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Is the Economy Half Full or Half Empty?
You Be the Judge

by Gary W. Patterson

 
   
 
   

As we wind down another year my mantra still holds. As you have seen, the volatility of a global economy will continue to produce winners and losers. Those leaders who take direct control of their financial destinies in an effort to fund high-return opportunities will be the victors; those that let the external economic forces consume them will be the victims. The operative phrase is “take control.” Unless you prefer to experience a Fiscal Thunder Mountain© for your business.

  1. The sooner you adapt to today’s economic reality, the sooner your company will be poised to grow. The reality is, the only factor keeping you from moving forward is you (the team). “Buy when there is blood running in the streets for best value” (Baron Rothschild) has been a mantra since the panic that followed the Battle of Waterloo – and you want to act likewise for best value. While the pessimists wallow in doom and gloom and continue to make excuses about why their companies are hurting, the optimists will focus on developing new growth strategies, seizing new opportunities, and creating new revenue streams.

  2. Stop manipulating the numbers. Ask yourself, “How could a hundred year industry leader go bankrupt overnight (there have been many)? Be honest with yourself and your executive team and clean up your balance sheet. For the most part, accounts such as allowance for receivables and inventory reserves are considered nothing more than “smoothing out” tools for too many companies. That said, where is your company playing financial games to accrue inner-sanctum bonuses instead of providing quality financial information that will increase the wealth of all your employees?

  3. Accessible cash is king. Is this next example your company in the making i.e. when Toyota’s financial provision for brake recalls varies by hundreds of millions of dollars from the analysts, what financial results can you believe? How opportunistic can your corporate finance strategy be when you are not sure about the accuracy of your balance sheet and cash equivalents today and six months into the future? If you must, sell low to liquidate useless inventory and/or money-losing facilities and products. Use freed-up cash to fund new opportunities on the horizon. Or are you so unsure of your books that you cannot project 6 months accurately.

  4. Put your money into resources that create new opportunities. Why would Monster.com bet the company on a single day’s ad? Follow on copy cats bet their companies on Super Bowl ads and lost. Research shows that major initiatives for new opportunities never get off the ground because of lack of resources and effective strategic planning. Where should you reallocate resources today so that next year’s revenues and net income levels will bring about new opportunities?

  5. Don’t let yesterday’s business model dictate your financial decisions of tomorrow. Take a hard look at your business model from a financial perspective and ask yourself how relevant it is for today’s business environment. Perhaps it’s time for a business model overhaul. Are you aware what changed in our business environment that an industry leading public company had to change its business model OVERNIGHT in order to survive?

  6. Discard data minutia and focus on your company’s five critical success factors. How could Cisco, a Fortune 100 company with award winning financial systems, overstock $3 BILLION dollars of high tech items? Identify and spotlight five performance metrics of your operations that are absolutely essential to the health and well-being of your business. So many companies haven’t a clue about the core of their operations because they’re drowning in useless, indecipherable data.

  7. Fire customers who no longer support your company’s financial and strategic goals. Why would a high technology company keep selling its main product at a loss – and then want to shoot the messenger who found this discrepancy and warned them? Aren’t you tired of hearing your accounting people complain about how certain customers are costing your money or worse how they’re abusing your employees? Shedding dead weight will not only create companywide goodwill but will also increase your company’s profits.

  8. If you don’t think you need a contingency plan, think again. Would you rather be a BP disaster or a Tylenol success story? Every company needs a contingency plan. It could be as simple as creating a crisis communication plan or as complex as preventing possible worst-case scenarios from becoming a reality.

  9. Join the 21st century. Why would a Fortune 500 manufacturing division start 8 computer conversions and never finish one? Stop using budgetary constraints as an excuse for not investing in the latest technologies, including safety systems.

  10. Create a fiscal vision. Let’s refresh our mindset regarding Finance 101 i.e. the bottom line of every company is to be financially solvent, and the only way to achieve solvency is to have a fiscal vision. In my book, no amount of strategizing is going to help a company gain competitive advantage if its strategy is disconnected to the company’s financial performance. Business leaders who have the courage to face the numbers squarely and create a growth strategy business plan driven by the (financial) facts will not only survive but will thrive despite these uncertain, economic times. Or, would you prefer to follow the path of Mercedes and overpay by $40 BILLION when they bought Chrysler?

As you and I know, business has CHANGED dramatically since 2008. What changes have you made since then? Particularly what changes have you made regarding the 10 A+ points just mentioned?


       
   
 
       
   

The Author

Gary Patterson

Stick Out Your Balance Sheet and Cough

Gary W. Patterson has more than 30 years of senior management experience with high growth technology, wireless, manufacturing and service companies. He has worked with more than 200 companies — from start-ups to Inc 500 to Fortune 500 — providing high level strategic guidance and expertise. Gary’s financial acumen and extensive business knowledge have brought about significant outcomes for his clients, helping them to successfully navigate that often murky pathway to growth and profitability. He the author of Stick Out Your Balance Sheet and Cough: Best Practices for Long-Term Business Health.

Visit www.FiscalDoctor.com for additional information or email Gary@FiscalDoctor.com.

 
       
   
 
       
   
Many more articles in The CFO Refresher in The CEO Refresher Archives
 
       
   
 
       
   
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Copyright 2010 by Gary W. Patterson. All rights reserved.

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