Your mission (and challenge) in business can be simply stated as:
Getting and Keeping Customers… Profitably.
Peter Drucker said it this way:
"The purpose of business is to create and keep a customer."
Your Customer Factory
I like to look at a business as having two parts – two "factories".
The first part is your Customer Factory (see the graphic above – special thanks to Ash Maurya, author of the book Running Lean: Iterate from Plan A to a Plan That Works).
The mission of your customer factory is to create happy customers. And do it profitably.
That's where the serious-minded entrepreneur or CEO shines. You know it all starts with the customer and the customer experience.
Creating repeat customers is the essence of business. Turning customers into raving fans who preach the word about your business to their friends and colleagues creates an unstoppable customer generating machine.
You also know the role of money in creating a successful business. Getting and keeping customers profitably makes it possible to achieve your ultimate financial goal in business:
Creating Wealth for the Owners of the Company
I am defining wealth here as having a strong net worth (both in the business and for each of its owners).
It flows like this: Profitability – Cash Flow – Net Worth.
Profitability generates cash flow. Managing your cash flow wisely creates a strong net worth (wealth) for the owners of the business. Here is a visual representation of how the three financial components work together to create financial success:
Your Money Factory
The second part of your business is the Money Factory. This is the part of your business whose goal is creating wealth for the owners of the business. It looks like this:
Profitability is the primary driver of cash flow over the long term. Then wise financial management of all the different drivers of cash flow (in addition to profitability) positions you to create happy owners (by helping them create a strong net worth).
A happy owner is one who knows the business is strong financially, sees the value of the business continuing to increase, understands that a portion of the cash flow should be reinvested in the business so it can grow, and enjoys receiving cash distributions that represent a healthy return on their investment.
The Role of a Seasoned CFO
A seasoned CFO knows that your Money Factory must be managed strategically. You need a process, a system, for managing all the different components of what it takes to create a company that is strong financially.
The 10-step process (click here), or roadmap, provides the achievable, step-by-step process for making your company stronger every month. (Click here to read a more detailed description of the 10-step process in an article I wrote for the Business Bank of Texas here in Austin.)
The Monthly Financial Rhythm (click here) is the overall system, or framework, I use for implementing the 10-step process. Its larger purpose is to help you build a Money Factory that creates wealth for owners. Its mission is to help you win financially in business.
Both Factories Are Important
Your Customer Factory and your Money Factory both need to be humming along nicely in order to achieve your two highest priorities in business:
- Getting and keeping customers… profitably
- Creating wealth for owners
Take a minute to evaluate how you are doing in each area.
On a scale of 1 to 10, where 1 is horrible and 10 is awesome, rate how well your business is doing on each priority.
Your rating will tell you where you need to invest your time and attention.
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