Harvesting The Bounty
Cash Crop for Business Owners Part Three
Why you should be evaluating the crop and not just eating the produce.
You’ve planted the seeds, watered and fertilized them, and now they are starting to bear some fruit (or vegetables…or profit margins).
Now what? It’s time to assess your harvest. When you planted the seeds, you probably had some idea of what you hoped to produce. Now you need to compare those projections with your actual crop.
Whether you had a bumper crop or a locust infestation, measuring results is a key step in ensuring continual improvement. Consider the following tips and strategies as you survey your “fields.”
Evaluation
A harvest is rarely graded by “pass/fail.” So dig into the shades of production. What went well? What didn’t go so well and what did we learn? What will we tweak next time around? There is as much to be learned from success as there is from failure. Take notes to ensure that the wins are repeatable and the losses are avoidable going forward.
Some business owners (and gardeners) are adventurers who are willing to take risks and try new things. There’s nothing wrong with trying new things, but it’s important to acknowledge what just didn’t grow in your soil. If it’s likely never going to grow in your soil, stop putting resources toward it.
Now what?
When things in your organization are going well and you’ve started to reap the rewards of your hard work, it’s easy to sit back and enjoy the bounty on the table every night. But this is exactly when you should be thinking about and planning for making the most of that harvest. Will you can or freeze some for a later date or eat it all right now? Businesses generally follow a few set patterns:
Immediate gratification. The common theme here is “There’s a lot of good stuff here. Let’s use it right now.” Some business owners choose to put that bounty straight into their own pockets – often spending it on not-very-liquid homes, vacations, cars, and other fun perks. Still others choose to spruce up their offices or take the entire team to Disneyworld. However, the money is spent – it’s all spent.
Reinvest in future bounties. The theme behind this pattern: “There’s way too much to eat right now, but this is top-quality produce and will make excellent fertilizer. I’ll till the rest of this into the soil for next year.” These business owners are all about investing in the new initiative – new product or service lines, new markets, geographic expansion, and new employees.
Preserve some for later. Businesses following this pattern think: “It might be a cold and long winter. And some of this might taste pretty good around February.” Owners who fall into this category are all about liquidity. They pay down debt and build up cash reserves. If their companies are already properly leveraged and have sufficient reserves, these business owners take the cash out and put it into areas that it can be drawn out later in case the company might need it.
So what’s the right approach? Every business owner has their own flair, their own risk tolerance, and their own set of goals. We find that the most successful business owners use a combination of these three patterns.
A good finance and accounting team can help you determine the appropriate mix to achieve your individual goals.
“At the end of every fiscal year, we used to have a default, low-budget party to “celebrate” another year in business. The problem? We weren’t actually paying proper attention to the results. Here we were, eating the same cake every year, not understanding what we’d done wrong, what we’d done right and what we could be doing better. Now that we’ve partnered with outside experts to help us evaluate our performance, we know exactly how we did – and how big our cake should be.” – Small Business Owner
With careful evaluation and strategic planning, you can have your tomatoes and eat them too. Contact us today to learn more!
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