In this 2-part series, we’re looking at the blind spots in owner-managed businesses and how they can impact profit margins—from disconnected systems to convoluted financial reporting systems—before explaining how a strategic business review can help plug profit leaks.
Our last article looked at how undocumented knowledge, over-servicing clients, outdated systems, poor view of job profitability, and not tracking labour utilisation can all negatively impact a business.
This second article discusses opportunities around marketing strategies, cash flow visibility, decision-making, and risk.
5 more blind spots in owner-managed businesses a strategic business review can uncover
1. Sales and marketing relying too heavily on existing relationships
Strong relationships and word-of-mouth can be powerful growth engines. But owner-managed businesses in particular tend to have an overreliance on senior or founding team members to bring in new business and referrals from existing customers, rather than making strategic plays for market share.
A lot of businesses lack a clear understanding of where and how they show up in prospective customers’ buying journey as well as why they may be losing them to their nearest competitors.
A CFO can bring a commercial lens to a business’s marketing efforts. They can make recommendations around strategic customer acquisition and retention strategies and help businesses connect sales and marketing activities to larger financial goals
2. Cash-flow visibility a manual process, not a real-time snapshot
Unfortunately for many businesses, being able to see how (and when) cash actually moves through the business — aka a real-time view of their cash position–still means manually bringing together data from different systems (banking, inventory, accounting) in a spreadsheet first.
The problem with that is business owners are always on the backfoot, constantly responding to issues from a day or 2 days ago.
A strategic review can be helpful because it sheds light on structural weaknesses in the business and hidden cash flow leaks that a P&L statement may miss.
A strategic review gives owners a better understanding of working-capital drivers and helps them to plan for a range of scenarios. Ultimately, this allows them to identify emerging pressures early and respond before a cash-flow problem becomes a full-blown crisis.
3. Too many financial reports, not enough practical insight
There is no shortage of analytics tools and dashboards that can tell business owners what happened, but what business owners really need help with is why it happened, what happens next, or what they should do about it.
An executive-level CFO has the skills to translate financial data into useful management information about performance drivers, looming risks, and areas where management attention is needed most urgently.
From here they can connect revenue, margins, labour, overheads, and cash to the operational realities of the business.
The focus isn’t on fancy reporting. It’s on better information for faster, better decisions.
4. Business-specific blind spots
Sometimes the issue isn’t a lack of financial knowledge. It’s doing things inefficiently because that’s how they’ve always been done. It’s being too close to the business to see the alternative.
For instance, the business owner who rents equipment that they may never need again for a particular client without considering the long-term commercial and cashflow implications or possible tax incentives upon purchasing it instead.
A CFO can offer an objective view, challenge assumptions, help business owners test alternatives, and identify risks (and opportunities) that are difficult to see when you’re too caught up in the day to day.
5. Risk and compliance
As a business grows, informal financial controls that once worked can become increasingly risky.
Weak controls can expose a business to errors, fraud, cash leakage and compliance problems—while inadequate risk oversight can leave owners reacting to problems rather than anticipating them.
A CFO can provide executive oversight across financial controls, fraud prevention, ATO and tax compliance, risk assessment and mitigation, and audit preparation and liaison.
The objective isn’t simply achieving compliance. It’s instilling ongoing financial discipline that protects the business and gives owners greater confidence in their decisions.
How a strategic review can help owner-managed businesses
As an independent, evidence-based assessment, a strategic business review can help business owners see where their business stands, what is holding it back, and, more importantly, where it can optimise in order to accelerate growth. But not on a dashboard that boils down results to a few key metrics, but with in-person guidance from an experienced exec.
A CFO conducting a strategic review sets out to understand how well a business is run by evaluating aspects like leadership, financial management, sales and marketing strategies, management practices, business processes, and more.
While it may feel like an audit or investigation, it’s helpful to remember that a strategic business review doesn’t just highlight a business’s problems, it offers detailed solutions in the form of recommendations and next steps as well.
In a nutshell, a strategic business review can be the first crucial step to helping businesses identify and address their weaknesses, but also seize the opportunities before them and move into the next phase of growth.
The last word
Across both articles in this series, we’ve seen that cash can become tied up in convoluted processes, inefficient systems, poorly priced work, unproductive labour, weak working-capital management, and other issues that simply aren’t being flagged in the numbers.
An executive-level CFO helps bring these issues into view — and turns financial information into decisions that can improve performance.
For many owner-managed and growth-focused businesses, a full-time CFO isn’t the answer. They may not need that level of expertise five days a week, 52 weeks a year. But having experienced CFO support at crucial times, can help make better decisions about profitability and growth.
At CFO Australia, we work with owner-managed businesses to provide the level of executive support that can take businesses from good to great by unlocking operational efficiency and releasing capital trapped in their systems and processes.
Get in touch
At CFO Australia, our team of fractional and outsourced CFOs is a diverse group of professionals, each with a wealth of experience in various industries. From finance and accounting to strategy and business development, our CFO experts are equipped with the skills and knowledge necessary to drive your business forward. To learn more about our interim or virtual CFO services, get in touch with our team.
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This article is intended to provide general information only, and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances, and assumptions, and its accuracy may be affected by changes in laws, regulations, or market conditions. Accordingly, neither CFO Australia any member or employee of CFO Australia or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.
