Do your clients struggle to decide which KPIs and financial metrics they should measure in their business?
You might find Episode 026 of the Epic Business Growth for CPAs podcast, (back when it was titled She Thinks Big!) to be helpful.
In it, Hannah Smolinkski of Clara CFO Group, joins me to talk about how to choose the financial measurements and KPIs that are most important to small business owners.
Hannah is a Virtual CFO who works with business owners to help them better understand their financials so they can make smarter business decisions.
NB: This episode was recorded before I niched to coaching CPAs and accountants. Listen to it from the perspective of what 6 and 7-figure business-owning clients need in terms of financial guidance.
The Biggest Business Challenges
I asked Hannah to share with our listeners the biggest challenges she sees her clients struggle with. She said that many of her clients struggle with figuring out what to actually charge and how it will affect their revenue. She also talks about underscoring for business owners the difference between revenue and profit: if these two concepts are conflated, the business owner risks walking home with peanuts in their pocket despite high sales numbers. Reminder: even business owners who earn 6 and 7 figures can still need help with the basics when it comes to financials.
Hannah also mentioned that one of the biggest challenges her clients face is identifying and correctly predicting expenses. Many business owners will underestimate how many expenses they will have, often forgetting about credit card processing fees, taxes and other less-obvious payments made throughout the year.
On the other hand, Hannah said some business owners overestimate their expenses, causing them to take out unnecessary loans. Some may have a hard time getting out from under their debt.
Business owners are often really great at what they do, but they don’t always have the financial education they need in order to make strategic money decisions for their business.
Tracking Financial Measurements
Tracking Financial Measurements
Hannah works to help business owners identify which financial measurements and KPIs (key performance indicators) they should be keeping track of. Here are a few that she says are important for almost every business:
- Monthly revenue
- Monthly profit
- Cost-of-goods-sold (COGS)
- The margin between COGS and product price
- Customer metrics such as new leads, new orders, or scheduled sessions
- Net cash (cash minus debt)
Many business owners miss opportunities to make more money by not tracking these important KPIs. As a fractional CFO, Hannah steps into small businesses to help them track these numbers and then begin to manipulate and change them for the benefit of their business.
Once the business is able to track these numbers for a few months or annually, she is able to help them make useful comparisons and help them understand the stories the numbers are telling. It’s of enormous value to clients who have seasonal fluctuation in revenue to be able to plan ahead so they have cash flow, even in the slow months.
Financial tracking and decision making isn’t a one-size-fits-all, download a template type of process, though. Businesses need to make individual choices about expenses and sales prices as every situation is different. Guidance from the right vCFO makes wise decisions more likely.
Who is better at money, the women, or the men?
Hannah also shared some differences she often sees between her male and female clients. While she notes that these are generalizations and don’t apply to everyone, she has seen men and women fall into these traps over and over again.
For her female clients, Hannah notices more money spent on personal and professional development. She says that they are extremely self-aware and recognize what they don’t know. This can be beneficial if it means learning something new that leads to more clients or increased prices, but it can be a detriment if it means spending unnecessary time and money trying to prove they are good enough.
For her male clients, Hannah notices that they are more likely to make more off-the-cuff decisions with not as much planning involved. This can be beneficial if it leads to by-passing fear and just getting to work, but it can be a detriment if it means making decisions so fast that costs are not taken into account.
Like her clients, Hannah advises listeners of Episode 026 to measure their KPIs every single month so they can begin to make strategic decisions for their business. She also recommends setting a budget, comparing it to current, actual spend, and leveling out the difference between the two. Be sure to check out the Clara CFO Group blog and this podcast episode for additional financial resources.
If you’re feeling frustrated with working 50+ hours per week, trading your time for money and still not making as much as you want, be sure to schedule a totally free 15-minute consultation with me. I’d love to help show you how to work less and make more.