Many, or maybe most, of my clients are facing an impasse with their businesses, a brick wall if you will. The dilemma is that for any of a number of reasons their companies are not capable of achieving the owner’s goals. At B2B CFO® we say that companies in this situation are in the ‘danger zone’ and are lost in the growth transition. In fact, the founder of B2B CFO®, Jerry Mills, has written a very enlightening book about this very topic titled, “The Danger Zone; Lost in the Growth Transition”. This article will share some of my personal observations about companies in this situation and what the owners can do to get ‘there’ (wherever it is they want to go) from here.
It is possible that a company facing this dilemma is still growing but, nearly always the business owner realizes, or at least suspects, that unless something changes within the organization there are limits to the current rate of growth that will prevent it from ever achieving his/her goals.
Typically there are four key inter-related issues that cause this problem.
- The most commonly stated problem is the lack of working capital, or cash, to invest in the business. Often this issue is directly related to, or caused by, the next three problems.
- Internal processes are not efficient and are not capable of handling much more business and may already be reaching the breaking point. There are few, if any, measures of activity and efficiency in the company’s most critical processes.
- The third factor is related to people. The issue here could be: (a) some employees are in the wrong seats or, (b) employees in key positions simply don’t have the skills that are critical for growth and success or, (c) the business is built around the owner or, (d) all three.
- The fourth, and last, problem is that there are insufficient financial controls in place. Without good financial processes and controls in place, this is what will happen: the owner will not be able to get accurate, timely financial data about the company’s performance; he/she will not be able to get reliable financial projections that could be used to make good, timely decisions and, the company will be unnecessarily and abundantly susceptible to fraud.
Any one of these problems can kill a company or certainly stop it dead in its tracks. The cost of either is enormous.
If you are a business owner and want to get from where your company is today to where you want it to be, take a hard look at your organization. Bring in an outside expert such as a B2B CFO® partner to review your organization and find opportunities for improvement. A fresh set of experienced eyes can pay huge dividends, especially if it gets your company out of the “danger zone” and onto the road to success. If that kind of help would make it possible for your company to, say, double or triple in size, or more, what would that be worth to you? How would that affect your company’s valuation and how would that help you leave the business at a time of your choosing?
I have met many business owners who have a hard time seeing the problems listed above in their own organizations even though they are in plain sight. Some clients called only after it became exceedingly clear that something had to change for their very survival. One who owned a fairly large company hadn’t seen reliable financial statements in eight months! And, as it turned out, the problem involved incompetence in the organization on several levels including the family member who was the company’s “CFO”; and, there was some fraud as well. Compounding the problem was that internal processes had evolved over time and were inefficient. That organization is now doing well and is on its way to achieving the owner’s goals.
Here is wishing you and your company the best of luck and success in either avoiding or getting out of the danger zone and in reaching your goals.