Tag Archives: financial tools

Ways to Boost Financial Performance in Face of Economic Uncertainty

Ways To Boost Financial Performance In Face Of Economic Uncertainty

Here we are in a challenging economic environment that spans almost every industry. Every day we are reminded of this with still high unemployment rates, less than hoped for corporate financial results, bankruptcies and foreclosures, low consumer confidence, etc. With this news constantly put before us, I frequently hear from business colleagues that it isn’t possible to succeed in this environment. However, the one commonality among all of these is that business owners generally cannot control them in the sense of the larger economy.

Instead of crawling into a cave and hiding, a better alternative is to focus on the things that we can control in our businesses. There are many things we cannot control; some of the larger macroeconomic issues listed above are among them. What then can we control? To name just a few, we can control new product development, marketing, internal costs, operational efficiency, reliance on debt to run businesses and the amount of time and money we invest in growth (i.e., resource allocation).

To illustrate a more positive approach, I provide the following example of one of my partners and their clients. Their industry was down about 25 percent in 2009, and the business was definitely feeling the downturn early in the year. During the 1st quarter, a key competitor went out of business and liquidated. Instead of sitting on their heels and letting the poor economic environment hold them back, the owner and his team sprung into action. Together we were able to quickly put together a financial projection for the business.

Based on the projection, the client decided to hire the competitor’s top salesperson, a key customer service rep and a technical expert. We also worked with the client’s bank, presented the financial plan and were able to increase the line of credit to support the several-million-dollar increase in business. By the end of 2009, instead of being down 25 percent and having real struggles, the business was up 7 percent for the year and had increased market share in a very competitive space. This year, the client is expanding his warehouse and office space in anticipation of future growth.

The lesson here is that prudent risk, even in the face of economic uncertainty, can provide the impetus for excellent financial performance. Here are some thoughts that come to mind when I think of ways to be more aggressive in this shaky world:

  • Invest in new equipment that will reduce manufacturing cost and increase gross margin. The financial tools to use to help with this decision are a return on investment and discounted cash flow analysis.
  • Develop or acquire a new product/service that brings unique value to your market or provides access to a previously untapped market. The financial tools here are similar, but in this case, I would also suggest a pro forma P&L.
  • Advertise your product, rebuild your website, or add the ability for customers to purchase from your website to stimulate new sales. Similar financial tools can help bring facts to this decision.

Let’s not allow what we’re hearing in the media and from the government cause us to stifle our businesses. There remains a tremendous number of opportunities in every marketplace. Taking advantage of these opportunities now requires a more analytical approach followed by a good plan of execution. A plan is only that, a plan. However, a well thought out plan with good financial projections can lead to a more certain and acceptable outcome.

For more information increasing your business’s financial performance, visit B2BCFO.com.

Financial Statements

Using Financial Statements, Tools To Plan Your Future

Know what you have before planning the future using specific financial tools and financial statements.

There are many famous quotes about the importance of enjoying the present and not focusing too much on the past or the future. We do this in our personal lives and with many of our responsibilities, such as work, education and our finances. As a financial planner, I meet with many people seeking assistance with meeting specific financial goals and find that many times they have ideas of what they want and what they have already done. This is great, but before planning the future, it is important to know what you have now, a snapshot of your current situation. This is a critical piece, not only for individuals, but businesses, too.

Before focusing on investment news, what stocks are hot, politics and what might be a new trend in the investment world, investors should focus on understanding their current position. It is nearly impossible to determine the right mix of investments and what strategies may be appropriate without knowing this. Investors can use specific financial tools, including different financial statements, to help them identify what they have. These tools can apply to both individuals and businesses.

The first step is a data-gathering process. The second is imputing the information from various financial statements. For individuals, we would include a statement of financial position and a statement of cash flow. For business owners, we would include a balance sheet, income statement, statement of cash flow, and a pro forma statement. These are great tools that can help identify one’s financial position.

When creating a statement of financial position, one will clearly list his or hers assets and liabilities. Assets, such as real estate or other valuable items, should be considered at current market value (the price that one is willing to pay today for it). Assets should be categorized as cash and cash-equivalents, such as checking, savings, money market accounts, stocks, bonds, mutual funds and life insurance. Liabilities include credit cards, auto loans, unsecured loans, real estate mortgages, education loans and personal debts. This will provide individuals a balance sheet of assets at a particular point in time.

The next important piece is a statement of cash flow. Some of us may know this as an income statement. This statement will show inflow of income and outflow of income at a particular point in time. The inflow may include salaries, sale of assets, investment dividends, rent and bonuses. Outflows may include mortgage payments, auto payments, credit card payments, insurance, general living expenses and taxes. The statement of financial position and statement of cash flow are valuable tools to have before implementing an investment plan.

A pro forma statement is the last tool to use and includes future projections of the balance sheet and cash flow statement. This is important because as our economy and life situations change, we may need to adjustment our plan as needed. The same process also applies to business owners. However, the business entity will need to consider many more details regarding assets and liabilities, as well as inventory and staff.

Once the financial statement process has been completed, one will have a greater understanding of his or her position when beginning an investment plan. In addition, this process can improve the odds of success and allow more control in an investor’s decisions.

For more information about financial statements and financial planning, visit jacobgold.com.

Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

This information was prepared by Michael Cochell of Jacob Gold & Associates Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.