Don't let your small business make you small minded.

This is one of those tough lessons I learned this week. I am an entrepreneurial CFO. This means that I am a Part time CFO that performs CFO Services and my background consists primarily of owning and operating small businesses all through my career. Even now, in addition to my CFO practice I co-own a property casualty insurance agency with my partner.

What I learned this week is that as a small business owner we can become small minded. What I also learned that a large part of what drives that small mindedness is self doubt.

Here is my story:

Back in 2002 I put together a business plan to create Virtual Trade Shows. These virtual trade shows would help small companies who cannot afford to attend or exhibit at important trade shows an opportunity to attend over the internet.

Here is an excerpt of the concept from the Executive Summary:

"Tradeshowsonthenet.com, Inc. ("TSON" or "the Company") was created to streamline commercial tradeshows and make them much more cost effective and more productive to the participant. The tradeshows would take place on the internet providing both exhibitors and attendees with more capabilities and tools in order for them to accomplish more at a lower cost than they would if they all were actually at an exhibit hall. The Company's purpose is not to eliminate tradeshows, but creating them in a virtual environment while maintaining all the advantages that tradeshows afford and increasing efficiencies, data and participation."

As I reflect back on why I did not pursue my business plan, I remembered I was fraught with self doubt. Self doubt that I could not raise the money, self doubt that I could not come up with the technical programmers, Self doubt that the idea was before its time and so on.

Last week I received an email from On24 a company among other things creates and builds virtual trade shows. They have 3 Venture firms on their board and look like they are doing extremely well. I saw pieces of their latest virtual trade show and it is exactly what I envisioned. Evidently the founder of On24 had no doubts about raising money, finding programmers and the timing of the project.

I had prepared and executed business plans before but they were on a smaller scale. I let a small business mentality make me small minded and I let self doubt prevent me from executing this plan.

The take away here is:

Wouldn't it be a shame if self doubt prevents you from serving the world!

Michael Barbarita
Next Step CFO
CFO Services
781-326-3822
yourcfo@nextstepcfo.net

What Are Rolling Forecasts

One of the more important CFO Services is Business and Cash Flow Forecasting. This CFO Service gives the business owner the foresight to take action. Many business owners operate their business on a day to day basis without any business and cash flow forecasting and without thinking about what is going to happen next month, next quarter or even next week! As a result they never understand the benefits of business and cash flow forecasting and guess what? Their competition does understand the benefits. Their competition understands that business and cash flow forecasting:

• Reveals weaknesses and strengths in your organization.
• Finds solutions to solve those weaknesses and improve on those strengths.
• Helps you to learn more about your business.
• Helps you to be proactive about addressing potential trouble down the road like for example, a cash flow problem.
• Makes people in the organization accountable
• Gives the business owner piece of mind

One of the problems with business and cash flow forecasting is that once the forecast becomes 30 days old it is stale, outdated and most times forgotten. To address this problem the state of the art CFO performs what are called rolling forecasts. Rolling forecast capability allows one to enter actual results for the most recent month and then the rest of the forecast rolls forward for the next 12 months. This is called a 12 month rolling forecast and should be done every month to keep the forecast current. I usually prepare a 24 month rolling forecast for my clients to get a longer range perspective of where the business is going. With these updates the CFO and business owner can make changes as needed as well as identify any other problems. The rolling forecast makes the forecasting process a monthly occurrence and a monthly planning process that adds tremendous value. With my clients I also combine the results of the rolling forecast with an analysis of the key performance indicators for the month.

With tools like the rolling forecast, the business owner can be on top of their game and gain a competitive advantage against the many business owners who do not do so!

Michael Barbarita
Next Step CFO
CFO Services
781-326-3822
yourcfo@nextstepcfo.net

Cash Flow Problems

In a future post I will talk about how to alleviate Cash Flow Problems. In some of my previous posts in other blogs I have mentioned some causes of Cash Flow Problems, but in this post I thought I would identify as many causes of Cash Flow Problems as I can. Cash Flow Problems are caused by:

1. Too much inventory.
2. Too much salary to owner or too many withdrawals by owner.
3. Doing business with customers who are slow paying or who do not pay at all.
4. High Overhead too high.
5. Too much interest expense on debt.
6. Under capitalization from the beginning
7. Unexpected casualty not covered by insurance.
8. Excessive purchases of fixed assets and capitalized costs.
9. Operating losses
10. Paying bills too quickly

The above bullet points represent the key causes of Cash Flow Problems. As previously stated in future posts I will identify ways to alleviate Cash Flow Problems once these events occurs.

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