"I'm not here to give you the good news." I say that phrase to clients much more often than you might think. Because I ultimately want to celebrate their business's success with them, I’m there to tell them the actual state of their company's finances and guide...
Traditional forecasting can be a losing endeavor
If you’re a business owner, I bet you’ve been told you should be forecasting. This traditional advice suggests that there is a specific model to follow or a manual to use. However, as you and I both know, the reality is that when life gets in the way, your forecasting goes out the window.
As business owners, so many variables are outside our control – employees leaving, vendor changes and inflation are just a few. Personal situations can have a significant impact, too – things change when your parent is sick or your child is home from school. I can understand this struggle all too well. Fritz Financial Solutions has been been understaffed, overstaffed, seen health issues and plenty more.
Unfortunately, there is not a team of MBAs waiting to guide all our businesses through every bump in the road. And unlike large corporations, growing companies feel the pain of the unexpected instantly, like when an employee doesn’t show up for work and you have to work the front desk.
While I may get some pushback for this, I say enough with traditional forecasting. Unless you’re seeking VC funding and planning to be the next $10 million success story, forecasting can feel like a futile exercise. Even the best laid plans can be victim to life’s unexpected turns when you’re an entrepreneur. Instead, here are some guidelines on where to focus to prepare your business for the unexpected:
First, develop your financial strategy based in some kind of reality. Understand your monthly expenses so you know how much revenue you have to generate to cover the cost of goods and expenses. Only then can you manage your cash and resources effectively.
Second, prepare for the unexpected. Having three months’ worth of expenses saved up can go a long way. This is especially important if you have any kind of hourly billing or generating revenue that requires you to be present. You’ll be able to cover your operating expenses if you have to take off a week to care for a sick family member. The businesses that make it through unprecedented times are the ones that stand ready for the rainy day with cash in reserves.
Third, prepare your company for the future by understanding your sales pipelines and how it will affect your business. For example, if you grow, will you have the capacity to deliver? If you provide services, can you predict your client turnover? What happens if your biggest client leaves? Understanding how you attract and retain customers is at the top of the list.
Lastly, having a compassionate financial partner like Fritz Financial Solutions will ensure you have someone to support you as you make difficult decisions. Your financial partners should be armed with your financial data to help you stay on track or find the detour to get back on track.
Being in touch with your numbers empowers you to be ready for the unexpected. With the right tools and financial data in hand, you can better navigate any bumps in the road and continue growing your business without wasting time or worrying about traditional forecasting.
What solution can Fritz Financial find for you?
Schedule a meeting with Daliah Fritz