Small Business CFO Coaching and Consulting
Thanks to people like Dan Sullivan and Grant Cardone, 10x is alive and well. 10x is fashionable, sexy, and glamorous.
How about 2x? What’s wrong with doubling, say revenue or profits? Would you take it?
2x may not be the crème de la crème of business multiples, but it’s still a powerful tool when employed properly.
I came from a corporate world where debt was expected and even planned. And that corporate world taught me it was okay to maintain a certain debt to capital ratio at all times. And for my larger clients, that works. Or rather, we make this manageable.
In smaller businesses, especially with revenues under $10 million, debt can be a killer. Many business owners I’ve worked with over the years have needed money immediately for additional working capital, maintenance capital expenditures or for expansion.
Many of these business owners sign on the dotted line a little too quickly, and all is well until that first debt payment. And then the second. And the next.
Life just got hard, complicated, and stressful.
Several years ago, a business owner of a $3 million specialty contracting firm called me because his P&L looked great but he didn’t know where the cash was going.
Have you added new contracts causing your receivables to go up? “Yes.”
Are inventory levels going up and are your payments for work in progress occurring faster than when you receive customer payments? “Yes, how did you know that?”
Bought any new trucks lately? New equipment? Have you started making loan payments? “Yes, I have.”
Did you just bring on a couple new staff members? “I added one the month before last so we could support this new contract.”
Just curious, have you increased your draws? “When can you come to visit me?”
Who doesn’t like to keep score?
When I think about scorekeeping, for some reason I’m reminded of my first tee-ball experience as a parent. Moms and dads were told, “We never keep score because we don’t want the self-esteem of your children to be harmed. We just want them to have fun.”
Yet, what was every mom doing in the bleachers at every game? Keeping score. The dads? We kept score in our heads. We sat there silently hoping our team would crush the other.
Keeping score can be motivating. Most people with drive want to keep scaling. They don’t want to be left behind.
A scoring system is a mechanism that can push all of us to greater performance. I believe that’s especially true for the sales team of any small business.
Early in my business career dating back to the late ’80s and early ’90s, I was not much of a reader. I think I can count on one hand the first few business books I read:
1. Barbarians at the Gate by Bryan Burrough and John Helyar
2. The Goal by Eli Goldratt
3. The Machine That Changed the World by Roos, Jones, and Womack
4. In Search of Excellence by Tom Peters
What was number 5? Drum roll, please.
