Tuesday, October 12, 2010

A CFO's guide to profit (and weightloss)

Why is it diets don't work?  With billions of dollars of revenue being generated annually via weight loss plans, and quite likely just as many pounds being lost each year- why is it that we're still fat?   We intellectually know that we can't continuously eat lavishly and exercise sparingly without accruing some consequences, but yet we still always manage to refind those glorious 10 pounds that we'd proudly managed to drop the previous quarter.

Those lucky ones that have won the battle of the bulge for life have done so through disciplined eating and execution.  Planning meals and actually eating them (and only them) is the simple not-so-secret concept that separates the winners and losers (which in this case would be the winners - confusing?)  Those who are successful long-term have learned to navigate around the challenges that present themselves from time to time when life manages to keep things from going exactly according to plan.  (Cake celebrations at the office sound familiar?)

I think maintaining profitability and adequate cashflow is basically as simple as maintaining a healthy weight.  It's both easy and impossible for most of us.   Only about half (made up stat) of new businesses actually start with a solid business plan.  Of those, only about half (again, made up) actually use that plan to guide their behavior and influence budgets.  And of those, again about half (you guessed it, totally made up again) are going to actually spend in accordance with it.    Even with made up stats, we're likely down to ~10% (yes - out of thin air).

Obviously I'm over simplifying a complex business issue - or am I?   You are paying your accounting team good money to manage profitability for your business, and they have processes that require approvals and checks and balances, right?  Don't go believing anyone but you is responsible for your business success.   Think about it - even a personal chef hired to provide you with meals containing just the right amount of calories can't guarentee weight-maintenance, because at the end of the day it's up to you to choose what you eat.  (Don't believe me? Ask Oprah.)

As a small business CFO,  I'm certainly not intending to dimish the power of management accounting to influence business success. But I also believe small business success is so influened by CEO behavior that it comes down to leadership willingness to own the plan  - not getting distracted by spending tempations, nor get overzealous with spending cuts.   Those CEOs with the discpline will win.

No comments:

Post a Comment