Curt Fowler

Last week, I introduced you to the four quadrants that great businesses are always striving to improve in. They are finance, customers, people and clarity. 

Today, I want to talk to you about quadrant one – finance. Why do I always start our conversations with business leaders by talking about finance? It’s not because I’m an accountant and that is all I want to talk about.

I’d much prefer to talk about vision, culture and strategy, but the numbers matter too much to save until later. Cash flow is oxygen for your business. We must make sure you have plenty of oxygen to accomplish your plans before taking any other steps.

Warren Buffett likes to say that accounting is the language of business. He is so right. The more people in your organization that can speak that language, the better you’ll perform. I love helping leaders understand the numbers and share that critical information with their team.

When we look at financials, we are looking at lagging indicators. Financials are the report card of your business. Very similar to getting on the scale after a week of dieting. Like dieting, staring at the scale won’t get you any skinnier. 

You’ve got to work on the leading indicators to make that happen. In weight loss, the leading indicators are how many calories you consume and how many calories you burn. In business, the leading indicators reside in the other three quadrants – customers, people and clarity.

What do we look for in the financials?

First, we look at cash flow. Are you producing or consuming cash? If you are consuming cash, we do a runway analysis to find out how long you can live on the cash you have. The results tell us how much “runway” you have to fix the problem.

Next, we adjust your numbers so they are comparable to your peers. We do this by making sure all owners are paid a market-based wage and not surviving on dividends. As Greg Crabtree likes to say, “you get a salary for what you do, and you get a return on what you own.”

Once we’ve adjusted your numbers, we benchmark. Benchmarking is the practice of comparing your numbers to peers in a search for best practices. We find areas you can improve and then create plans to make the lagging indicators better by working on the right leading indicators.

As our clients and their employees get better at understanding their financials, they get excited about working on the leading indicators and watching for the outcomes on the financial statements.

Business is a fun game and it is a lot more fun when all the players are watching the same scoreboard.

We love helping leaders build great businesses. If you’d like to learn more you can check out our great free resources at www.valuesdrivenresults.com/resource-library/ or give us a call at (229) 244-1559. We’d love to help you in any way we can.

Curt Fowler is president of Fowler & Company and director at Fowler, Holley, Rambo & Stalvey. He is dedicated to helping leaders build great organizations and better lives for themselves and the people they lead.

Curt is a syndicated business writer, keynote speaker and business advisor. He has an MBA in strategy and entrepreneurship from the Kellogg School, is a CPA and a pretty good guy as defined by his wife and four children.