CO— Roadmap for Rebuilding: Planning Your Financial Future

One thing that unites all small business owners is continually being concerned about their respective companies’ financial health. During the pandemic, business owners have had to be incredibly savvy with finances, as they pivoted their approaches, applied for Paycheck Protection Program (PPP) loans, and reconfigured long-term growth strategies.

These topics and more were discussed at the latest CO— Roadmap for Rebuilding event. Event host Jeanette Mulvey, content director at CO—, led the discussion, which featured advice about building your long-term financial future and better business relationships. The panelists included Adam Fazackerley, COO and co-founder of Lay-n-Go; Iya Karade, CEO and founder of Athletic Arts Academy of New Jersey; Tom Kelly, director of analyst relations at Oracle NetSuite; and Stephanie Sims, founder of Finance-Ability.

Here are several of the top insights from the discussion.

Cash flow is top of mind for small business owners, but other metrics are important, too

As businesses set up for long-term financial health, cash flow — the amount of cash being transferred into and out of a business during a regular period — is often the top metric they are looking at, Kelly notes.

“In most companies, you can account for things on a cash basis, which basically means as you receive $1, you recognize that,” Kelly said. “Or [you can recognize cash] on an accrual basis, so where you invoice a customer, you recognize revenue. There's a little bit of differentiation that goes along with how you're running your business and how you're going to interpret the information that comes off. But at the end of the day, when we talk about cash management and cash flow, that's key.”

However, Kelly also mentions a few more metrics that businesses should be tracking closely outside of the basics like revenue, profit and losses. These include:

• Inventory balance.
• Gross profit.
• Profitability by product.
• Profitability by employee.

When talking to investors, choose the ‘smart money’

Business owners looking for capital should carefully consider the type of investors they need to help them grow. Fazackerley notes that they should seek out ‘smart money’ from a source with a deep understanding of your industry.

“Whether they’re former founders or whether they’ve invested in other founders in your space, [smart money investors] can help you,” Fazackerley said. “You're not only getting money, but you're getting wisdom so that as you grow your company, they will see similar patterns and trends. They understand margin challenges, understand cash flow requirements, and understand the cost of goods sold. Instead of just money in the bank that you deploy as you see fit, you also have this understanding and support so you can make better decisions.”

Don’t have the answer? Ask your network

Karade noted that as she has built her business and changed financial strategies during the pandemic, she has leaned on advisors and professionals who could often point her in the right direction. She mentioned SCORE and talking with retired business professionals as two places to seek help.

“Reach out to your network, and talk to all people who are in your financial circle,” Karade said. “I consider myself the CEO, the butcher, the baker, and the candlestick maker. I needed help understanding and keeping track of bookkeeping systems to see where we're spending and where we could increase spending or decrease spending in our marketing aspects. … Talk with seasoned executives that will sit across the Zoom camera with you and really drill down on what your processes are.”

Build your finance team like a sports team

Sims, who advises many entrepreneurs on financial matters, likes to use a sports analogy for finance teams by suggesting you need two separate teams to help you manage money.

“Just like football teams have an offense and defense, you need two distinct lineups on that financial team,” Sims said. “You need the people who help you track and understand your numbers, and often those are internal. And you also need the people who are going to help you find the resources to grow. Those people are important because they're going to use that financial data to make those decisions.”

Think about growth in the post-pandemic period

With the COVID-19 pandemic’s end (hopefully) coming this year, Sims points out that businesses need to shift from panic mode to growth mode.

“As we start to come out of this emergency mode, start to turn your eyes toward growth,” Sims said. “Especially as you start to think about the resources you need to grow your business, whether that’s through a banking relationship or it might be related to venture capital. The most important thing to think about is what you want out of your business. You have to know what is right for you because ultimately, any of the resource partners you bring in need to be aligned with that mission.”

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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