Your leadership team inarguably plays a critical role within your company. You place your utmost trust in these individuals because they possess the power to take your company to new heights – or run it right into the ground.
So, what are you doing to instill financial discipline into your leadership team? Here are the seven things we believe will help your leaders think critically about the business's numbers to create efficiencies and help it grow.
1. Adopt an "Under-Promise, Over-Deliver" Mindset
Companies that meet their forecasting goals demonstrate reliability and credibility in the marketplace. Your leadership team's mantra needs to be "under-promise and over-deliver," particularly when it comes to investor relations.
While not quickly done, under-promising and over-delivering is a positive way to build trust with investors.
Proving you're a reliable, consistent performer that delivers beyond expectations can ultimately help pave the way to your company's growth. Furthermore, setting realistic goals and meeting them allows for a more truthful benchmark to measure the company's future performance.
2. Spend Below Budget
Spend your company's money like it's your own. It seems simple enough advice, but many companies fall into the trap of spending more than their budgets allow—and falling short when unforeseen circumstances occur.
Companies should analyze their resource allocation so they have a cash reserve when needed. The leadership team should prob your company's actual spending and tidy up the budget every quarter to ensure your business consistently spends below budget.
3. Hire Behind the Curve, Not Ahead
Hiring "behind the curve" allows companies to onboard new employees as demands of the work (and the markets.
Companies who hire strategically will better understand the role that needs to be filled, putting them in a stronger position to hire the right person for the job.
When companies hire "ahead of the curve," they anticipate a future role and fill that position ahead of time—and run the risk of a) hiring the wrong person for the job or b) filling a position for a role that may or may not be needed in the long-term.
For companies with limited funds, as small and medium-sized businesses often do, hiring behind the curve provides additional flexibility and reduces overhead during critical periods of growth.
4. Review Large Expenditures Periodically
Budgeting for capital expenditures is essential for a business to operate and grow from a sound financial position.
Your leadership team should be reviewing your company's capital expenditures periodically to make sure your investments in those assets are worth the cost.
Are they helping your business generate profits? Do they coincide with your long-term goals?
The COVID-19 pandemic has reshaped the way many companies view capital expenditures. Namely, reassessing the physical space they occupy and the physical allocation of employees.
Companies should review their physical space periodically to determine whether or not the cost of the space is justified.
Companies have the option to reconfigure their workspace to accommodate a growing workforce, sublease extra space they aren't using, or in some cases, renegotiate with their landlord regarding the use of space, or extend a lease without price increases.
Along with examining physical space, companies should consider assessing overhead items like equipment, company vehicles, storage, insurance policies, and cost of capital.
In most cases, leasing is an option and may be appealing when purchasing assets like computers and technology, which become quickly obsolete.
5. Avoid a Bloated Tech Stack
Software exists for everything you can imagine, from cybersecurity to manufacturing, project management, restaurant point of service, and the list goes on.
Although you may feel the need to have access to many of these tools (because they promise to make you better, faster, and more competent), be sure to pick and choose wisely.
Having several small contracts can quickly add up spending, and you may be paying for software that isn't being used.
Are you paying for an expensive sales software your team never uses? A reporting tool that your marketing team has abandoned? Or a CRM that goes untouched?
These software packages, however diminutive, add up over time. From high-level reporting to onboarding new employees, a bloated tech stack is not only expensive but overloads your company's operations on every level.
To keep costs reasonable and to ensure your company's operations are optimized at every level, ensure your leadership team evaluates the small contracts in place to determine what is definitively adding value.
6. Review Staffing Levels
As startups grow, they often adapt to something different to fulfill their customers' needs. As a result, roles and jobs within your company itself may shift change, and you may no longer need to skillsets of some of your employees.
To promote financial discipline in business, review your people periodically and ensure they're still required for the job they perform.
Encourage your leadership team to review each employee periodically to make sure they're still the right fit for your company and, if they are, that they're performing at peak levels.
Overstaffing can lead to a lack of employee engagement, resulting in a lack of commitment to the company and a lack of morale. Conversely, reducing hours for permanent staff can also lead to low morale.
To strike a balance between overstaffing and understaffing, companies should review the state of their current workforce and note any historical shifts in demand, seasonality, or other factors that may impact productivity levels.
7. Assess Salespeople Productivity
Without sales, you're without a company. Because your salespeople are the lifeblood of your business, training is vitally important.
It can mean the difference between a return on investment in a sales rep or a loss of that investment.
Encourage a high rate of interaction among your leadership team and salespeople, and have your leaders regularly assess each salesperson's productivity.
Putting metrics in place can help to formalize the process while measuring each salesperson's productivity fairly.
Companies should encourage leadership teams to incentivize top performers and remove employees who display toxic attitudes or are not cut out for sales roles.
While letting go of employees is never easy, if salespeople are not performing to company standards, your team is doing both the company and the sales rep a greater service in the long run.
The importance of financial discipline in business cannot be overstated. For more information on transforming your business or to see how our team can help you create efficiencies in your company, visit our business resources for entrepreneurs hub, or click here to schedule a consultation with Gene S. Godick, President of G-Squared Partners.