You have probably realized that having clarity on your financials and metrics for growth is
paramount. Business strategy is dependent on effective and rapid decision making. Without
having a clear understanding of your monthly and yearly financials, you will not be able to make
short- and long-term strategic growth decisions.
What if your target was to hit $10M in sales as part of a broader reach to expand market reach
for your product or service?
Is this an arbitrary number or does this have some significance on your larger goal or BHAG
(Big, Hairy, Audacious, Goal)?
Did you ask yourself if you have enough capital to get there in the time frame you planned?
All of these questions should and can be looked at both from a realistic level from team
capability and bandwidth all the way to demand for your product or service. At Your Outsourced
CFO (YOCFO) we recommend looking at your Trickle-Down Metrics© plan.
Start tracking your company’s performance with Trickle-Down Metrics©
Possibly the most important factor in determining your strategic initiatives is your “why”, or the
intentions you had when deciding to start your business. This 7-step process allows YOCFO to
get into the owner’s head, and immediately enact positive change in the business by feeding the
strategies down the ladder into the day-to-day structure of the business. The process is as
1. Target the Trickle-Down Metrics derived from the ‘why’
2. Identify Supporting Downstream Metrics
3. Collect a Variety of Data
4. Monitor Outcomes
5. Take Action
1. Target metrics that are derived from the ‘why’
The team members at YOCFO recognize the owner’s “why” as being the key driver for your
business’ strategic initiatives. Often, the owner’s ‘why’ is very broad and doesn’t immediately
provide clarity as to what the next steps are. For example, “I want to pass the business down to
my children in 20 years” or “I want to build this business up and sell it in 30 years for a nice
retirement”, or “I am closing in on 70 and want to sell this for the best price I can in a couple
years” are all long term goals that are essential to communicate and unpack. While not offering
much information as to the steps involved, these statements provide a basis for us to begin
determining what changes should be made within the business in order to achieve these goals.
2. Identify supporting downstream metrics
The next step to realizing strategic initiatives is to identify the downstream metrics, or the
metrics that will inform your strategy coming from all sides of your business. Whether basing it
off of numerical Key Performance Indicators (KPIs) or human resources, it is important to plan
out action items to facilitate the completion of your objectives.
Let us explain some common examples:
Owner’s Why/Goal: An owner of a manufacturing business wants to sell his company in 2-3
years because the owner is older and the kids do not want to take over management of the
business. Here are metrics within 3 years that we should track:
1. EBITDA targets — to produce most value from a financial buyer
2. Replacement of owner — for clients relationships is most likely an Executive level
3. Inventory management — turning more to bring in better cash to support growth
4. Modernizing things — for better efficiency and cost cutting
These 4 critical goals that support the “why” are all very different when it comes to structuring
the capital plan including hiring, inventory purchasing and equipment modernization. Planning
for this business owner’s 3-year goal starts now. To understand why, check out this simple
illustration: If it costs you $500K to improve these things in the first years, but you show a $300K
improvement in EBITDA by the end of year 3, you might get $1-1.5M more at a sale effectively
adding $500K-$1M to your retirement if run correctly.
Owner Why/Goal: An owner of a technology based e-commerce B2B business wants to be a
triple bottom line B-Corp focusing on social & environmental issues as much as they do on
profit, but at the same time they want to make their product ubiquitous throughout the US
market. What metrics are relevant here:
1. R&D and development budget — will most likely need to be financed from investors only
who share the same goals and returns. So the search could take years rather than
2. Equity compensation — as a tool rather than competitive pay could be more heavily
3. Strategic partners — in logistics and other areas that share the vision and support the
approach with lower cost structures.
4. Branding & differentiation — will need heavy initial emphasis.
As you might imagine, the financial budgets, strategies, metrics and planning are massively
different between these two examples over the next 3 years. This is not simply about gathering
financial reporting together on a normal basis to assess cash or profit.
3. Collect a variety of data
The collection of data is the most critical next step in the waterfall from the owners “why” to the
execution. For company A, there could be valuation analysis and review of what consolidation is
occurring in their space for a manufacturing company selling in 3 years. You might need to hire
a consulting or investment banking firm in your space to bring in some specific strategies for
your market. This will help focus more on the key levels of the 4 metrics above that need to be
mapped to consistently.
In contrast, a B-Corp Ecommerce business might need to review loads of consumer sentiment
and buying pattern data using many focus groups over several years to gather the right
approach to continue expanding their market. This could help delineate which of the 4 above
need more $ and more time.
4. Monitor Outcomes
Just as important as collecting your data, monitoring the outcomes is the crucial step that will
allow you to glean insight from your data. As you are tracking your business’ growth, keep
alignment with your employees in mind; they help to determine the success of the business.
Ensuring the team has a baseline understanding of the current financial state of the company
will provide valuable insight in understanding the strategic goals and acting upon them.
Monitoring of outcomes becomes a full-team responsibility that is shared.
Aside from setting goals within the realm of your current business model and processes, you
may also find your team brainstorming strategies that could mean new revenue streams for your
business, improved efficiency or general societal benefits consistently leading to more profits or
simply feeling better every day about where the business is headed.
With proper planning and monitoring, your company can also prepare for future unforeseen
events during precarious and uncertain times. If you’d like to learn more about navigating a
crisis, download our free economic disruption guide here.
5. Take Action
This next step is the most important. You can have the best goals, the most engaged team and
a receptive marketplace, but if you don’t consistently and quickly take action you will not get
closer to realizing your “why”. Your employees, stakeholders, and strategic partners or critical
partners like YOCFO must understand what you are trying to do and help you get there.
Every business book on the market has some theme about making sure you don’t fall off the
tracks: get behind the market, become inefficient, hire the right people in the wrong roles. This is
why repeating and evaluating to ensure that the WHY is still intact and the metrics are still
aligned quarterly, or minimally once a year, is part of this process.
Assuming things are clear, the team is engaged, and the engine is gassed up, the final step is to
fulfill the BHAG and grow your business.
Work with Your Outsourced CFO
When considering the benefits of a properly strategized goal for your business, you might find
difficulty determining how to go about it or even where to start. The team at Your Outsourced
CFO is dedicated to ensuring our clients are effectively strategizing and managing for business
growth. We work alongside you as a strategic partner, helping to financially stay on track, while
assisting in executing your growth objectives. Through accurate data collection and metric
tracking, YOCFO’s team provides the financial clarity for our clients to plan for the future.
If you are ready to take your business to the next level and would like to hear more about the
value of a strategic partner like YOCFO, connect with us to identify the Trickle-Down Metrics©
for your business.