By: Steven Walker, CPA, CA

How to get the information you need to manage your business

Your numbers are trying to tell you something. Are you listening?

In my experience, most business owners aren’t. At least, they aren’t listening hard enough. Let me explain.

Every piece of information you need to make decisions regarding your business can be found in your numbers. Want to know where to spend your marketing dollars? Your numbers can tell you. Thinking about streamlining and dropping some products or segments? Listen to your numbers to discover which ones to let go.

But here’s the problem. You’re not going to get that information from your year-end financial statements. And unfortunately, the creation of those statements is about all the accounting the average business owner does.

In this article, I’m going to discuss the accounting method most business owners use and why it’s almost entirely useless for decision-making purposes.

Then I’ll tell you about another way of looking at your numbers that will—100 per cent guaranteed—make you a more effective manager and substantially improve your business.

Peering through a keyhole

Ever tried to see what’s going on in a room through an old-fashioned keyhole?

With a limited view, you might get the general idea—who’s in the room, what the person is doing. But there’s plenty outside your field of vision that, if seen, would give you more insight into why that person is behaving that way.

Your year-end financial statements work in the same way. They provide a general overview of what’s happened in your business but can’t tell you why. Yet for most business owners, they are the source of the only numbers used to make business decisions.

What is the purpose of accounting?

In short, the purpose of accounting is to provide relevant information to decision makers, both internal (management) and external (bankers).

For most small and medium-size businesses, the focus of accounting is simply the preparation of year-end financial statements for tax purposes and, possibly, for outside parties.

When you receive your year-end statements from your accountant, you are simply receiving a record of how your business did last year and how much tax you owe.

How do these statements help your business?

In a nutshell, they don’t. There are two reasons for this…..stay tuned for my next post to find out more…

By: Steven Walker, CPA, CA

How to get the information you need to manage your business

In my last post I started to talk about getting the required information to help you manage your business…

The information you receive through your year-end financial statements is outdated the minute its in your hands. Your financial statements are prepared anywhere from 3 to 6 months after your year-end. How useful can 6-month-old numbers be for decision-making purposes?

Not only is the information old, it’s quite limited. The statements are prepared for outside parties who typically do not require details. If you’re using these statements to make important decisions for your business, you’re basically wandering in the dark.

As a business owner, it’s your job to steer your business and make decisions that will affect future profits positively. This is extremely difficult, if not impossible, to do with the limited and out-dated information contained in your year-end statements.

Digging deeper

As big business well knows, managing a business requires access to details so you can analyze your products and services, your cash flow or any other aspect of your operations. This analysis is the only way management can get the information they need to make effective decisions.

Information divided into pre-established categories can shed new light on your business. For example, it’s all well and good to know the profit margin for your entire business for the year—a number you can get off your year-end statements—but what can you do with that information?

By digging deeper, you can discover the profit margin of product A and compare it to the profit margins of products B, C and D. This allows you to make decisions about your product lines in order to increase future profits.

Through a detailed breakdown of information, you can discover:

Opportunities for growth

  • Which products or segments to drop or promote
  • Where you may be able to, or need to, increase your prices
  • Areas for cost reduction
  • Problem areas that need your attention

Try getting all that from your year-end statements!

3-steps to obtaining the numbers that will help you grow your business

  1. Decide what information you need to achieve your business goals.
  2. Establish a system to collect that information.
  3. Generate useable information frequently so it is always current.

Small steps to success

There is no end to the types of information you can collect about your business but setting up to obtain the numbers you require isn’t always easy.

I recommend taking small steps and slowly creating information management systems. You don’t have to begin collecting every piece of information immediately. A little is always better than nothing, so just begin with one change and see what happens.

For example, I have a client actively pursuing growth, who decided to make a small step in this direction. After determining the kind of information he wanted, he divided his customers into four market segments. Then he kept track of sales made to and profits realized from each of those segments.

After several months, he noticed something surprising. The numbers were clearly telling him that a hot segment of the market was responsible for a relatively miniscule number of his sales.

Somehow, he’d missed taking advantage of the growth in that particular market segment. His numbers were practically shouting: Here is an easy way to increase profits! Luckily, he’d tuned in to the message soon enough to take advantage of the situation.

The client responded by directing his sales team to focus on that market. Not surprisingly, sales increased substantially.

One small step. One big return. Next year, he can, if he wishes, add to the amount of information he collects to further strengthen his management capabilities.

Moving forward

There is no doubt this process requires more effort on your part. While the actual duties can be delegated, you are the one who needs to determine what information will provide the most benefit, how you will keep track of it, and what reports will need to be generated.

More importantly, you are responsible for putting what you learn from your numbers into action.

But please don’t let the thought of the extra work keep you from making changes to your accounting system. Start collecting some additional information today and see what results.

In my next post I will give you a ‘real life’ example of how applying the concepts from my first few posts were implemented in a business and helped transformed that business.

By: Steven Walker, CPA, CA

In my last couple of articles I talked about using your numbers to help you manage and grow your business.

The following is real life example of how a client used this concept to help grow his business…

Several years ago I was engaged by this client. During my initial conversations with the business owner, he admitted to me that he really didn’t understand his financial statements, nor did he trust they were correct, largely because he didn’t understand them.  He also admitted to me that he certainly did not use his numbers to help him manage his business.  Really, how could he, if he didn’t understand what his numbers were telling him?

In looking at his numbers and more specifically his internally generated profit and loss statement, it was clear to me this information could provide little value for decision making.

The business, at the time, generated sales of approximately $1.5 million, to what turned out to be, different business segments or classes of customers.

After being engaged by the client, the first initiative that was undertaken was to do what I call a ‘horizontal analysis’ on his profit and loss accounts.  Instead of the traditional vertical income statement I analyzed his profit and loss accounts and classified these accounts into the different segments within the business.   We were then able to quantify the sales levels, both in sales $$$ and volume of jobs, gross margin $$$, gross margin %, average transaction value, average gross per job for each of the business segments.

This analysis showed us that each of these segments yielded very different results from each other. Further, we were able to identify that the activities to grow each segment were in fact quite different.

After doing this analysis, we applied the ‘4 Ways to Grow Your Business’ to each business segment and developed a profit improvement plan for the entire business.

Afterwards, we re-structured the company’s chart of accounts so we could accurately monitor the results of the profit improvement plan on a go-forward basis.  This process and thinking has been continued year over year for the past 5 years.

The results of implementing these basic, yet most often over looked and underutilized concepts has been nothing short of outstanding.  Over the past 4 years the business has grown 135% in sales and profit has soared to reach a maximum of 7.5% of sales.

See, I told you it was simple!

By: Steven Walker, CPA, CA

Okay, savvy business owner. Here’s a question for you. You have to get from point A to point B in an unfamiliar city. What one item will virtually guarantee your successful arrival?

The humble map is indispensable when it comes to travel. It points you in the right direction and provides a reference point by which you can gauge your progress and determine if you’re still on course. And if you’re not, the map shows you at a glance how to get back to where you need to be.

When it comes to travel we all understand the need for maps in order to reach our destinations as quickly and painlessly as possible. Now, you’re probably wondering what this has to do with business, and why a CFO-to-go is yammering on about sightseeing.

What’s in a name?

You see, whenever I talk about strategic planning to clients, a funny thing happens. Eyes glaze over and formerly excited business owners eager to improve their profits lose all interest in what I’m saying.

I know it’s the phrase ‘strategic planning.’ It’s one of those phrases that have become jargon, losing all meaning. You hear it and immediately think of futile exercises with no earthly practical purpose, exercises that keep you from what you need to be doing—running your business.

So I try not to use the phrase, at least not right away. Instead, I explain that there is an exciting, energizing tool you can use to bring focus, vitality and direction to your business, giving you a map leading straight to success.

Dream on

One of the reasons strategic planning has developed a bad reputation is that a large part of the process involves dreaming. Business owners aren’t supposed to sit around daydreaming! They’ve got work to do, businesses to run, fires to put out.

We tend to view action as the required ingredient to success. Planning is omitted because, hey, there are only so many hours in the day and you’ve got to spend them getting things done.

It’s true that action is critical if your business is going to reach its full potential. Planning on its own gets you nowhere. But in the same way, action without defined purpose—a plan—is not going to allow you to move forward. Instead, you flail about, using trial and error and taking the long road to a destination you may not have desired.

You need to know where you’re going

Visualizing what you want in the future is the only way to develop a plan that will allow you to reach your goals. Would you laugh at a group of tough, grizzled army generals sitting together and daydreaming? That’s exactly where strategic planning came from. The military wanted to ensure that the enemy would be met under the most advantageous conditions. So they brainstormed in order to identify those conditions and formulate a way to achieve their goals.

The term was adopted by business in the 1960’s to describe a thoughtful, analytical approach to improving companies. It is now the most valuable management tool in existence. Realistically, you simply cannot experience growth in your business—and increased profitability—without strategic planning.

By: Steven Walker, CPA, CA

In my last post, I discussed how critical strategic planning is to creating success in business. It is absolutely fundamental, and yet most business owners fear and avoid the process. In fact it isn’t all that intimidating when you break it down and approach it logically. The strategic planning process involves exploring and answering three key questions:

  1. Where is the business today?
  2. Where do you want the business to go?
  3. How are you going to get there?

You aren’t trying to create an operational plan. The objective is not to detail each and every step required to achieve your goals, but rather to ensure that you understand the ultimate aims for the business and have a general map leading to the realization of those aims.

For example, you may be strategically planning to introduce a new product within the next year. The plan will include all the major steps to introducing that product—source suppliers, create collateral material, etc., but it won’t list each and every step involved, such as telephone supplier A and interview three graphic designers.

Getting ready

Set aside a large chunk of time, like a day or even a weekend, for your strategic planning session. Step one has to be done before the session, so evaluate how long you anticipate this step to take and mark a future date as strategic planning day.

During your session, you won’t be involved in actively running your business. You need to focus on the future, not on the day-to-day. This is your opportunity to work on your business, so avoid the possibility of interruptions by getting away from the office.

A word of caution—strategic planning really can’t be done alone. Find someone who can keep you on course, assist you in evaluating your ideas and provide both feedback and support to join you for the entire session.

Step One: Where are you now?

While dreaming is required in strategic planning, it must be based in reality. If you don’t understand exactly what’s going on in your business today, any plans you make for the future are no more than pipe dreams that will never be realized.

A systematic evaluation of the entire organization that looks at both the internal and external factors affecting the business will tell you everything you need to know so that your planning session is based on fact rather than fiction.

Perform this analysis in the days, weeks or months leading up to the strategic planning session.

Step Two: Where do you want to be?

This is the most exciting part of the process. During this step, you’ll clarify the vision you have for your business, as well as its mission. Where do you want your business to go? What do you want it to look like? How much profit do you need?

After considering general economic factors as well as those specific to your industry, you can make assumptions about the future that will allow you to develop your goals for the business and formulate a workable plan.

Step Three: Getting there

You know what you want. Now you have to determine how you’re going to get there. In this step, you’ll create specific action steps that will allow you to achieve your goals and move your business forward.

I also recommend establishing timelines and detailing levels of responsibilities so all parties know what’s expected and when.

In the future

Life goes on. You’ll change; the business will change; the economy will change.

Revisit your strategic plan on an annual basis in order to evaluate progress and determine if the contents of the plan are still applicable. Scheduling at least one strategic planning session a year will keep your business flowing smoothly and ensure growth occurs exactly the way you want it to occur.

Insights from a business advisor

In this report, I address the 12 most common mistakes I have seen business owners (even the really smart ones!) make time and time again. The good news is that these mistakes can be corrected or avoided altogether. So, consider this a friendly heads-up from your external CFO and business advisor. My hope is that, armed with this bit of information, you can avoid these errors right from the start and make the best decisions possible for your business to thrive

By: Steven Walker, CPA, CA

Over the past couple of months as the oil price has plummeted and the economic outlook has changed, I have talked to a lot of people – including business owners and market place experts – listened to, and read many media reports all related to what the recent drop in oil prices means for Calgary’s businesses. That said, I think the most pertinent report I have heard yet was just this past week on the radio station CHQR.

Paraphrasing, the reporter went on to say that in his opinion, “no one really knows how long this down turn will last, nor when we rebound to what levels we will rebound.” The reporter went on to say that Albertans have enjoyed a very good run economically over the past several years, but perhaps when we do rebound, it just may not be to the economic levels we have previously seen.

The intent of this blog article is NOT to give my two cents as to when, why, and to what levels we will rebound, but to give you, the business owner, my perspective on how best to deal with the times we find ourselves.

9 Management Tips for Business Growth:

  1. Be a strong leader. There is a saying, “If it doesn’t kill you, it will make you stronger.” Now more than ever, you need to step up to the plate and be a strong leader in your company. Show your team that in times of possible adversity you will not back down but fight even harder. Strong leadership is the key to success, in good times and bad. Take a position of strength and your attitude and spirit will inspire your team to perform strongly as well.
  1. Recognize this is likely not forever. Slower economic times have happened before and will, in fact, happen again. If you recognize this, you can relax and prepare for the good times that will happen in the future. The better you can position your company to survive and do well in difficult times, the better chance you have of flourishing when these difficult times fade away.
  1. Do NOT just think about ‘cost cutting’ measures. Costs, in themselves, are drivers of profit; you need to spend money to make money. A strategy of simple cost cutting will leave you unable to compete.

That being said, you DO NEED to focus closely on where you are spending your money.

  1. Think about strategies that will grow the top line of your income statement. It is not impossible to increase your revenues or sales even when the economy is in weaker shape. I’ve seen it happen first hand.

Remember that revenues are a function of both volume and transaction size. Think of ways to maintain volume but also devise strategies for increasing it, all the while trying to increase your average transaction value. The good news is that these strategies don’t have to cost a lot of money.

  1. Do NOT simply slash your prices to gain sales. In the long term, the only companies that can survive and do well with a price-cutting strategy are those that have the absolute lowest cost structure. Chances are you do NOT have the lowest cost structure and will fail if you try to use this strategy.

Lowering prices is a very hard strategy to implement successfully, so think carefully about the long-term implications and get good advice before doing it.

  1. Size up your entire company. When was the last time you looked at your organization chart, employees’ job descriptions, business processes, and employee activities? It’s probably been a while. If you want to stay on top, take the time now to conduct a thorough analysis of everything in your business, from sales to marketing to process to accounting.

Are there ways you can reduce inefficiencies in your business that could save you some expense? I am not suggesting you blindly fire your employees, not at all. But perhaps you can alter some processes or activities that eliminate one extra part-time position. You never know. Be creative and think outside the box.

  1. Revisit your marketing plan. And if you don’t actually have a written marketing plan, now is the time for your business to develop one.

Creating a marketing plan won’t cost you a lot of money, either. There are many books and resources on low-cost marketing activities and they will work if these activities are appropriate for your business, designed properly, and implemented consistently.

  1. Customer service, customer service, customer service. If you want to survive and thrive in a recession, you must remember your customers are the lifeblood of your business. Determine the life value of your customers; it should inspire you to service your customers better than you have ever done in the past.

Successful businesses understand the saying, “Under promise and over deliver.” Take it from me, if you do not treat your customers like kings and queens during this period, you are giving them excuses to shop elsewhere.

  1. Pay closer attention to your numbers. During uncertain times it is vitally important to know your numbers and what they mean to the success of your business. Understand what products, services, customers, and business segments make you money and which ones do not. Then focus on activities that will generate the most profit.

Remember, though, that profit is not a guarantee of cash flow so ensure your company is implementing activities that will optimize its cash flow. In the best of times, increased profits without cash flow are simply a slow death. In recessionary times, growing your profits without growing your cash flow could mean the end of your company before you know it.


By: Steven Walker, CPA, CA

How To Consistently Meet and Exceed Your Revenue Goals

Sales do not happen overnight. Rather, successful businesses take the time to plan out their sales, understanding when the ebb and flow in their business happens, who their ideal customers for their product / service are, what are their motivating factor for actually purchasing, and that not all sales are going to be equal.

With this understanding, you are being proactively strategic throughout the year in planning your sales cycle and filling your sales pipeline.

When working with many of my successful clients, we develop ways to be strategic in their business, and profitable with their sales. In each case, there are typically eight key steps we focus on to achieve profitable sales. These steps are:

  1.  Tie your sales plan to your Profit & Loss (P&L) objectives: By doing this, you keep focused on your growth goals throughout the year, as well as gaining an understanding of where you sit at any given month.
  2.  Learn what “wow’s” your customers: Understand what products and services your business wants to sell, is good at selling, and is actually able to sell. Note that you must be able to deliver beyond your customers’ expectations…not simply meet their expectations. In a nut shell, this simply means you need to WOW your customers on every sale! If you do this, they will remain a loyal client, and most likely refer you to other potential loyal clients.
  3.  Understand your types of customer: Drill your sales plan down to your customer level, understanding the types of customers you work with, the revenue tied to them, their purchasing habits (volume, time of the year, etc.), and potential for growth.
  4.  Defining your customer: Define WHO your ideal customer is in terms of what their needs are vs. what their wants truly are, who they are in terms of revenue, age, gender, psychographics, and so forth. This is different than point 3 in that here, you are able to niche and focus your marketing at a specific group of people you where want to grow your customer base, rather than who your customers already are. If these two are already aligned, great!
  5.  Align core business with customers: Understand and admit what your core business actually sells as this must be aligned to what your customers want to buy from you. For instance, if you own a hot tub company, what is it that your customers are buying from you? A hot tub? No. You are most likely selling relaxation. This is what your core business truly is – relaxation – and that is what you will sell to your customer group.
  6.  Focus your sales team: Make sure your sales team is focused on your core business and do not go off on tangents with your potential customers, turning the potential sale away. Confirm that your team understands their goals and how they tie into the company’s goals. This will help them understand what their focus should be and how they have direct impact to your business.
  7.  Accurate sales data: Ensure your sales team has accurate historical sales data for each of your (their) customers. This will help them tailor their sales approach to the customer, making the customer feel connected to your product / service, thereby seeing value in what your core business is…and more likely to purchase!
  8.  Monitor your sales vs. your sales plan: Always monitor actual sales performance against your sales plan and take actions to bridge any gaps. This is why point 1 is crucial to your company. When you are able to review your P&L timely, you are able to see where you sit in relation to your sales goals and take corrective action, if required, or stay on course if you are meeting your goals.

Really, it boils down to knowing where your efforts are being spent and knowing that you should not be spending equal effort on all products and services. To set yourself, your team, and your entire business up for more sales…but not more work, develop a strategic sales plan based on your most profitable products / services and work your way back.

Interested in talking about how you can set you and your company up with a successful sales plan? Contact me today for a conversation.

I give you my word

You will be satisfied with my involvement. If not, I will revisit our agreement.


Ready to get started?

Let’s start the conversation. Contact me today for your initial consultation.

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