Julie is a passionate and experienced financial professional dedicated to helping women launch and manage financially sound companies. She believes that the creative and collaborative approach of women makes them uniquely suited to mentor, guide, and lead.
The fourth quarter has arrived, and businesses are knee-deep in planning for 2021. Larger companies are updating plans they created over the summer, while smaller businesses may be thinking about the year ahead for the first time. Articles and blog posts on LinkedIn reveal the importance of budgeting, especially during a pandemic. Now more than ever, businesses need financial plans that are realistic and flexible and emphasize cash flow. Operating plans must include contingencies: spending that can be cut if revenue disappears or incremental investments that can be made if sales take off.
That is all true, but it feels detached from the enormity of what we have experienced this past year.
Whether your business time has benefited from the pandemic or has struggled to keep doors open and employees on the payroll, 2020 has been a year of living in the “upside down” of Stranger Things. We have walked out of our homes into a world that has changed, and we cannot find the door to get back in.
Public transportation is out. Masks are in. Co-workers trade happy hour at the local bar for a game of trivia over Zoom… if they are lucky. Others wait at home for the day their business can fully reopen and work resumes.
When the economy's downturn hit, I began helping my clients navigate loan applications, furloughs, and lease obligations. We waited for a government response like a child asking a parent for an allowance. At first, we were optimistic, but then, we tired of begging. There were winners and losers when relief did come: state and local governments were out, airlines were in.
We are not done.
As we pull out the roadmap and prepare for an uncertain 2021, we must look beyond the familiar signs on the side of the road. They are bright and flashy and hard to ignore, but following a well-worn path will only lead us to the same destination, and it is hard to turn a bus around. Instead, we must brave a new route with a better view and a world where businesses are part of the solution.
A Wrong Turn
Years ago, I worked for a Fortune 500 company in corporate Financial Planning & Analysis (FP&A in the business world). As a senior manager with two young sons at home, I commuted forty-five to ninety minutes each way. I joined my co-workers at long fiberboard tables in an open environment, separated only by a monitor, a pair of headphones, and the aroma of a co-worker’s coffee. We clicked our keyboards, loaded data, budgeted, forecasted, and planned. All year round.
Budgeting for the next year started in the summer, with several revisions occurring before the end of the calendar year and throughout the next year. It was a constant process. An increase in commodity input costs or a decrease in planned sales volume, for instance, would necessitate major changes to the financial plan.
My uncle once asked me at a family gathering what I did for a living. After I explained, he asked what I did when the budget was done. Done? I cocked my head to the side and paused to think.
I had not even explained the target-setting process and the effort to deliver the plan!
To understand corporate targets, you have to understand the role shareholders play in a publicly owned company. Shareholders buy stock in hopes of earning a financial return on their investment, either in the form of dividends or as an increase in the price of the stock.
From the company’s perspective, the arrangement raises cash, lots of it…but at a price. Think your children are demanding? Try having thousands of shareholders. EVERY SINGLE YEAR, the shareholders want to see growth. EVERY SINGLE YEAR, sales must go up. EVERY SINGLE YEAR, costs must go down.
To build shareholder expectations into the financial plan, “targets” are issued to internal divisions and functional areas. While the CEO and CFO make campaign-like speeches, the budget changes, yet again, and employees get recruited to join the “winning” team.
“Go deliver the targeted results.”
“Go get the sales.”
“Go find the cost savings.”
We brainstorm cost-cutting initiatives. We launch "buy one/get one"- promotions to boost volume. We swap out expensive ingredients for cheaper ones. We change production locations. We haggle suppliers to lower prices. We sit across conference tables, assign action items, and review financial results. We analyze data, point fingers, use angry voices, and debate the reasonableness of the target.
We work long hours.
We miss pizza night with the family, concerts for our children, and hours of sleep.
We deliver some new sales, cut some costs, and still…we miss the target.
There is no fanfare.
Just lower employee bonuses before the work begins anew and the promise, “We will do better next year.”
A New Route Time
I stayed on this road for a long time. My eyes grew heavy behind the wheel, but I wasn't quite ready to pull off the road. The caravan of believers is long. Stepping out of line requires courage and a firm belief that we can do better.
I stayed the course until I couldn't do it anymore, and my car crapped out on the side of the road. The story in the rearview mirror had become clear. Chasing the promise of endless growth, bigger bonuses, and better titles was a never-ending road to nowhere. It was all a mirage. What had I accomplished? What problem had I solved? Who had I served?
Now in the midst of a pandemic, I find myself in a new world on a new road taking in gulps of fresh air and the openness of the expanse. Maybe you feel it, too. There is a lot less traffic out here, and while there is no guarantee we won't get stuck in a detour, the path offers hope and possibility.
We may not be able to change public companies' ownership structure anytime soon, but we can help guide our companies down a new path in 2021. We can start a new caravan with a conversation instead of targets.
What if we were to look at the world around us in the midst of a pandemic and ask ourselves these three questions?
Who am I serving?
How can I help?
How do I measure success?
If you have a mission statement, marketing plans, and a list of company values, you are already on the path, right? You can speak at length about your target consumer and the problem you are solving. Check that box.
Not so fast.
Who are we REALLY serving? Our customers and employees or the shareholders and owners? Are we part of the problem or part of the solution?
Are we supporting a financial model that protects our natural resources, allows our employees to share in the generation of wealth, and improves consumers' lives?
Alternatively, are we supporting a growth model that promotes unlimited consumption and brings wealth and well-being to owners and not those we claim to serve?
It is time to call into focus what really matters. It is time to spend our long work hours solving real problems.
Need some help getting started? Here are 10 ways to refocus your business and create better financial plans for 2021:
Meet with your team and align on answers to the above questions BEFORE you start creating a financial plan. Then, build your financial plan in support of your strategy. Yes, there will be limits to what you can afford, and no, you do not have to offer all of your services for free, but you do need to have meaningful conversations about what you can change.
Consider adding non-financial metrics to your success measurements: employee satisfaction, waste reduction, number of customers served, etc.
Invite a diverse group of people to join your board of directors or advisory board. Include employees and laborers, environmental specialists, women, and people of color. Make sure your board includes the groups you claim to serve.
Track and share your impact on the world: reduction in use of natural resources, meals served, employees hired, funds donated, etc.
Ensure that all employees are included in the list of who you serve. Make their financial, emotional, and physical well-being a priority.
Review and make changes to your compensation structures. Ask yourself if you could live off of what you are paying your employees. Reallocate dollars from top earners to lower-level positions.
Link compensation incentives to customer and employee satisfaction and not just profits.
If your company has been favorably impacted by the pandemic, consider hiring new employees at a fair wage instead of pocketing higher profits.
Donate a percentage of company earnings or volunteer for an entity aligned with your mission.
My personal favorite: stop mathematically forcing plans to reach a target. Instead, bring your employees together to solve the real challenges at hand.
We are in this together. The traffic on the road moves pretty fast, and it can be hard to find an exit ramp, but the path is clear if you slow down and focus on what really matters: the earth, community, health, and each other.
Your 2021 business plan is the perfect place to start. If you feel like you are riding alone or going the wrong way down a one-way street, grab someone else’s hand and carpool, or reach out to me. I am an excellent backseat driver. Let’s write the next chapter together.
Julie is a passionate and experienced financial professional dedicated to helping women launch and manage financially sound companies. She believes that women's creative and collaborative approach makes them uniquely suited to mentor, guide, and lead. When women-owned businesses grow, so do their voices, influence, and communities. Julie has over twenty-five years of financial management experience inside major corporations working with marketing, manufacturing, and supply chain teams. She has learned first-hand the pitfalls of corporate greed and brings a holistic view of business success to her clients. Julie is the founder of Watch Her Grow, a company providing expert financial services to women-owned businesses.
