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Blog Feature

By: Mark Rosenman on March 23rd, 2017

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Staying Profitable As Your Business Grows

Business Advice

It’s easy for companies to pinch pennies when cash is short. But when business gets good it’s natural that controls over discretionary spending are relaxed, which can lead to wasteful practices that eventually threaten profitability. How have you seen executives keep operations lean and avoid wasteful spending--even when the company is doing well?


 

Burney MichaelMichael Burney

Michael has a track record as an effective CEO, CFO and senior executive of small and large companies, private and public, domestic and international. He utilizes a detail oriented, interactive systems approach to board, management, financial, geographical, and environmental issues.

"You could micro-manage the business or you could change the culture of the business. If the culture of the company has evolved to include wasteful spending, get everyone involved to define what the financial control goal(s) are. Then document what the processes are that will lead to reaching those goals. Employees are empowered when they know what the goals are and the processes to get there. These goals and processes become the new culture of the company."

 

bill carrollBill Carroll

Bill is an accomplished CEO with a history of leading large and mid-sized companies through complex challenges, maintaining profitability and liquidity while expanding into new growth markets.

"Proportionality. I have taught my client management teams to construct a simple pie chart representing the desired proportions for each of the major P&L items: Sales, Cost of Goods Sold, Contribution Margin, Semi-fixed Expenses, Net Profit, Tax Effects, Cash Effects and Money-in-the-Bank. They then track actual results against these categories."

 

tony cordTony Cord

Tony Cord brings to Newport an accomplished background as a practice leader, growth driver, board member and advisor to mid-market, emerging growth and PE sponsors. He leads Newport's Mid-Atlantic Practice. 

"Those having a business plan and an annual budget process by function or department, including identifying R&D/innovation spending and a monthly financial reporting system, including budget variance reporting, tend to be best managed and positioned for opportunities. On a practical note, most businesses undervalue and underutilize their CPA or CPA firm. Ask them to sit down with you quarterly for an hour and review your business financials in plain English. You'd be surprised how you can spot waste, issues and opportunities!"

 

Denney KimKim Denney

Kim Denney is an experienced Houston area leader with a record of solving top-level problems as an executive with broad responsibilities in the Chemical, Petrochemical, Energy, and Manufacturing industries.

"The secret is to live frugally, no matter the season. This helps everyone stay on an even keel and happy with the predictable ground rules. People watch what the executives do, more than they listen to what they say. Sharing rental cars, staying in reasonably priced hotels, and seeing multiple customers on each business trip are the hallmarks of a company that watches their travel and entertainment spend. Having a written policy, and assuring expense reports are approved only per the policy, avoids bad practices seeping into the culture that will force a change when profits become a bit more difficult to obtain."

 

fred finkFred Fink

Fred has been successful both as an executive and an entrepreneur. Much of his career has been spent in different sectors of the healthcare industry.

"Not that hard to do. A culture that emphasizes everyone working towards the same goal is crucial. And leading by example. If you want everyone to watch travel expenses, the CEO shouldn’t travel in first class. Nor does he/she set any kind of double standard in spending. A well-oiled appropriations process where new initiatives are vetted and approved (or not) is also critical to keeping managers from unnecessary discretionary spending."

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Heerman BillBill Heermann

Bill has deep expertise in building and running industrial manufacturing and construction companies.Most recently he was President of Precision Industrial Contractors, which serves the industrial construction market.

"Strong budgeting practices establish the expected spend rate, monitor the actual spend rate, and provide feedback against the plan. Quarterly budget adjustments may raise or lower the spend rate. But the right practices and culture never allow or condone wanton spending."

 

Kearney SusanSusan Kearney

Susan is a multidimensional senior operating executive who has generated impressive results across the technology, education, B2B, B2C and social sectors in organizations ranging from start-ups to well established entities. Her approach focuses on engaging stakeholders and building consensus to develop and deploy aggressive sales and marketing strategies, customer retention initiatives and digital solutions.

"Growth efficiency metrics (for example, unit cost, loaded cost per sale, sales rep efficiency) based on benchmarks and industry best practices that are tracked by the board and C-suite will elevate cost control to a strategic level and ensure close monitoring of discretionary costs."

 

Lynn LednickyLynn Lednicky

Lynn has had a diverse career as an executive and advisor. As President and Founder of Lednicky Enterprises, he has provided expert advice to the energy, utility, and infrastructure sectors. His engagements have included M&A support, operational and financial restructuring, renewable energy, project development and financing and advising on production and use of natural gas as a domestic transportation fuel.

"This is all about operational discipline. Cost control is important in good times and bad. It is up to the executive team to consistently enforce the notion of cost discipline and the imperative to be good stewards of the money they control."

 

M PortoMargarita Porto

Margarita is an experienced leader who built a multimillion dollar global business unit, building on roles in engineering, sales and marketing. She has demonstrated expertise in leading global teams to open global markets.

"The leadership of the company should create a philosophy and culture of continual profit improvements, especially when the company is doing well. They should year after year establish clear and measurable cost reduction goals as part of the annual business plan that are in line with the long term direction/vision and strategy of the company."

 

mark rosenmanMark Rosenman 

Mark is a co-founder of Newport Board Group and its Chief Knowledge Officer. He specializes in content management, inbound marketing and thought leadership authoring.

"This issue really goes to the heart of company culture. I knew the CFO of a highly successful public company who would check out the wastebaskets in the meeting rooms in their headquarters to see whether employees were getting expensive lunches brought in. The dollars to be saved by not ordering lunch may have been immaterial--but the trend they represent isn't. A fully engaged, committed employee wants their company to be highly profitable because they see their interests as aligned with the firm. High profits will enable them to compete for a better job with the company than they have now. A less committed employee is happy to milk their expense account because they're "getting it while they can." The key is for employees to buy into the company's vision for the opportunities that the growth and profitability of the firm will bring them. This will lead them to avoid non-essential spending because it’s not in their best interest."

 

eran tagorEran Tagor

Eran has diverse experience in executive management, venture capital, private equity and M&A, including turnaround, restructuring and special situation transactions.

"One of the best practice I have seen is holding special events during times when the company is doing well. This communicates gratitude to the team, while keeping regular spending practices, procedures and budget control in place. It shows that management is aware of spending and restricts waste, but on the other hand is willing to make expenditures that strengthen the bond between the company and its employees."

 

Have you been struggled to stay proftiable as you grow your business? Share your struggles with us below, and don't forget to download our free guide "Business Growth Challenges Defined: You May Be In No Man's Land." 

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