(A follow-up to When Small Businesses Miss the Point of Forecasting.)

It’s no secret why 80% of small businesses fail within the first 18 months (according to SBA.gov). Most failed businesses are guilty of two cardinal sins.

1. Discounting experience

Some management teams think that success is driven by bringing a superior product or service to market followed by outworking the competition. If only business was that simple!

The first question I ask every new business owner – what’s your exit strategy? This question applies to all businesses, whether in financial services, consumer products, or another industry. If you don’t know where you’re going, how do you plan on getting there?

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It’s a question that some management teams debate long after bringing aboard new talent in the form of employees or consultants. Was the right person chosen for the task and was it a wise usage of funds? I often recommend that clients consider the points below in evaluating their decision. These criteria fit companies of any size, in any industry, whether it’s a start-up company or a venture cap or financial services giant.

Seek Talent with Complementary Skills

I’ve identified this as the biggest obstacle in acquiring the best talent. Some management teams ultimately settle on “yes” people. They want the good soldiers who follow company protocol and never create a stir. A few problems arise from this mentality:

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Networking is a word that makes most people cringe. For some, it calls to mind speed dating – getting jammed into a room with complete strangers, forced to share details of business and self. For others, it’s looked upon as a necessary evil. Successful business persons, however, generally view networking as synonymous with opportunity. As a small business owner, targeting “best in class” venture cap and financial service firms as my perfect prospects, networking is vital to my success.

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Eighty percent of small businesses fail within the first 18 months (according to SBA.gov). That statistic should raise red flags to entrepreneurs. How can businesses avoid getting relegated to the “4 out of 5” bucket? Careful planning aided by detailed forecasting will increase the odds for success.

BUT…

…I don’t have the time!

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In truth, it’s a lost art. Below are key observations for building meaningful relationships and accelerating your career the right way.

Strategic partnerships before friendships

This might sound cold and impersonal. In reality, it’s neither. It’s a valuable lesson that my first mentor tried to teach me in Manhattan. He told me, “The most fun people don’t always make the best co-workers. Always let someone’s work doing the talking.” Unfortunately, I didn’t truly comprehend the message until a few years later.

That’s when I received a promotion to the ranks of middle management. One of the co-workers who I occasionally joined for happy hour tried to use my promotion as his means for coasting through work. He started arriving late and leaving early. When we faced impromptu deadlines, he punted projects back to me or other managers. Eventually, it necessitated a face-to-face talk behind closed doors. All he could say was, “I thought we were friends.”
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Traditionally, a company might groom its Controller to ascend to the role of CFO, either as part of a long-term management plan or upon the former CFO’s departure or promotion. It makes sense on paper, since the Controller and CFO work closely together, sharing responsibility for the back office. However, as discussed in the blog titled 3 Common Mistakes by Management – through the Eyes of a CFO, more is expected and needed from the CFO in these changing times. These responsibilities include strategizing with upper management to develop tactics for managing the growth of companies. This makes the jump from Controller to CFO more challenging than ever. In layman’s terms, it’s like asking a historian to become a prognosticator!

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1. More revenue is always better

When I announced the launch of Hemera Financial Solutions, my peers frequently volunteered the same advice – “sales drive business.” While it’s certainly true, chasing revenue can cripple a business. During a recent business pitch, a prospective client raved about a new contract that paid $50,000 per month. I simply asked, “What’s the profit margin?” He had no idea.

He factored in the cost of the materials to complete the engagement, but never considered the cost of his employees’ time. After a rough calculation of the salaried staff hours required by the contract, I estimated that the prospective client lost $30,000 per month on that engagement. This job also tied up the availability of resources for other projects which suffered as less seasoned workers were forced into roles for which they weren’t adequately suited.

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