The BusinessCPR™ Management System (B-CPR) is the output of extensive research into what causes a business to fail. Subsequent research has shown the disciplined application of the B-CPR Management System helps small business owners make more money with less stress through higher profits, predictable cash flow, and cash reserves in the bank. These are the same business owners who achieve financial freedom through business ownership because they know, with certainty through their management practices, the next smart move to make in their business to generate higher sales and profits.
What gets lost in your business when a BUSINESSCPR™ step is skipped, missed, or fails in its execution
An effective way to appreciate the importance of five foundational steps in the B-CPR Management System to your business success is to look at the consequences that arise when that step is missing. Below is “what gets lost” when a B-CPR step is skipped, missed, or fails in its execution. The items that get lost are why businesses fail, while those that are consistently performed are key contributors to business success.
Step 1—Fail to increase the velocity of your operating cash flow today
Anytime you fail to do Step 1—Increase Your Operating Cash Flow Velocity, you are at increased risk of cash outflows exceeding cash inflows. Allowing this to happen means you will go out of business whenever insufficient cash is available to operate your business. Remember, the velocity of your cash flow from operations sets the pace (pulse) for your business.
Forecasting your weekly cash inflows and outflows protects your business through this first B-CPR step. Consistent action applied here allows you to recognize and stop unnecessary cash outflows currently depleting your cash reserves.
When cash outflows exceed cash inflows, you are in cardiac arrest because you are out of cash to fund your operations. The five most significant complications from cash outflows exceeding cash inflows are listed below:
- The owner is continually seeking cash versus controlling cash and, as a result, has no cash reliably on hand.
- A/R aging is more heavily weighted on the greater-than-sixty-days past due than on current receivables.
- Calls from vendors looking for their money inevitably increase in frequency and hostility.
- The business begins “borrowing from Peter to pay Paul” and, as a result, has zero cash reserves. Every dollar coming in is going out to pay others, usually the same day.
- The owner sees an increasing amount paid in NSF bank fees because they fail to understand how to manage their business through accurate and timely management reporting.
The “C” in B-CPR stands for Cash. Always protect your cash by building cash reserves through weekly management of cash inflows so that they never exceed cash outflows. By projecting your cash position every Monday afternoon for at least the next four weeks, you can determine where immediate action needs to be taken. Your immediate action from Step 1 is to increase your cash velocity by collecting the monies owed to you for the work you have performed when the payment is due to you.
Step 2—Fail to build your profit plan to guide your decision-making
Anytime you fail to do Step 2—Plan for Your Profits, you have no line of sight to what is and what isn’t important nor guide to help you make the best decisions.
Your profit plan sets the direction for your business. Here is where you define your targets to be realized by month and year for net sales, gross profit, operating income, and net income.
Without a profit plan, your decision quality is always at risk because it isn’t framed by success and failure. This exposes your business to the following cardiac arrest risks:
- The overwhelmed owner is always fighting daily fires because they lack a well-developed profit plan that prevents them from decisively executing their monthly money-making plan.
- The failure to target sales efforts where you have the best chance to make the most money results in a low probability of capturing high cash quality sales.
- There are no monthly targets to be realized. As a result, you and those in your employ never know whether you are accomplishing your goals or not.
- You have poor cash quality because you aren’t efficient in your material purchases and direct labor management. After all, no one is clear on who is accountable for what.
- Your business is worth less today than it was last year or the year before because there is no plan stating what you plan to do differently to improve the coming year’s results.
The “P” in B-CPR stands for Profits. The remedy to any of the above cardiac arrest risks lies in a twenty-four-month Profit Plan that sets clear targets and guides wise decision-making. This includes committing to the necessary actions that will help you to realize the plan. Ideally, your Profit Plan is put in place the month before the start of your next year or this week if it doesn’t exist for the next month.
Step 3—Fail to confirm the quality of your profits through leading and lagging metrics
Anytime you fail to do Step 3—Confirm the Quality of Your Profits, you have no line of sight to what is and what isn’t working as planned in your business. Your profit plan is only as good as the quality of the actual profits being produced each month. In the illustration reflected above, the dotted line represents what you spent; the solid triangle represents what you had planned to spend. The difference between the two represents the profit you failed to generate.
Confirming the quality of your actual month-to-month gross and operating profits against your planned sales and profits is the only way to know where you are tracking better than planned. Knowing this information allows you to confidently focus on fixing the areas that are worse than the plan.
Similar to the importance of consistently monitoring your pulse and blood pressure in your quest for heart health, failure to track your profit quality prevents you from recognizing what you need to start, change, or stop before your business suffers full-blown cardiac arrest. Below are some of the consequences to your business that result from not confirming your profit quality every month:
- Lack of timely financial reporting means you never know for sure if you are winning or losing in your game of business.
- COGS and SG&A expenses are growing faster than sales because there is no budget to manage them and no variance report to monitor their trends.
- The business owner is likely working harder today than ever before while paying themselves less because cash quality (profits) is not being produced.
- Employees are increasingly frustrated because management is more worried about money than about their well-being or their productivity.
- Odds are near 100 percent that failing to use financial reporting to confirm the quality of your profits means you won’t have control of your cash (Step 1) or a well-developed profit plan (Step 2) to manage your business.
The “R” in B-CPR is for Reporting. Avoiding the above business risks starts with your Weekly KPIs and Monthly Variance Reports. Monitoring these reports ensures that your planned actions are producing your desired results. This is the only way to know, with confidence, where you are performing better and worse than planned in your business. Without this knowledge, you will never know with confidence where and how quickly you need to intervene to stop your profit losses.
Step 4—Fail to stop the losses that keep your business at risk
Anytime you fail to do Step 4—Stop Your Profit Losses, you place your business at risk through costly profit losses as you run out of cash from operating your business at a loss.
No matter how thoughtfully it is constructed, no plan is perfect because the people executing it are human. You can compensate for human mistakes by decisively attacking your most unwanted profit losses. Failure to stop your biggest profit losses keeps your business at risk, and it’s the leading contributor to coming up short of your profit plan targets.
Slow cash flow from operations at low gross and operating margins puts your business at immediate risk of cardiac arrest, as seen in the following negative scenarios:
- You’ll have less money today for the bills you’re already past due in paying.
- You’ll waste too much time trying to collect monies owed to you while holding off those to whom you owe money.
- You’ll see sales are suffering because it’s hard to source materials and keep up with COGS and SG&A expenses.
- Your employee’s uncertainty is high, with no one taking any initiative to improve results.
- Your equity as a business owner is diminishing because losses from the P&L Statement are transferring to the Balance Sheet.
You can be certain that there will never be enough cash from profits whenever there are profit losses. There is no “C” or “P” in CPR if there are losses unless you find a way to stop these unwanted cash drains. Protect yourself from running your business out of cash by acting on the quantified leading and lagging metric “misses” that are most impacting your cash quality (heart rate) and cash velocity (pulse). Taking these actions ensures that your business is making the money it should as confirmed by the weekly cash on hand (Step 1) and the monthly change in profit levels (Step 3).
Step 5—Fail to be accountable for your results
Anytime you fail to complete Step 5—Be Accountable for Your Results, you rob yourself of the ability to control the actions of your business. You also disrupt any rhythm you build through Steps 1 through 4 to realize your desired results set in Step 2.
Prioritizing and eliminating activity based on what needs to be capitalized on or fixed in your business is how you make more money. The challenge in doing this year after year is the disciplined follow-through on planned actions to achieve your desired cash position from your growing business profitability that is required.
Without action on the “critical few” things needing to be completed each week, you waste time and money on the “relevant many” things that are easy to do but can and should be ignored for the moment. Lack of priority focus is a quick way to begin feeling the following business cardiac arrest effects:
- Stuff happens, but no one is sure if it’s the right stuff to do because there is no monitoring of actual performance results through recognized metrics.
- No one is clear on who is accountable for what, nor are they clear on what’s expected of them in their individual roles.
- Employees are more worried about whether their payroll checks will clear than they are about producing quality output and efficiently serving customers.
- Any work getting done is the result of efforts by the critical few in your employ; the rest of your employees have given up or checked out.
- The above four conditions result in the owner doing even more work for little to no pay or checking out. There is no organized, consistent process for effectively managing others to maximize profits.
When you are stressed about cash or worried about profits, you know with 100 percent certainty that the right actions have not been taken. You know this definitively based on the poor results produced. Every time you are left with less cash and smaller profits at the end of a month, quarter, or year, you know your actions—even if they involved a lot of hard work—weren’t what they needed to be.
The best way to realize your monthly sales and profit goals, identified in Step 2, is through disciplined action every day. The key is to focus on the “critical few,” not the “relevant many” things needing to get done. Prioritize your weekly actions according to Step 1—Cash Velocity, Step 3—Cash Quality, and Step 4—Stop the Losses. These three steps of the B-CPR model combine to help ensure that your planned actions produce your desired results.
Concluding the importance of each B-CPR step to your business success
Disciplined use of the BusinessCPR™ Management System has been scientifically proven to protect a business from failing. It is the surest way to realize sales, profit, and wealth creation goals. Cash flow from operations sets the foundation for the business being built, while the profit plan provides the monthly and annual targets by which to build financial freedom through business ownership.
Your profit plan is only as good as the accurate and timely monitoring of your actual results against your planned results throughout any given time period. This is the only way to know where your business is comfortably exceeding your expectations so that you can fix any areas where your business is performing less optimally.
No plan will be successful if there isn’t enough cash available to operate your business. Always protect your business by protecting your cash—the lifeblood of any business—first through forecasting weekly cash inflows and outflows. Second, by stopping unnecessary cash outflows that drain cash reserves and contribute to profit leakage.
You must follow through on these actions month-to-month to achieve your annual business goals and objectives. As you prioritize and eliminate unnecessary activity through disciplined follow-through, you will experience better results and work fewer hours.
Is owning your business a struggle?
If you struggle to hold onto cash or have shrinking profits take the “free” Business Fitness Health Check to learn how healthy your business is. Click the link below to take this no-obligation business fitness test.
Upon completing the business fitness test, you will receive a risk profile showing how at risk your business is to suffer cash flow and profit problems, the primary cause of business cardiac arrest over the next three years.