How do I know I am generating as much profit as possible? - Scott Geller

Scott Geller – The CFO Perspective

Episode: How do I know I am generating as much profit as possible?  

Date: February 8, 2021

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INTRODUCTION
I have 20 years of experience in the finance realm that started with the Federal Reserve Bank as a bank examiner, moved on to 7 years at a Fortune 300 insurance company, and then a 50-70 person spin-off technology firm under the Allianz umbrella of companies. I was with the spin-off from day zero all the way until the unfortunate end and I had to close down the business.

I am now a financial consultant serving primarily as a fractional or part time CFO for companies that range from start ups to young and scaling to established with stable growth. I take over from the accountant as a lean cost effective option for Profits Engineering, Cash Optimization, Strategic Acceleration and Executive Partnering committed to your success. Please contact me at scott.geller@capitisadvisors.com.

Show Objectives - The Why
Cash is like oxygen. When people don’t have oxygen, they die and so do businesses without cash. You need to store away cash always and put it in reserves. In order to put cash away, the company needs to be profitable. The market seems to have recently returned to valuing growth over profitability, similar to early 2000's, but I still believe and have been a witness where profitability is a necessity. The profitability might be in the future as with startups, but the profitability has to exist within the business model.

Business leaders tend to gauge the profitability of a business by reviewing the income statement at face value. I've seen where the income statement might have the titles, structure, and maybe even calculating margin ratios; however, the statement doesn't reflect the true profitability and at times is even misleading management.  The key is to dig under that face value, understand key drivers, utilize applicable tools, and leverage the perspective and experience of a CFO. The next step is to us that knowledge to create or identify untapped profitability that circulates oxygen (cash) to survive and grow. 


What You Need to Know - The What

1. Profitability of the Business
2. Net Income vs Profitability
3. Start with your services and products
   1. Succeeded in getting organized ... list of existing and new
   2. Determining performance
   3. Thinking about the categories
      1. Problem Child
      2. Star
      3. Cash Cow
      4. Dog
   4. Where Products and services are in the matrix with the 4 tests
      1. Growth rate vs industry and competitor
      2. Customers Budget
      3. Profits
      4. Why is the customer buying ... not just are they
4. Determine driving factors of your profitability
   1. Pricing
   2. Volume
   3. Efficiency
   4. Unique offering in market
   5. Other
5. Calculate your profitability throughout the business
   1. Gross Margin
   2. Operating Expenses
   3. G&A Expenses
   4. Operating Margin
   5. Incorporate accountant and CFO for inputs and structure

What You Need to Do - The How

1. What quality issues may have been identified during the feedback phase
2. Listening to stakeholders - Leadership, Employees, Clients, ex-clients, Prospect Feedback, Industry Publications, Market Studies
3. What process improvements can we implement immediately
   1. Key processes
   2. Highest impact process - volume, profitability, potential
4. How can we deliver our product/service to the customer as quickly as possible.
   1. Time is money
   2. Speed to market
5. Did we identify changes in people and technology to make us more efficient. 
   1. Right people in right positions
   2. Innovation can drive and should create profitability
6. Make personnel changes.  Take care with hiring processes as bad hires are very expensive to your company.
   1. Have you grown beyond some individual's skills? Ask twice to capture value before taking action
   2. Right people in the right positions?
   3. Missing skill sets
   4. Full assessment with an expert
7. Try to automate as much as possible
   1. Innovation across the company
   2. Exists in people's head to "paper"
   3. Excel to systems
   4. Systems to software
   5. Build vs Buy
8. Document processes and constantly revisit
   1. Similar to the Agile discussion - Work ... review ... work ... review
9. Start with quick fixes
10. Start with less expensive fixes
11. Calculate profitability of your changes
    1. Estimate of expected results
    2. Calculate results when possible
    3. Compare and contrast
12. Know your numbers – Financial planning and Cash Flow management
13. Think in terms of the business when making decisions
    1. Profits in short term vs. long term value
    2. Cutting people, processes, expenses, etc can lead to lost business

PPREVIOUS : Episode 4 - 2021_02_01 - How do I increase revenue “financially”?
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NEXT: Episode 6 - 2021_02_15_ Should my CFO be involved in my tech and innovation efforts?

Resources (optional):
You can connect with Scott via his website or LinkedIn
Connect on LinkedIn
See Scott’s Website

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