252: The Intersection of your Financial and Strategic Plans 

Michele Williams:

Hello, my name is Michele, and you're listening to Profit is a Choice. On the podcast today, we're going to be talking about the intersection of your financial plan and your strategic plan. It's not enough to have one or the other. We really need them in combination to make our business as healthy as possible. So, listen in as we talk about that overlap between the two.

Every day, empowered entrepreneurs are taking ownership of their company financial health and enjoying the rewards of reduced stress and more creativity. With my background as a financial software developer, owner of multiple businesses in the interior design industry, educator, and speaker, I coach women in the interior design industry to increase their profits, regain ownership of their bottom line, and to have fun again in their business. Welcome to Profit is a Choice.

Welcome to the podcast. I am excited to help you start a new year thinking about strategy and financial plans. If you've been hanging with us on the podcast, we've been talking about this probably for the last three or four months. It's so funny to me that it seems like we start planning for the next year almost in September, which we do September of the prior year, only because that informs how we end that year to begin the next one. But what I want to spend some time talking to you about today is the intersection of your financial plan and your strategic plan.

Sometimes it seems like we think we need to have one or the other, or we think that they are so separate. I remember when I did a podcast one time, and I was on a marketing podcast, and the comment was, I don't know what finances have to do with marketing. I was like, oh, my gosh, I don't even know how to separate them. The same is true with your strategic plan and your financial plan. If you think about it, the financial plan is really telling you how the money is going to be spent in the company and how it supports the goals and the planned achievements that that company has in store. Let's move it into your home, it's no different than saying, here's the money that I have available to me. Here are the clothes I need for the new season. Here are the gifts I need to buy. Here's the travel I want to do, and, oh, by the way, here's the mortgage that I need to make. This is the same kind of thing for your business. As you are creating your strategic plan, there are a couple of things that I want you to keep in mind.

First, every item on your strategic plan should have an associated price tag with it. Meaning it's going to cost you something to do or implement. Now, you may be thinking, oh, my gosh, this isn't something that requires us to buy an item. All right, that's true. However, it may take time to implement that particular task. How much time is it going to take you? Who's going to be doing it, who has to review it, and what is their hourly rate? That's going to be how much that cost you to implement. It may be that it requires you to hire a new person. It may mean that it requires you to let someone go. There's always a cost involved to the items on the strategic plan. The first thing that I would invite you to do is look at, well, build the strategic plan, but then look at the strategic plan and ask yourself, what costs can I associate with every item on the plan.

The second place that they intersect and that would be creating and managing the financial plan alongside the strategy. Kind of what we started off talking about anyway. You really can't separate them. Every single thing that we have an idea that we want to accomplish, we should have some money set aside or know how the money in the company is going to be spent or the time to actually execute that task. By putting the number to it that we talked about earlier and running these things side by side, it gives us a chance to evaluate every initiative and then to start putting things in priority order based on the money we have, the money that's coming in, the choice we made before it or after it. Being able to not only assign a dollar amount, but run them side by side, you almost have an equalizer as you compare and contrast the task and maybe the timing of those tasks.

The third thing is the company needs to have an idea of the cost to implement and achieve the goal. Sometimes it's easy to look at a task that doesn't have a dollar assigned, that's not running along a formal plan and think, let's just go do it. Then you're halfway in, and all of a sudden you realize, this is going to cost so much more. Let's use an example, a renovation. Your clients, you guys probably have run into this all the time. You get into things, you open it up, and there's so much more that is required. So not building out a plan and not looking at it and trying to assign numbers in advance, it doesn't mean you're going to get everything exactly right. None of this is trying to get you to the penny, it's trying to keep you within a healthy boundary of this is how much I've said I have to spend. This is the budget for time, effort, energy, and money to implement this task. Now, can I do it within those boundaries if you will.

The fourth thing is to really think about how these overall align with the full-on values and company goals. A company could have goals that are even bigger than what the current strategic plan is. Their goals could be larger and years out, much more visionary, where the strategic plan isn't built out that far. Being able to keep budgets and financial plans and everything in alignment, what it does is it allows you not only to plan to have enough money for today, but enough money for where you're going. Think about it this way. In your home, let's say you have a big project coming in, maybe you want to redo your entire kitchen, or you want to put all new furniture in it. It's not enough to keep up with the budget for your day-to-day spend. We have to be able to keep up with money savings for what is going to come, or even retirement. We're saving the minute you're 20 something years old and you start working, you're already saving for retirement when you're 65 or 70. It's that planning for today, but also planning for really long term. If we don't have a good reach or our arms wrapped around the financial implications and the strategic implications for where we are and where we're going, we could definitely get off track and go in two separate directions.

When you're thinking about doing this, I want you to consider creating strategy first at that intersection of strategy and finances. Create your strategic plan first. That's really the visionary of what you're going to do and where you're going to go. Then put your numbers to it. After you've created the plan and put your numbers to it, you may need to review, you may need to revise, you may need to move things into a different order. I would always start with strategy first, especially in a planning phase, and then look to what it's going to cost and then back up. It's no different than when we go out and perhaps, we do a design plan and we give them everything they said they wanted, and then we look at how much it's going to cost and then we start pairing back. It's the same thing in your business. Create the strategy for what you want, where you want to go, how you want to get there, put your numbers to it, and then look at it and ask yourself, where do I need to tweak or revise in some way.

The last thing that I really want to share with you about this intersection of the finances and the strategy is once you have the financials set to your strategy, it gives you something to measure. It allows you to set KPIs, or key performance indicators, the things that you want to measure. It also allows you to look at ROI, or what is the return on that investment. Again, think about marketing and finances. If I had a strategy of breaking into a new market area, not only is it breaking in, I want to measure what did it cost me to get in, and what was the return on that investment, and was it worth it. And so, being able to tie the finances to the strategy gives you the opportunity to set those indicators that you want to watch and manage, as well as looking at the return on that spend. Did I get back the money, or did we remake the money that I needed to? We could probably go on and on and on for this, but I do hope you see in that little, tiny Ven diagram, there is a definite overlap, or an intersection, if you will, between finances and strategy. It's not enough to build a financial plan and not have a strategic plan or a strategic plan and not even tie it to the numbers, because then it's almost like there are two sets of rules that we need to follow. These rules need to work together within the business.

Once you have the strategic plan and the financial plan, the next step is to build a budget that supports that. Sometimes financial planning is done at a much higher strategic level, which is kind of what we're talking about today. Then we build out a budget that matches that strategic plan. I can tell you what we use in my company and the companies that I work with to be able to do this work.

First, we always use some type of written strategic plan. That could be in something like, in a word, it could be in Google, it could be in any number of places that you're saving a written document that tells kind of the high level of what your company is going to do.

The second thing we do is we have a financial management system. I use QuickBooks, my clients use QuickBooks online, QuickBooks desktop, Studio Designer, or Design Manager. There are lots of things that you can use. FreshBooks, Sage, Wave, all of them. Something that keeps up with the day to day of your financials.

The third thing that we all use is we use Metrique Solutions. Metrique Solutions allows us to pull in that financial data from our financial accounting software, and then it allows us to do things like manage the data, analyze the data, model the data where we don't have other tools to do that. You may be building 45 spreadsheets to do that. The nice, really great thing about Metrique is we're able to load the data in and then we're able to analyze and immediately start to see where we're meeting the KPIs that we've set or where we're outside of what we need to do so that we can catch ourselves if we're moving off task at any given time.

If you are listening to this and you're thinking, I don't know how to do this, we absolutely can help you do that.

First, you can listen to, of course, all the podcasts and check out all the blogs, both on MetriqueSolutions.com and ScarletThreadConsulting.com. But if you want a little bit more personal approach to getting your financials in order and aligning your strategy and your finances, we have a program called CFO2Go. You can find out more about that by going to scarletthreadconsulting.com/CFO. On that page, we're going to offer an opportunity for you to work with our team to help you look at that intersection, build out those financial plans, create a budget to support it and manage it for this new year. You don't have to wing it and you may feel that everything is disparate in your company and not pulled together. We would never go out and tell a client, here's your design, but not tie it to the budget and then wonder why things didn't work yet we often do that in our own companies.

We don't have our own strategic plan/scope of work for what we're going to be doing and tie it to the finances. That's the big disconnect, honestly. This is the big disconnect. So let us help you reconnect your business, reconnect your finances and your strategy. I mentioned it on the last podcast that we did, but that is really where the stress relief comes in. That's really where the ability to breathe deeply comes in, is because you know that what you're doing and how you're doing it aligns with the money that is available for your company, not only for today, but for tomorrow. I would love nothing more than to be able to help you put these pieces together and maybe reconnect something that has been disconnected for you for a while.

You can find out more by going to scarletthreadconsulting.com/CFO or you can go talk to us through the Work with Me page and set up a discovery call. You can also check out let's say you've got all this together but no great way to manage it, you can go directly to MetriqueSolutions.com, sign up and let us get you going over there for easy management of the numbers that matter to you, every day brings you an opportunity to be profitable. The choices that you make matter. They either move you closer to where you're trying to be or further away. We would love an opportunity again to work with you and to move you closer to where you want to go. But being profitable is not an accident. It is a choice. So, I beg you, make a choice to be profitable. Profit is a Choice. Is proud to be part of thedesignnetwork.org where you can discover more design media reaching creative listeners. Thanks for listening and stay creative and business minded.