Regain control of your company finances and sleep better at night
How we built the extremely simple, deceptively thorough Financial Clarity dashboard we always wanted to clarify our finances, manage cash flow, and reduce anxiety in the process
In 2017, when Blue Sky Partners was getting off the ground, our three founding partners would get together for breakfast on Wednesdays and walk through our metrics. At that point, we used a modified version of the Traction Scorecard methodology to track things like projected revenue, leads generated, deals in pipeline, recently closed, and a handful of marketing metrics.
But the most important metrics we tracked were cash on hand and cash flow runway.
Based on previous experience running companies we knew that if our cash flow runway and cash on hand weren’t constantly going up it wouldn’t matter how many times we had posted to social media, or what our average deal size was. We needed cash and we needed to know how many pay cycles we would have cash for — every other metric was a nice to have in comparison.
Getting off the ground, though, our methods for tracking were kind of primitive. We had a CRM to track the number and dollar value of any proposal we had out, we could check our bank account and do some back of a napkin math over pancakes to figure out how long our cashflow runway was. But generating a really deep analysis of our sales projections, cash flow and runway took a lot of work — and scenario planning as extensively as we liked to was even more work.
Our typical planning included trying to look at six basic scenarios:
- No change
- Win deals categorized as “likely” in our CRM
- Win 30% of deals in our sales pipeline
- Win 50% of deals in our sales pipeline
- Win 75% of deals in our sales pipeline
- Win 100% of deals in our sales pipeline
With each of these, that meant thinking through payment terms for each deal we had out to account not just for actual and potential revenue, but for costs associated with each deal or project, as well. Too much math for the back of a napkin, but we made it work for a few months. Eventually, though, as our workload and pipeline got heavier, Tim — who was in charge of building out these scenarios — decided to build out what one of our clients, Prowess Project, has dubbed “the Magic Spreadsheet.”
What is this so-called “Magic Spreadsheet”?
For us and for our clients this spreadsheet dashboard has meant nothing less than sleeping better at night. It’s the easiest way to evaluate the efficacy of a business model, actual vs. projected revenue and expenses and, thus, cash on hand and cash flow.
It’s given Blue Sky Partners and our clients a level of clarity and control over the business that frankly didn’t exist before, and we’d attribute that to a few things.
First, much of the anxiety that comes from running a business is fear of the unknown.
It’s better to know you only have enough in the bank to cover one more pay cycle and know how big your revenue gap is (even if it’s daunting) than to sit back and guess. Our Financial Clarity Workshop and the Dashboard we build together eliminates those unknowns.
Second, while the Dashboard is partially automated, the Financial Clarity Dashboard still requires somebody to manage it manually.
Why do I list this as a good thing in the age of automation? Well, because if you’re a small business owner and you’re not thinking about every single real and potential dollar coming in and going out, there’s a chance you’ll be surprised one day — and that may not be a good thing. A little bit of friction in this case means a whole lot of mindfulness.
Finally, it’s extremely simple, deceptively thorough.
When we create the Financial Clarity Dashboard with our clients, we walk through everything with them over a four hour period to make sure we’re adjusting formulas to account for what payment terms are for your business, frequency of payments to employees, partners, and contractors, credit card interest rates, you name it. As quickly as we can, we make sure you have a picture of your business down to the dollar, and that you’re able to see clear as day which scenarios need to play out in order for you to hit your goals and hire in that new position, give your team a bonus, or just meet your revenue goals for the year.
As is the case for many of the most effective tools, we built the Financial Clarity Dashboard to solve a specific problem for ourselves, and we perfected it over the course of two years working with small and large companies and enterprise teams. We know it will help you, too, especially as the world and markets continues to be volatile and we climb out of this public health-driven recession together.