Put a Ladder to Your Goal: How to Use Financial Goals to Get in Control of Your Business

Angela felt stuck. Her goal was to sell her consulting company in three years for $5m, but profits were too low and she did not know how to move forward.

Are you in a similar position? Do you have a goal and a plan but lack the concrete steps and financial insights to keep your business moving through difficult times?

The answer to your and Angela’s problem is clear Financial Goals. They provide the tangible targets and milestones that lead to your goal. And they provide the financial insights that help you get unstuck.

Let our team at Insight Matters help you work out what Financial Goals will get your business moving again.

Get in control

Angela had grown and sold her first consulting company without any major problems. But this time around it was proving more difficult. She had a team of 10 consultants but they did not have enough billable hours. Costs also seemed too high. On top of that, staff turnover was high and so were her stress levels.

Angela was more and more directly involved in sales but this extra work took its toll and profits were still too low.

Like all seasoned business owners, she looked at her monthly financial reports for answers. But she did not understand what conclusion could she draw from the numbers. She just knew she needed 15% EBITDA profit, but didn’t know what that really meant.

She felt powerless.

The issues Angela’s business faced is actually common for business owners—especially entrepreneurs who run a consulting business. The challenge mainly come from two dimensions:

1. The owners’ expertise (or sale network) initially drive the business success. But they could become bottlenecks for the owner to scale or to eventually sell the business
2. Most business owners lack the skill to translate their financial numbers—the most meaningful metrics of a business— into useful business decision or daily actions. Thus, they often avoid the numbers and get back to doing what they are most familiar with.

Our help to Angela is to exactly address these two challenges. Rob and the Insight Matters team’s analytical work has brought Angela the insight of her own company—how exactly the business was doing and what should be her next steps. And on top of that, we provided her a system and support to ensure that she stayed on track.

No more getting stuck. Angela felt back in control.

Today, profit and revenue are up, and Angela is well on her way to achieving her $5m valuation. She may even push the valuation higher!

Our team at Insight Matters are experts at getting companies moving again. Our founder, Rob, has co-founded several high-tech businesses in China and is now using his experience to pursue his passion for helping other dynamic businesses.

What are the steps they took to help Angela in control of her goal? Below we will run you through the three key principles to bridge your business and financial goal into daily operation. 

Translate your vision into Financial Targets

Every business owner has a business or life goal. That could be to ‘build a successful business’, freedom, to retire early or to have a ‘lifestyle business’. But we need to translate our intangible vision into concrete financial targets for direction.

In that sense, the financial goals are, actually, the only meaningful goals, we believe. 

Our first step, thus, was to sit down and listen to Angela – to understand what she wanted to achieve. We then examined her company’s operations and finances, and worked out the right Financial Goals for her company.

We then broke these goals down into yearly revenue goals and three sales and pipeline metrics – also known as ‘leading indicators’. The metrics are key because they will be unique to your business and its current situation.

Our second step was to create a roadmap for Angela to sell her business. This involved setting specific targets for her Financial Goals and metrics at different points in time.

Our last step was to build Angela a dashboard to track her progress and ensure accountability. We also provided the personal support Angela needed to follow through.

The following three sections explain each of our three steps in detail.

Know what you optimize for

Every company and situation are different. We found the right Financial Goal and metrics for Angela for her current situation. But next year she may need something different.

You will need something different to Angela. And what you need to get you unstuck now will be different to what you need to accelerate growth next year.

There is no one approach that will work for every business.

At Insight Matters, we sit down, listen and examine every business carefully. Together with the owner, we work out the unique Financial Goals and metrics the business needs to move forward.

Based on the revenue targets, it turns out Angela needed 20 percent EBITDA rather than 15 percent to reach her $5m valuation in three years. This meant an EBITDA of $700k annually and thus revenue of $3.5m.

We then examined her company’s finance and operations in detail.

Our analysis found that contrary to what Angela believed, costs were not too high. Instead, the key problem was that her revenue was too low. Administration costs were a little high, but they provided the company with the ability to scale to the desired level of future revenue.

Next, we turned our focus on how to boost her revenue.

We found that her profit margins were higher for the higher end service, even though these projects usually were smaller. Angela thus needed to increase sales to higher end service and to reduce the percentage of larger but less profitable projects. To do this we broke sales down into three main leading metrics for Angela to target:

1. The number of tenders;
2. The percentage of tenders that she should win
3. The average size of each tender per service type

These are the metric that made sense for Angela to increase sales to higher margin clients. For your company, this could look completely different.

We find the unique Financial Goals and metric specific to your business and current situation.

Design the roadmap

Taking the financial goal of $5m in revenue and the three sales metrics, we built a roadmap for Angela to achieve her goal of selling the business for $5m.

The roadmap tells you how you will use your financial goals and metrics to achieve your dream. It determines what the metrics need to be at different points in time and what actions the company needs to take to achieve those targets.

For Angela and her company, the first action step in the roadmap was to systematize sales. She needed to put new information flows into place so that she could measure the three sales metrics. She also needed to align the efforts of her sales team to the metrics.

The second action step was to hire a new salesperson to free Angela from most of the sales. Angela was good at sales but with all sales depending on her, she became a bottleneck in achieving the sales targets.

The third action step was to speed up the availability of the P&L reports from 20 to 25 days to 10 days. While the financial goals and sales metrics would generate the key financial insights, it was thus important to have the information as soon as possible. Stale information is not useful.

The third action step was to increase prices by 5 to 8 percent so that the gross margin would be high enough to make 20% EBITDA possible. Without a higher gross margin, Angela would not achieve her EBITDA goal. Before proceeding, we checked that there was scope to do this with the higher end service without losing too much business.

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Discipline, Discipline, Discipline

With the financial goals, metrics, and roadmap in place, the final step was to ensure that these would lead to new behavior and change.

Insight Matters does not only provide the tools for your company’s success, but also provides the system to ensure your success.

Our system comprises a monthly dashboard and personal support and accountability.

We provided Angela with an electronic dashboard for her financial goals and metrics that was easy to understand and color-coded to show key results. Angela now had the information and clarity she needed to make decisions. She was finally freed from starting at the black and white numbers on the P&L.

Besides the dashboard, Rob and the team at Insight Matters had monthly check-ins with Angela. A business owner needs support and encouragement besides numbers. The real goal is to grow the business and its leaders.

Insight Matters goes beyond financial expertise. We want to see you and your company soar.

Conclusion

Angela is no longer stuck and her goal of selling her company for $5m is back on track. Do you need a financial advisor to help you with your dream?

Knowing your destination is not enough. Good companies have plans and goals but great companies have the Financial Goals and metrics to get them there.

Like we did for Angela, let Rob and our team at Insight Matters get you moving again. Our team has the experience and expertise to help you. Contact us today. We are waiting to help you.