When making decisions we often think: what’s the trade-off between time and money? Manufacturers use this to justify purchasing equipment. Startups consider this when planning a growth. The mindset is either-or. Time or money. Never have both.
Classic finance is built off this paradigm. But smart CFOs know this perspective is ignorant. There are business hacks to save you time and money.
Where we lose time and money
Where does a business lose it’s shirt? It isn’t from paying employees too much, spending too much on a website, or spending too much on consulting (although owners love to focus on this because it is a “controllable” cost.) Businesses lose resources when we make BIG mistakes. Ask yourself, how would I handle these situations:
- An employee sues me for workplace harassment
- My primary supplier goes out of business
- A hail storm destroys the roof on my facility, and takes 3 months to repair
- The market turns, and my biggest customer leaves
Any of these will consume management’s time or precious cash as lawyers and consultants scramble to save the business. Often we take any help available to us, even if it means massive debt at high interest. The dark times hurt your culture and good employees start to flee. Even if the business survives, it will bear the burden of debt service for years to come.
How does that compare to “controllable” costs?
Capital Planning and Risk Management
Save time and money by anticipating risks and planning contingencies. Imagine if that hailstorm hit, but you had business continuity insurance? What if your supplier went out of business, but you had an alternate tooled up and ready to pick up the slack? What if there was a downturn, but you had been cultivating banking relationships and lines of credit to draw upon in dark times?
For every risk there is a contingency. A good CFO will map these risks and build contingencies to avoid a crisis.
I’ll be on a panel July 13th to discuss capital planning and risk management for small businesses. If you want to be proactive about avoiding a business crisis, stop by for an hour of education and networking!