“Six-two and even.” was the famed answer former Boston Red Sox Manager Joe Morgan often gave when he was questioned for certain decisions in a game. This expression, of course, doesn’t really mean anything other than saying he had no real answer, his decisions were not based in anything logical, but rather on a gut feeling.
Too many small business owners take following their gut a bit too far. They go in without proper information or analysis and can’t make quantifiable or sound business decisions. A CFO can help business owners to kick the habit of always shooting from the hip, with the help of tools such as forecasts and financial dashboards, which provide critical guidance to the mos commonly asked questions, such as:
Will I have enough cash to get through a dip in my business and what kind of dip can I withstand without needing more cash?
What will happen to my business if I invest in a new product line and what will be the impact on cash flow?
What will happen if I maintain the status quo and keep doing business like I have been?
Should I discontinue a product line and dropping this line make me more profitable?
Should I buy a truck or new piece of equipment?
What will happen to my business if I try a new advertising campaign?
I want to get involved in internet marketing. What investments need to be made in people, time and money and how does this impact the entire business?
Should I add a location and can my business handle the additional investment in adding the location?
What is the liquidation value of my business should I decide to discontinue my business?
Can my business be more productive and are we operating at peak efficiency?
Is there another business model that would be more effective?
Should I add another employee or is that just going to build additional expense with very little benefit?
Should I lay off staff and what impact will that have on the business?
How do I evaluate sales performance?
Is my overhead too high?
Are my selling prices where they should be?
Are my gross profit margins where they should be?
Depending on how you answer, these questions can make or break your company. With a CFO’s assistance, and through utilizing their forecasts and financial dash boards, a business owner greatly increases their chances of answering these questions the right way, and not with “six-two and even.”