Please download the free workbook that goes with this episode.
This episode will empower you with the insights to pinpoint your ideal customer, refine your services, and secure your competitive edge. We'll navigate through a SWOT analysis and discuss the significance of core values before crafting a strategic statement that's as robust as your ambition. Whether you're a seasoned business owner or just starting, you'll leave with a clearer direction and the tools to make informed decisions that will pave the way for prosperity in 2024. Let's make those goals a reality, shall we?
Please connect with me on:
1. Instagram: stephen.mclain
2. Twitter: smclainiii
3. Facebook: stephenmclainconsultant
4. LinkedIn: stephenjmclainiii
For more resources, please visit Finance Leader Academy: financeleaderacademy.com.
On the website, you can download the Small Business Strategy Guide and Workbook. You can use this guide to evaluate your Small Business Strategy and how your accounting & finance systems can help you make better decisions.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Stephen McLain (00:00):
Hi, this is Stephen McLain of the Finance
Leader Podcast.
This is Bonus Episode number 74.
Good day and good week toeveryone.
I hope everyone had a greatholiday time and New Year's
celebration.
Since this is the start of thenew year, it is time for
announcing New Year'sresolutions, which, if you have
(00:20):
been listening to me for a while, you know I don't believe in
New Year's resolutions becausethey often fall apart after a
few weeks due to not even havinga solid plan around them.
There is a declaration withouta commitment to a process and
usually there is a lack ofaccountability.
I want to help you do betterand accomplish those core goals.
(00:43):
I believe in goal setting usingthe smart method.
I will discuss more about goalsetting next week.
I can't wait to share and Ican't wait to get started with
you for 2024.
I know we will accomplish muchthis year and we will do it with
a planning framework that willset us up for success.
(01:05):
This week, I want to share anintroduction on small business
strategy and how you can developan accounting and finance
system to help you achieve yourvision, strategy and goals in
your business.
I don't often focus on smallbusinesses specifically, but
there is a real need to helpsmall business owners and
solopreneurs understand how aneffective accounting and finance
(01:28):
system can help them grow theirbusiness.
So I also want to help thisspecific community, too.
We can develop small businessfinance leaders in this
community, since it's often agreater understanding of the
financials and business-relateddata that can lead to better
strategic decisions and,hopefully, improved results in
(01:49):
sales and reduced expenses and ahealthier allocation of limited
resources.
So this week I want to providea short introduction to business
strategy, plus an introductionon what accounting and finance
system considerations to startthinking about.
Your strategy is a roadmap forhow you will achieve your
(02:10):
business goals, create acompetitive advantage and create
value for your business.
The first thing is who is yourideal customer and target market
?
Next, how are you going toserve that customer and target
market?
So what is your product andservice mix?
(02:30):
Next, and probably mostimportant, is how will you
compete?
Is there going to be pricealone?
Better quality, more features,better service, maybe a hybrid
of many of these?
To be more competitive, youneed to find your ideal price.
You need to purchase rawmaterials and services at a more
(02:51):
favorable cost, and this helpsyou track your gross margin and
how profitable your business is.
The next thing I want you to dois to do a SWOT analysis, that
is, to list your strengths, yourweaknesses, your opportunities
and your threats.
Next, I want you to list outyour core values.
What is important to you on howyou support your ideal customer
(03:13):
and how you run your business,how you treat your employees?
What does your business do tosupport the local community?
The next thing I want you to dois to set your priorities.
How will you prioritize yourresources to then meet your
strategy and, when you get achance, write out your vision
statement.
From your answers, then writeout a sentence declaring your
(03:36):
strategy.
How will you compete and serveyour ideal customer?
And I want to give you anexample here.
This is a strategic statementfor a local coffee shop.
We will provide high qualitycoffee offerings from free trade
source coffee bean farms and asuper motivational work area
space to the local corporateprofessionals in the downtown
(03:58):
area where they can gather formeetings outside their office or
work on a project alone.
Now, this strategy talks aboutproviding a high quality coffee
offering, particularlymentioning where they're going
to source the coffee beans andalso what type of space that
people can enjoy these coffeeofferings and also who their
(04:20):
ideal customer is going to be.
Now I want you to go back andwrite your strategic statement,
identifying again who your idealcustomer is, what you're
offering, what you're going tooffer in addition to that
product and service mix, yourideal customer and also how your
customer can enjoy your productor your service.
(04:41):
Now, to be clear, your businessstrategy is different from a
comprehensive business plan.
A strategy is an assessment ofyour customer and the market you
will serve.
This helps you determine howyou will compete in this market,
and you'll need to makeimportant decisions and choices
about the resources you do have.
Resources include cash, credit,equipment, intellectual
(05:05):
property and this also includesyour team and how you manage
their labor contributions, andalso how well you treat them.
Your strategy will be part ofyour business plan if you will
also be looking for funding.
Now we must link an accountingand finance system to your
strategy.
Here's a quick introduction.
I will discuss more in anupcoming full episode.
(05:28):
Number one capture and classifyyour financial transactions.
This is the foundation of anyaccounting system.
You have to know where yourmoney is being spent and know
when you are earning revenue.
Additionally, you need tocategorize your transactions and
lump similar ones together soyou have more accurate data.
This helps not only in knowingabout how your money is moving,
(05:51):
but also helps in accountabilityand internal controls.
Additionally, along with yourcash flow, when you know what is
happening with your finances,you can determine and negotiate
better raw materials costs.
Number two track your cash flow.
The foundational lifeblood ofany business is cash flow.
You need to collect yourreceivables and pay your bills.
(06:12):
You may need to use short-termfinancing in your business.
Tracking your cash flow helpsyou know how much cash you are
burning through and if you needadditional cash through
receivables collecting or withshort-term financing and credit.
Number three publish financialstatements.
At a minimum, you must publisha profit and loss statement
(06:34):
showing your revenues less anycost of goods sold and your
expenses.
If your business isequipment-based or you sell
physical products, you shouldalso publish a balance sheet.
Ideally, every business shouldbe publishing a balance sheet.
Number four budgeting.
Please make sure you areproducing an annual budget with
projected revenues, cost ofgoods sold, expenses and capital
(06:58):
investments, so you have a planto identify how much you expect
to earn and how much you willspend Each month or quarter.
Calculate the variances to seehow close you were to your
projection.
The more you perform thisexercise, the more accurate you
could become in the future.
Number five establish internalcontrols.
(07:19):
How are you establishingaccountability for your
resources?
How are you monitoring yourphysical cash?
How are you preventing thetheft of your inventory or
property?
Internal controls help preventtheft from within your business
and ensure you are performing abank reconciliation every month.
Number six determine your keybusiness growth metrics and
(07:40):
capture related data.
Finance is different fromaccounting because you need to
also look at non-financial datato measure effectiveness, like
store traffic or clicks or cartabandonments, to figure out what
is happening within yourbusiness so you can make
adjustments.
Let's say you own abrick-and-mortar store.
You will also want to knowsales by hour and day so you
(08:04):
know what day and what hours thebulk of your sales occur.
You can then adjust workschedules and even opening and
closing times.
This can maximize your sales byalso helping you to be more
efficient with your labor.
What metrics should you trackto make a better business
decision with the resources youhave and filing?
(08:24):
Number seven make assessmentsand adjust your resource
commitments accordingly.
The reason we measure ourfinances is so we can make
better decisions to grow thebusiness and to maximize our
resources for the best results,measure, assess and make better
decisions.
I hope this short introductorydiscussion about how your
accounting and finance systemscan help you achieve your
(08:46):
strategy and help to grow yourbusiness.
I will expand on this topic inan upcoming episode.
Please check out Finance LeaderAcademy, where you can find
some great resources.
Please download the free shortreference guide I created that
goes along with this episode.
Again, this guide is free andit will help you to prompt some
thoughts and planning regardingwhat an accounting and finance
(09:10):
system can do to help you growyour business.
Have a great rest of your week.
Thank you for listening to theFinance Leader podcast.
Next week, I will be discussinggoal setting for 2024.
Thank you.
Hi, this is Stephen McLain of the Finance
Leader Podcast.
This is Bonus Episode number 74.
Good day and good week toeveryone.
I hope everyone had a greatholiday time and New Year's
celebration.
Since this is the start of thenew year, it is time for
announcing New Year'sresolutions, which, if you have
(00:20):
been listening to me for a while, you know I don't believe in
New Year's resolutions becausethey often fall apart after a
few weeks due to not even havinga solid plan around them.
There is a declaration withouta commitment to a process and
usually there is a lack ofaccountability.
I want to help you do betterand accomplish those core goals.
(00:43):
I believe in goal setting usingthe smart method.
I will discuss more about goalsetting next week.
I can't wait to share and Ican't wait to get started with
you for 2024.
I know we will accomplish muchthis year and we will do it with
a planning framework that willset us up for success.
(01:05):
This week, I want to share anintroduction on small business
strategy and how you can developan accounting and finance
system to help you achieve yourvision, strategy and goals in
your business.
I don't often focus on smallbusinesses specifically, but
there is a real need to helpsmall business owners and
solopreneurs understand how aneffective accounting and finance
(01:28):
system can help them grow theirbusiness.
So I also want to help thisspecific community, too.
We can develop small businessfinance leaders in this
community, since it's often agreater understanding of the
financials and business-relateddata that can lead to better
strategic decisions and,hopefully, improved results in
(01:49):
sales and reduced expenses and ahealthier allocation of limited
resources.
So this week I want to providea short introduction to business
strategy, plus an introductionon what accounting and finance
system considerations to startthinking about.
Your strategy is a roadmap forhow you will achieve your
(02:10):
business goals, create acompetitive advantage and create
value for your business.
The first thing is who is yourideal customer and target market
?
Next, how are you going toserve that customer and target
market?
So what is your product andservice mix?
(02:30):
Next, and probably mostimportant, is how will you
compete?
Is there going to be pricealone?
Better quality, more features,better service, maybe a hybrid
of many of these?
To be more competitive, youneed to find your ideal price.
You need to purchase rawmaterials and services at a more
(02:51):
favorable cost, and this helpsyou track your gross margin and
how profitable your business is.
The next thing I want you to dois to do a SWOT analysis, that
is, to list your strengths, yourweaknesses, your opportunities
and your threats.
Next, I want you to list outyour core values.
What is important to you on howyou support your ideal customer
(03:13):
and how you run your business,how you treat your employees?
What does your business do tosupport the local community?
The next thing I want you to dois to set your priorities.
How will you prioritize yourresources to then meet your
strategy and, when you get achance, write out your vision
statement.
From your answers, then writeout a sentence declaring your
(03:36):
strategy.
How will you compete and serveyour ideal customer?
And I want to give you anexample here.
This is a strategic statementfor a local coffee shop.
We will provide high qualitycoffee offerings from free trade
source coffee bean farms and asuper motivational work area
space to the local corporateprofessionals in the downtown
(03:58):
area where they can gather formeetings outside their office or
work on a project alone.
Now, this strategy talks aboutproviding a high quality coffee
offering, particularlymentioning where they're going
to source the coffee beans andalso what type of space that
people can enjoy these coffeeofferings and also who their
(04:20):
ideal customer is going to be.
Now I want you to go back andwrite your strategic statement,
identifying again who your idealcustomer is, what you're
offering, what you're going tooffer in addition to that
product and service mix, yourideal customer and also how your
customer can enjoy your productor your service.
(04:41):
Now, to be clear, your businessstrategy is different from a
comprehensive business plan.
A strategy is an assessment ofyour customer and the market you
will serve.
This helps you determine howyou will compete in this market,
and you'll need to makeimportant decisions and choices
about the resources you do have.
Resources include cash, credit,equipment, intellectual
(05:05):
property and this also includesyour team and how you manage
their labor contributions, andalso how well you treat them.
Your strategy will be part ofyour business plan if you will
also be looking for funding.
Now we must link an accountingand finance system to your
strategy.
Here's a quick introduction.
I will discuss more in anupcoming full episode.
(05:28):
Number one capture and classifyyour financial transactions.
This is the foundation of anyaccounting system.
You have to know where yourmoney is being spent and know
when you are earning revenue.
Additionally, you need tocategorize your transactions and
lump similar ones together soyou have more accurate data.
This helps not only in knowingabout how your money is moving,
(05:51):
but also helps in accountabilityand internal controls.
Additionally, along with yourcash flow, when you know what is
happening with your finances,you can determine and negotiate
better raw materials costs.
Number two track your cash flow.
The foundational lifeblood ofany business is cash flow.
You need to collect yourreceivables and pay your bills.
(06:12):
You may need to use short-termfinancing in your business.
Tracking your cash flow helpsyou know how much cash you are
burning through and if you needadditional cash through
receivables collecting or withshort-term financing and credit.
Number three publish financialstatements.
At a minimum, you must publisha profit and loss statement
(06:34):
showing your revenues less anycost of goods sold and your
expenses.
If your business isequipment-based or you sell
physical products, you shouldalso publish a balance sheet.
Ideally, every business shouldbe publishing a balance sheet.
Number four budgeting.
Please make sure you areproducing an annual budget with
projected revenues, cost ofgoods sold, expenses and capital
(06:58):
investments, so you have a planto identify how much you expect
to earn and how much you willspend Each month or quarter.
Calculate the variances to seehow close you were to your
projection.
The more you perform thisexercise, the more accurate you
could become in the future.
Number five establish internalcontrols.
(07:19):
How are you establishingaccountability for your
resources?
How are you monitoring yourphysical cash?
How are you preventing thetheft of your inventory or
property?
Internal controls help preventtheft from within your business
and ensure you are performing abank reconciliation every month.
Number six determine your keybusiness growth metrics and
(07:40):
capture related data.
Finance is different fromaccounting because you need to
also look at non-financial datato measure effectiveness, like
store traffic or clicks or cartabandonments, to figure out what
is happening within yourbusiness so you can make
adjustments.
Let's say you own abrick-and-mortar store.
You will also want to knowsales by hour and day so you
(08:04):
know what day and what hours thebulk of your sales occur.
You can then adjust workschedules and even opening and
closing times.
This can maximize your sales byalso helping you to be more
efficient with your labor.
What metrics should you trackto make a better business
decision with the resources youhave and filing?
(08:24):
Number seven make assessmentsand adjust your resource
commitments accordingly.
The reason we measure ourfinances is so we can make
better decisions to grow thebusiness and to maximize our
resources for the best results,measure, assess and make better
decisions.
I hope this short introductorydiscussion about how your
accounting and finance systemscan help you achieve your
(08:46):
strategy and help to grow yourbusiness.
I will expand on this topic inan upcoming episode.
Please check out Finance LeaderAcademy, where you can find
some great resources.
Please download the free shortreference guide I created that
goes along with this episode.
Again, this guide is free andit will help you to prompt some
thoughts and planning regardingwhat an accounting and finance
(09:10):
system can do to help you growyour business.
Have a great rest of your week.
Thank you for listening to theFinance Leader podcast.
Next week, I will be discussinggoal setting for 2024.
Thank you.
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