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True Goals of Best-in-Class Leaders

Posted Wednesday, May 6, 2015 by Stuart Margolis, CPA, MT Margolis Partners LLC.

alt textAs financial consultants we love to analyze financial results. Financials tell a story about what’s happened at the company over the period of time being analyzed. It’s all good information. Many companies will take their historical data and predict future performance based on that data, hoping or expecting the same results as last time. But what if you don’t want the same results? What if you want better results?

Let’s say you want to increase profit by 25%. Can you set the goal there? Absolutely! Will it work? There is “a chance” it will work. If you’d like to sweeten the odds, read further.

As we consult with firms across the country, here’s the secret to our success in helping them to become profit leaders (or remain profit leaders).

After analyzing the historic and competitive financials, we take a good hard look at the predictors for future performance and develop a strong plan of action to improve profitability, reduce business risk, increase business value, and/or create more options for owners when they eventually want to leave the business. Success happens when a solid Profit Plan is built for the company and everyone becomes discipline to stay within that model as market conditions, plan execution and leadership impose change upon the organization.

Outstanding performance in one area of the company whether a cost reduction or “big win” sale, can create a short-term burst of success, but to achieve long-standing success proper execution of a Profit Plan can offer the financial security you seek. Elements of the plan should include Financial Balance, Growth, Excellent Execution, and Cohesive Leadership.

Financial Balance

I often get asked, ”What is the profile of a company wanting a Profit Plan”? At first you might guess that it’s poor performers, companies that need a big boost. Actually, that’s not the case. Our most successful Profit Plans were implemented by our most brilliant clients who were best-in-class but wanted to be even better. To work with us on a Profit Plan you don’t need to be a best-in-class performer already, but you do need to have (or be willing to develop) a best-in-class mindset for financial performance. In short, profit leaders understand that operating profitably is their choice. They view management practices (issues under their control) as the driving forces of profitability. Average to below-average performers tend to credit or blame changes in the marketplace for the most significant force causing profits to go up or down. We can’t help you change your marketplace, but we can help you change factors that can be controlled.

When it comes to financial performance, the ability to consistently generate cash flow under varying market conditions becomes a primary focus of our plans. Profitability and consistent cash flow fuel the investments needed to sustain long-term growth. On the flip side, inconsistent profitability or weak cash flow significantly increases business risk and makes an organization vulnerable. With a pro-active Profit Plan in place, the course is charted, giving confidence to bright managers who know they can control factors identified in the plan.

Growth

Typically, growth is viewed positively. Don’t get me wrong. We agree that growth is good. Taking it a notch further, we believe “managed growth” is even better. Your Profit Plans should take into account staffing, equipment, consumables, waste and more. We believe in structuring to be lean and growing into your bigger size. It doesn’t mean you can’t hire new talent or buy more innovative equipment. It means, plan for it and be savvy about it.

Excellent Execution

The best-in-class performers execute Profit Plans throughout their organization. Daily performance is based on the continuous improvement measures set forth in the Profit Plan. They realize that some scaling, flexing and change will be important in certain areas. They manage it internally so that the sum of the pieces equals a greater whole. Execution is not just about the ability to produce a quality product on time or become the low cost provider of a product, but rather about managing for continuous improvement in personal performance throughout the company.

Cohesive Leadership

At the beginning of the article I mentioned that the best candidates for Profit Plans need to have (or desire) best-in-class mindsets. To integrate the plan, leaders from the top down need to be on board.

Since transition, change and succession are real life occurrences in every business, good leaders choose not to ignore it. They embrace it and plan for it. By doing so, cohesiveness is established at the company. When one person leaves, the plan, methodologies and the everyday execution of tasks stay. The plan helps to minimize risk and create organizational value. A business driven by a high functioning team has corporate value. Typically, the corporate value is higher than that of a business driven by one strong leader with individual value.

Forward thought on value

Financial analysis, benchmarking, and ratio analysis are absolutely necessary. Don’t stop there. To become (or remain) best-in-class use metrics to create your plan. Use the plan to change implementation of work performed. Once you establish a strong sense of control, you will realize how very powerful your company can be. It really is possible to run like a well-oiled machine.

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About Margolis Partners

Margolis Partners have long been recognized as the financial experts for privately-held businesses with a specialty in print and packaging, assisting companies with strategic and financial management, valuation, mergers/acquisitions, accounting, audit and tax services. The firm is noted for its expertise in enabling companies to optimize profits. Proudly, it is the purveyor of the industry’s Value-Added Principles of Management, and compiles the annual Printing Industries of America Ratios, the printing industry’s premier financial benchmarking tool. www.MargolisPartners.com