If you are the CEO and/or CFO of an organization of any stage your number one job is to build a business that is repeatable and can scale and grow. While there are many different paths to getting to this point, there is one thing that every business that has achieved this has in common – they have a financial model that is very good at “predicting the future.”
Now of course a financial model can not really predict the future, but what a great financial model can do is give the CEO and CFO the clearest picture of how their actions and initiatives will impact every aspect of the business and in particular revenue and profit.
I’ll be the first to tell you that thinking about a financial model, especially in a vacuum, is not always the most exciting thing, however it is critical in achieving maximum outcomes. And frankly, if you truly love the business you are running, the work that goes into building a great model should be really fun and exciting because it allows you to tap into and unlock the excitement and emotion of why you decided to run this business to begin with.
There are lots of different ways to approach building your model and while any one of them can have the desired outcome if you put the work in, there are 4 things that all these methods have in common – the need to truly understand a) Who your customer is on the deepest level 2) An extremely intricate understanding of not only your business model but also all of the drivers of your model 3) how to prioritize the work you need to do to achieve success and 4) how to measure when you are (or are not) headed in the right direction.
Enter here the LEVERS framework. This framework walks you through a hands-on workshop for each of the aforementioned concepts and offers an in-depth way to start both developing hypotheses as well as a system for validating those hypotheses. It’s a framework that exists for the entire executive team to work on together which in itself lends for several ancillary benefits including a way to ensure the entire executive team is aligned with a deep understanding and agreement on what needs to be done, by who, why when and how to know when it’s working.
The output of these workshops is that all of the information gives you the majority of the inputs and assumptions you need in order to build a forward looking financial model and even more importantly a very deep understanding of the actual mechanics of your business.
And even better than that, when your model is complete, and on the assumption that you are actually using it to run and monitor your business, it provides a very clear directive for every member of your business to know what they should be doing, what they are impacting, how their impact is helping the business grow AND it also provides a very clear picture of what you should not be working on.
The LEVERS framework is one that any business can do on their own. In the book: LEVERS – The Framework for Building Repeatability into Your Business, we provide specific guidance on ways to collect everything you need to build a great model but you can achieve this without the book if you have your own frameworks to do so. And for those who would like some extra hands-on help, the authors also offer in-depth coaching for your entire executive team on the entire framework.
Summing all this up into once concise message, if you are a business owner looking to build repeatability and eventually growth and scale into your business it is essential that you build a financial model so that you can both have a clear understanding of the mechanics of your business and so that you can start building your “crystal ball”. In order to build thee best model you need to prove your hypothesis with data around who your customers are, what your business model is and what work you need to do to achieve your goals. And while this is all very obvious on the surface, it’s very hard to actually achieve. The LEVERS framework is one way to help put you on the right path.
If you are interested in doing the work yourself, you can pick up the book at leversbook.com and if you’d like to work with the authors directly you can learn more at retrocause.com.
Written by Amos Schwartzfarb.
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