Drawing up the blueprints: designing your financial strategy


Drawing up the blueprints: designing your financial strategy

Louis Sullivan was a gifted architect living in the USA near the end of the 1800s. Before Sullivan’s time, multi-storey buildings in the US had relied on weight-bearing walls to carry the loads of the additional storeys. This meant huge strain on the lower levels of the buildings, the need for very thick lower walls, and limits on how high the buildings could be built. Around this time, America was seeing major urban expansion and a society that needed newer, larger, higher buildings.

The evolution of steel into a cheap and multi-functionary commodity proved part of the answer. Sullivan used steel to create frames on which the rest of the building could lean. These steel frames meant that buildings could be higher, windows could be larger, and interior walls could be thinner, allowing for more floor space. Sullivan had a vision: a building should be solid, useful, and beautiful. Using the maxim that “form follows function” he brought his vision to life by creating some of the most acclaimed buildings in Chicago, many of which can still be seen today.

Sullivan’s work attests to his foresight, his understanding of the tools and technologies of the day, and most of all, his vision. These combined factors produced beautiful, iconic buildings that we continue to enjoy. But if you were to ask Sullivan where the starting point of each of these masterpieces was, he would tell you that in every case, it all began with a plan.

Just as Sullivan used blueprints to create beautiful buildings, so business owners need a sound financial strategy to help their businesses achieve their vision. The financial strategy becomes the blueprint of the business’s financial success. And just as the utmost care and energy went into creating the blueprints for these iconic buildings, so the greatest care needs to be taken when devising your company’s financial strategy. Below are some tips for creating the blueprints for your company’s financial success.

  1. Know your industry. When compiling your company’s financial strategy, you not only need to know your company, you need to know the greater environment in which it operates. For example, is your competition likely to undercut your price? When in the year is business most brisk? Are your competitors sourcing their products at a cheaper price than you are, so are their margins higher or lower than yours? The better you know the business that surrounds your business, the more easily you can identify a financial “edge” for your strategy.
  2. Make sure it’s doable. The financial strategy of the company is generally derived with the input of top management. It’s important that strategic insight is leveraged for the plan, but it’s just as important that there’s not a disconnect between strategy and implementation. Invite the input of middle management as you strategise. When contemplating an action item for your strategy, ask yourself: how will this be translated into something that people in the business can do on a daily basis? Ensure that your financial strategy has the backing of those who will implement it, from the moment it is formulated.
  3. Focus on a live document. Too often, the financial strategy is the result of a high-level pow-wow that happens once every three or five years. It is typed up into Word and Powerpoint, emailed out, discussed at a few meetings, and then all but forgotten. In contrast, a truly effective financial strategy is an evolving, reactive document. It recognizes environmental opportunities and changes to include them. It reviews and updates targets regularly. It acts as a means by which departments can constantly evaluate their decisions and behaviour.   
  4. Look forwards and backwards.  An effective financial strategy not only looks at where the company wants to go, but where it’s been and how it’s arrived there. It’s permeated with lessons learned and its direction is one that has been weighed up, considered and attested to by someone with experience in the field.

If your company needs help compiling a financial strategy that will truly help your company to realise its vision, The Finance Team can assist. Our associates are experienced, highly qualified finance professionals whose services can be drawn on for the time you need them.

Image credit: http://techzulu.com/


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