When business owners call on consultants, they are often excited to jump straight into strategy or tactics for a project or process. After all, time is money and most business owners are motivated, action-oriented people. But the reality is that business owners and their leadership teams are usually going a million miles per hour, which skews their perspective on the big picture. That’s why, in my opinion, every strategic initiative or consulting engagement involving CFO services should start with one simple question: why are you in business? This post explores why this question is critical and how it can influence your strategy and management processes.
It’s not a trick question
Asking why you’re in business is not my way of fishing for a mission statement. It’s a personal question. What I need to understand is why you’re taking on the big risks of owning a business and working so hard. Based on my experiences as a business owner, I’m assuming your business takes up most of your time and keeps you up at night worrying about all kinds of things. So understanding why you would put yourself through that often cuts right to the heart of key considerations for any strategic or tactical plan. Let’s look at some examples to understand why.
My first client as a consultant was a couple who owned a $10M company in the insurance space with roughly 100 employees. When I sat down with them and discussed why they were in business, they had a very crisp answer. They told me that they were in a niche space where they were considered experts and got to speak at a lot of conferences and they absolutely loved what they were doing and wanted to keep doing it. They were concerned, however, that they had too much wealth tied up in the company, so they wanted to take some wealth out of the business and diversify their investments. At the same time, they were competitive and they were looking for a way to close a $17 million-dollar gap against the industry leader.
Planning an exit
Shortly after meeting with my first client, I met with another client who was in a very different situation. He owned a large carpeting business and his response was, “I’m tired and I just want out.”
Keeping it in the family
Another client I worked with who owned a trucking company told me he was in business to build his company up so he could leave it for his kids.
Not all owners have clear answers readily available to my question. In those cases, my follow up is, when do you want to exit your business? Often, an owner will respond with “I love what I’m doing and never want to exit my business.” While I understand the sentiment behind that answer, I assure every client that they’ll want to exit their business at some point, and so we then explore:
- Their best guess for when they’d like to retire
- The terms they’d like to exit under
- What they hoped to have accomplish by the time they exit
- How much value they hope to get out of their company
Getting from personal reasons to smarter planning
You can see in all the cases above that the responses had nothing to do with mission statements or products. In each case, the owners were in very different places and the plans we put together needed to be informed by the bigger-picture reality of their lives and goals.
For example, as part of his strategic planning, the trucking company owner needed to be identifying positions he could segregate for his kids so they could be effective in them. He also needed to be defining his accountability centers and products differently to fit his vision for the business. The carpeting business owner, however, needed to quickly institutionalize the business. He needed to bring in a strong management team that could survive his departure so potential buyers would be convinced that the business could run without him. And yet another client who didn’t have a crisp vision for where he wanted to take his company became a lot more focused when he decided he wanted to retire in 9 years at a relatively young age with a specific valuation. Of course, answering why you’re in business can be much more complicated when there are multiple owners, but the potentially divergent goals of different stakeholders makes it even more important to consider early and often.
Toward a disciplined management process
As a part time CFO, I love talking with business owners about why they’re in business and figuring out how they might be able to adapt disciplined management processes to reduce surprises in pursuit of growth and other goals. So if you are looking for CFO consulting in Dallas, give me a call and we’ll set up some time to chat.