5 Big Financial Words for Growing Your Company in 2016 and How to Prepare for Rising Interest Rates
By Connie Lavin
Senior Vice President
Commercial Banking Manager - Business Banking
First Midwest Bank
NAWBO Chicago threw down a challenge and Connie Lavin, Senior Vice President, Commercial Banking Manager - Business Banking for First Midwest Bank, did not disappoint. As our guest blogger for December we asked her to offer up five big financial words for 2016. Here’s what she had to say.
Try driving a car without a dashboard. Suddenly, essential details like speed, gas level and mileage become unknown variables. For business leaders, 2016 will be about building a financial dashboard for your business. As a banking executive who has seen the rolling hills of the Great Recession – and the many innovative companies who have built a path toward financial resurgence since then – I’ve observed that a business owner can no longer be passive and leave financial metrics up to someone else in their company. The most successful companies that I have worked with all include a very engaged owner, president and/or CEO.
The following five words should encourage an owner to continuously look at their financial dashboard and make adjustments to accommodate increases and decreases in their business. Take a look.
1. Succession Planning – You are your business and your business is you. But what happens as your business grows and you need to hire a CEO or operations manager? What’s the end game, and do you have a plan to sell your business at a certain point? What happens in case of accident? Proper succession planning is critical for business owners, yet many don’t have a solid plan.
2. Data & Reporting – In this era of “big data,” business owners need to know their own data. Reporting on this data can provide insights that you didn’t know or validate insights that you thought were correct. Finding trends in data can boost sales, provide efficiencies, and help you forecast the future. You can find your most profitable days or seasons, your best customers, and your best channels for sales. Combine your data with industry data for even broader insights.
3. Revenue & Profit – Sales are an indication of a company's success. Sales trends reveal the success or failure of strategies and, by keeping a close eye on trends, an owner can make adjustments so that margin is positively impacted. At the same time, all business owners need to worry about profit. Profits allow a business flexibility to make investments in people, technology and new markets. All of these are critical for growing top line revenue and, in return, future profits.
4. Rates – The Federal Reserve Bank has been very clear that rates are going up. The debate is when and by how much over what length of time. Business owners need to look at their floating rate credit facilities and begin a shock test on rate increases to see how these increases will impact cash flow going forward. Owners can use this information to make plans that will positively impact margins.
5. Wealth & Taxes – Tax management strategy is increasingly important as an owner drives wealth through reinvestment of profit in their company. Many owners still believe that it is wise to drive losses to reduce taxes. In this market, it is difficult for businesses to obtain good rates and financing with multiple years of losses. An owner needs to be sure they are constantly engaged with their accountant who can provide advice on taxes and their banker who understands the company story.
As for the 36.1% of women-owned firms in Chicago (U.S. Census Bureau), it is clear we can and must do more to support women in their efforts to build businesses, create jobs, and grow our economy. While one in five firms with revenue of $1 million or more is woman-owned, ninety percent of women-owned businesses have no employees other than the business owner, compared to 82% of all firms (U.S. Chamber of Commerce Foundation). Additionally, only 2% of women-owned firms have 10 or more employees—trailing the 4% rate for all businesses.
Revenue and hopefully, profit, will grow in tandem when businesses begin to hire more employees and expand their operations. Staying focused on the dashboard and the five financial power words above will give a business owner momentum in achieving their growth goals and tool them for higher interest rates in 2016.
“Women-Owned Businesses—Carving a New American Business Landscape Report,” The Center for Women in Business, a program of the U.S. Chamber of Commerce Foundation. https://www.uschamberfoundation.org/sites/default/files/legacy/cwb/ccfwib.pdf
U.S. Census Bureau: State and County QuickFacts. Data derived from Population Estimates, American Community Survey, Census of Population and Housing, County Business Patterns, Economic Census, Survey of Business Owners, Building Permits, Census of Governments (last revised: Wednesday, 14-Oct-2015).
Bravo to Gail Zelitzky for being featured in the blog Next Act for Women. Gail’s business journey and success is chronicled in a post entitled “Becoming a Business Coach in her 50s: Gail’s Story” on October 15. Read it here.
Emily Lonigro Boylan of LimeRed Studio, a graphic design and web development services firm for socially-conscious companies, universities, nonprofits, and other organizations, won three awards for their work this year. The super creative firm earned a Silver Davey Award, a Silver W3 Award for a website for Trout Unlimited (NPO) (It's all about fish conservation! Check it out.) and a Gold Davey for brochures created for UIC Admissions.