Last month, I wrote about the importance of having a financial plan as a roadmap to your company’s progress to achieving forecasted levels of profitability.
This month, I want to discuss the components of your plan. There are many books, software programs, and outlines that lay out the components of a business plan. Some are good, some are not so good. But what I find most important about any plan is whether or not it is internally consistent and cohesive. In other words, does it “hang together”?
At one point during my career, I was responsible for presenting the company’s financial plan to major investment banks. I remember one meeting in particular, where an investment banker took the time to point out that the numbers he saw in the financial plan agreed precisely with those he was presented by the VP of Engineering. Frankly, I was surprised that he took the time to mention something that seemed so obvious. Of course they agreed, I thought, we work for the same company and talk on a regular basis. But the investment banker told me that rather than being common, this was unique. Often, executives or managers of different departments have varying views about resources required to deliver an agreed objective (or don’t agree on the objective itself) and nowhere does this become more evident than in the financial plan. The result is a business plan that doesn’t “hang together”. This is almost always obvious to an experienced reader and it’s a sure sign that not everyone in the organization is “on the same page”.
The very process of developing a plan for your business should involve active discussions of various points of view. Though these discussions, components of your plan (marketing, operations, research, product development, customer service, selling effort, pricing, etc.) will be debated, at which point either a decision will be made or consensus will be built (depending upon the decision making progress at your company).
What should emerge is a common point of view about the goals and the necessary steps to get there. This is the true power of having a roadmap for your business and an area where your chief finance executive should play a key role. To truly add value, (s)he must understand every function of the business, keep an eye out for inconsistency, and work tirelessly to resolve disputes.
If you need help with your business or financial plans, please send an email to or give me a call at (314) 863-6637. And, remember . . .
Your Cash Is Flowing. Know Where.
Copyright @ 2006 Homza Consulting, Inc.