Every service business has a score. This score shows you how you’re doing. Are you operating at peak performance or way below your potential? Are you winning or losing? Not having this score is like being lost without a compass, wandering in the desert hoping to stumble on water.
The Financial Scoreboard
I’ll admit, early on I had not been great with the financial side of running my businesses.
In most of my previous businesses, I focused heavily on sales and marketing. Even going way back to my first service business that involved cleaning windows in Colorado when I was 17, I would use flyers, make sales calls and knock on doors. Sales and Marketing were my strengths, so I leaned on those skills. Looking back, I’m very grateful to have started with those skills. To really get something off the ground, get feedback, and spark any initial growth, sales skills are going to be needed most. Not financial reporting.
However, as I moved beyond that initial phase of traction and my businesses started to grow, I started to realize the importance of measuring and tracking numbers.
I refer to this as the power of “Keeping Score” or putting on your biz “optics.”
Quick note: I’ll start by saying that anyone can benefit from creating a financial scoreboard. I would even lean on the side of setting it up as early as possible, with the caveat that it is probably less applicable if you haven’t hit your first 10 customers or at least $5k in monthly revenue and sustained it for a number of months. That is my personal threshold for a business. If you’re not at that level yet then your focus should stay on validation, sales, customer research, and marketing efforts. Once you get there, allocating focus and energy to building your financial scoreboard will be vital moving forward.
Let’s be honest, there is a lot of fear (at least for me there was) around tackling finances. It’s daunting for us mere mortals who aren’t math wizards with financial degrees. But it doesn’t need to be this way. I have a rule in life where I like to know just enough to be dangerous in many disciplines, and I would encourage you to do the same. Especially in the business areas where you may be weak.
I do this for a lot of things in life like…Salsa Dancing, Cooking, Chess, Money, etc.
I have focused a lot of my energy into becoming dangerous when it comes to financial reporting and building scoreboards, not only for my businesses but also for my consulting customers. This has served me well and is one of the reasons my last business sold so quickly.
If we can agree that business is a game then your financial dashboard is your scoreboard. Yet so many business owners suit up every day to play and never bother to actually keep score. Can you imagine the Superbowl not having a scoreboard? The lack of optics and the ability to even know if you are winning or losing, or where you are going, haunts most businesses. Can you relate?
Flying by the seat of your pants and guessing …is……
…….not a smart way to run your business.
Investing in these skills, as well as someone to help you in this area of your business, can be game-changing.
I say this from a lot of experience, and knowing what it is like to run a business without and then with a scoreboard. I want to pass this knowledge on to you, and help you start your journey of actually building a financial scoreboard for your service business.
For me, my stubbornness of not wanting to learn the financial side of running a business was drastically holding me back from the growth I really wanted to achieve. I would argue the same goes for you. It’s easy to push this aspect of running a business out of sight and out of mind.
Every mentor and every successful business operator I have studied had financial scoreboards in their businesses and knew how to leverage them. This has been enough for me to allocate focus and energy here. I now want to help you do the same. This doesn’t have to be complicated, daunting or challenging either. It can actually be fun, very rewarding, and incredibly insightful.
Business is tough enough – the landscape is ever changing, and there is no secret formula for success. For me, business is an intellectual sport. Sure you have competition but not in a traditional sports setting. There are no boundaries, no ceilings, goal posts, and baskets. Much of your growth is dependent on a “you vs you” mindset. Knowing where you are and where you want to go, and pulling the right levers to give your business the best chance of success depends on your ability to measure, think, and adjust.
Having a financial scoreboard in your business can’t guarantee success, but it will give you the optics and opportunity to dramatically increase its chances. If you don’t master this skill, your chances of frustration and even failure are almost guaranteed.
For me the two most powerful principles I have learned in business that have helped me invest, grow, buy, sell, and scale many productized service businesses over the years are the power of “Measuring” and “Thinking” time; both of which are fueled by the foundation of a financial scoreboard.
To get you started, here are a few quick points that I think will help you on your journey of creating your scoreboard. If you would like help setting this up for your business shoot me an email here. I can help audit where you are at and outline the best ways to create a financial scoreboard for your business.
1. Bookkeeping vs A Scoreboard
Your accountant and bookkeeper will do their job, but what they won’t do is actually deliver the data and numbers in a way that will provide you with the required optics to make key business decisions. Systems like Quickbooks and Xero are financial recording tools, not financial or business optics scoreboards. It’s important to know the difference. Some may be able to build this out for you, but in most cases I have found that you are better off having someone experienced in this area. In big companies, this typically falls onto a CFO’s plate. Luckily, these days you can access this same level of reporting for your productized service easier than ever before without having to hire a dedicated CFO by leveraging skilled freelancers or consultants. Remember getting something set up is better than measuring nothing. Don’t get hung up on perfecting this, but rather try to get something up that you can modify and improve over time.
2. Investing in your team
As I mentioned above, it is important to know just enough to be dangerous when it comes to this part of your business. I would also suggest building your team by hiring specialists or key consultants. This not only helps save time and skip past hidden landmines, but also brings in a third party objectivity that can really help ensure you are looking at every angle and focusing on the actual problems rather than symptoms within your business. For example, I work with a lot of service businesses that have dedicated accounts and bookkeepers already in place, and help them place data into financial scoreboards and strategize on it monthly. No matter who you end up hiring or working with, make sure that you invest in this area of your business as the ROI is priceless.
3. Learn the language of business
I recommend that you start by learning about the three core areas of your financial statements: the balance sheet, income statement and cash flow statement. Get a basic understanding of how these work together and how they will fuel your financial scoreboard. This is the first stage of “measuring” and understanding. Your scoreboard will then help you leverage this data to see trends, forecast, and track key metrics. This, in turn, will let you pull the right levers, and strategically control inputs and outputs. I would also add reading the Profit First book as well. This is something I also help integrate into the scoreboard that really helps create benchmarks and buckets for all your money.[activecampaign form=1]
My goal is to break this down further, and share samples, templates and video tutorials. There is a lot one can dive into here, but I want to help share as much around this topic as possible because it has been so impactful for me. I would love to hear from you. What would be most valuable to help you build your scoreboard? Please comment below and let me know.