Financial Modeling

OBJECTIVE: To understand why a Service Provider was bleeding funds, while their sales funnel was full.

SITUATION: A financier reach out for some assistance to understand, why one of their clients was bleeding money, yet sales growth was phenomenal. 

FINDINGS: With spending less than day with the company stakeholders the following was ascertained; (i) the bookkeeper was a family and friend that lacked competent skill (ii) the owner of the company lacked strong financial understanding, and was relying on a “cheap” resource to provide guidance. (iii) the “cheap” resource built a fiscal model that would have worked if it was implemented, and measured correctly. The model cost analysis had fundamental errors, which ultimately contributed to the cash exodus. In addition thereto there was a lack of (a) inventory controls (b) no job costing (c) project management. 

SOLUTION: This would entail a complete overhaul of the fiscal model; A common misconception is the entrepreneur wants to be:

  • The Cheapest
  • The Best Service Provider
  • The Best Quality. 

The recommendation is make a choice of any two of the former options, you cannot be all three. Baring in mind there is always someone that will beat you on price.

An enhanced business model, which went down to the micro level was created. Items included, pricing, growth, quality of work, efficiency of projects / jobs, recall monitoring of projects / jobs, type of clients, brand awareness and development. Inventory management was also implemented.

Aligning finance needs with the correct financial partner is of paramount importance. Not all money is the same! 

Similarly, just as important is the implementation of KPI’s, trending, ROI. These “tools” allow for monitoring and guiding your day to day operations.