Managing Your Capital

Matrix Key:  Financial Viability - Resource Management - Capital

"Capital, in some form or other, will always be needed." - Mahatma Gandhi

As most entrepreneurs know, obtaining capital to fund their start up or their ongoing operations can be a daunting task.  Your business must have capital in order to be financially viable.  So once you acquire capital, how do you manage it?  Capital is a precious resource that needs care and nurturing if it is to help your business grow.

To properly manage your capital, you need to manage all four of the following:

1. Investors - They gave you the money.  Make sure you hold yourself accountable to them and be able to show them the value of their investment.
2. Profits - If you are not converting your capital into profits, you have a problem.
3. Banks - Your banker can be your most effective partner.  Banks can supply additional capital and give you tools to manage it.
4. Accounting - You must track how your capital is being deployed into the production and delivery of your product and be as efficient as possible.

Every business owner has a duty to carefully manage capital.  It is important to find the right balance between releasing capital into the business and holding some back to fund future projects.  Get as much advice as you can from trusted sources, and always be on top of your numbers.  When you manage capital effectively, you have already won half the battle.

Are you ready to win?

Measuring The Projections

Matrix Key:  Financial Viability - Profitability - Measuring the Projections

"It is often said that there are two types of forecasts, lucky or wrong." - Unknown

Even the best business projections and forecasts are meaningless unless you compare them to your actual performance.  One of the most important facets of Financial Viability is to measure your projections, that is, to measure your company's performance against those projections.  If your results vary widely from your projections, you should take action immediately to either stop the bleeding or make necessary adjustments.  So what's the best plan for measuring against projections?

Here are four weekly actions to take to stay on top of your projections:

1. Accounting department meeting
2. Production department meeting
3. Sales department meeting
4. Estimate department meeting   

Each of these parts of your business need to constantly review their costs, labor, and time, as well as report on any unusual circumstances that will skew the results higher or lower.  A forecast is a critical tool for success, but it is just that, a prediction that will be lucky or wrong.  The proof is in the pudding, and measuring your results is a key ingredient your recipe for profit.

Are You Ready to Win?

Good Accounting System

Matrix Key:  Financial Viability - Profitability - Accounting System

"The company accountant is shy and retiring.  He's shy a quarter of a million dollars.  That's why he's retiring." - Milton Berle

There's a good reason that the cornerstone of the WholeLife Matrix is having a Good Accounting System.  The accounting system is the road map of your business.  Without it your business is basically blindfolded and wandering aimlessly.  All the hard work you put into your product, your employees and your visibility in the market vanish in a heartbeat without a good accounting system. 

The four requirements of a good accounting system are:

1.      The system must be Tracked Daily;

2.      You must have Someone Accountable;

3.      There must be a system of Checks and Balances; and

4.      There must be Capacity for Growth.

Look at your current accounting structure – can you identify each of these requirements in your system?  As the above quote hilariously implies, your accounting system is only as good as the people who run it.  Depending on the size of your business, you might need only one person to manage the accounting system or you might need a whole department.  Make sure you invest in a quality experienced financial accountant.  That's a winning bet for your business' long term health.

Are you ready to win?