Overcoming FONA - Small Business Solutions
What is the greatest fear of many business owners, especially owners of smaller businesses? It’s not FOMO (Fear of Missing Out), it is FONA (Fear of Numbers and Analysis). As a result, they are leaving a lot of money on the table. Too often, business managers and owners do not know their numbers well enough, although understanding them is key to understanding how their business works. It’s not sufficient to learn the basics; instead, a deep dive is necessary if you want to run your business by the numbers. To maximize profit, the entire leadership team must participate in measuring, analyzing, and acting upon performance information across all areas of the business, including sales and marketing, operations and administration.
Running your business by the numbers involves accessing and utilizing quantitative information about your business. This empowers you to make more informed business decisions and lead your business more effectively. It’s about making continuous improvements, but you can’t improve anything that you don’t measure. Running your business by the numbers allows you to:
Analyze – Identify root causes of challenges and opportunities (cash flow, profitability, performance)
Optimize – Develop tools to manage people more effectively (goals, performance management, workload balancing) and processes more efficiently (revenue generation, operations, administration)
Strategize – Plan and prepare for future growth and sustainability (staffing, inventory, financing, investments)
For example, a New Jersey manufacturer achieved twice as much profit from the same amount of revenue by optimizing their business. They leveraged their financial and operational information to develop key performance indicators (KPIs). The KPIs were a powerful tool for setting goals and measuring progress throughout the organization. Holding employees, supervisors, and managers accountable resulted in significant productivity gains, which in turn decreased expenses and increased profits.
Another New Jersey manufacturer successfully navigated a challenging period by capitalizing on growth opportunities through strategic planning for the future. Business planning and preparation are critical since companies can easily go out of business by growing faster than they can handle. Financial projections, cash flow management, and growth capital are essential. When a business is growing, it requires additional cash, even when profits are increasing.
How often do you review your financial statements, and what do you glean from them? What are your margins, and how can you improve them? Are expenses and cash balances in line with your budget? Does your leadership team review and make decisions based on KPIs every week? Regardless of your company’s success, implementing these practices more effectively will drive greater profitability.
