S + I x T = F O (Strategy + Implementation x Time = Financial Outcomes)

Many people and businesses, make the mistake of believing that the setting of the financial goals is how they will get growth. They have a financial outcome in mind and this is what drives the business. However, this is just target setting and it is not a mechanism for growth. What you do and how you do it will always create the financial outcomes for your business and your targets will be irrelevant if you do not have the means and mechanism to deliver on them. I have seen financial targets and projections being the basis of the “growth strategy” on many occasions and while financial projections are important they are not the growth drivers. For me your growth drivers are:

• Creating your USP and building the value proposition for customers
• Understanding your customers and your income channels
• Your marketing activities
• Building your reputation
• Building your Brand
• Your actions, short, medium and long-term

Developing a strategy for the business needs to include how you create, build and deploy these drivers and looking beyond the short term financial goals.

For established companies with growth aspirations the formula helps you to look within the business to see where you can make the improvements to move the business forward. There is no such thing as a perfect business or strategy so there are always ways to improve what you are doing. To try and grow and improve on the previous years financial performance without making improvements, or investment, is completely illogical yet lots of businesses are trying to do this.

Creating growth is a skill but when we run our businesses we sometime become too close to everything. We cannot see the wood from the trees and this is where the external advisor should add value. Their role, is to help you to evolve the business strategically and improve the implementation, by identifying some operational weaknesses. Some of these improvements can create quick wins and some will take longer to come through, but you grow by making these improvements.

Financial projections and forecasts, when you are a new and young business, or for a new product line, are notoriously difficult to get right and using the formula can help you sense check your numbers. Developing the strategy, and implementing it, is a huge learning process that then filters into your numbers. If you can develop the management information that gives you genuine intelligence on how your role out is performing, against what you thought, then this will help you create better financial forecasts in the long run.

If we are rigid in evaluating our performance, against just the financial projections, then you miss the value in the knowledge you have now that you did not have before.

Time is the variable we all struggle with because projects always take longer than we think. If you are doing a financial forecast, then have a think about what it might look like if your early assumptions and strategy are only half right? How might this affect the projections. Does it mean you are failing?  – no, because you are still moving forward, but it will mean the journey will take longer. This could mean you will run for longer before you are profitable, and you may consequently need to invest or raise more money than you thought.

Coming up short on projection, particularly if you have investors on board, can be uncomfortable. However, if they recognise the evolution and progress being made, then I think this would give everyone comfort. Personally, I would be very wary of an investor who is too focused on the early numbers without understanding the learning process you need to go through to build financial forecasts that have some substance to them. Every set of early projections I have prepared, have been hopelessly off the mark to the point they are irrelevant. However, in time the strategy evolves, and the implementation improves, creating numbers that are real and mean something.

By using this simple formula, you can also map the financial progress you have made, against the knowledge you have gained.

Craig Eason is the founder of Startup4ten® and the Inventive Step® coaching network and has been an Insurance Broker for over 27 years.