – Tracking the Work

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