Focus Too Much on Financial Performance at Your Peril

31st Jul , 2024

Sufficient levels of profit, cashflow and returns are all essential for a business’s success and survival. However, focusing too much on financial performance can lead to strategic myopia. This myopia can result in under performance or even the demise of the business. Business leaders or owners should actively drive the strategic levers of their business that in turn should deliver financial performance.

An overfocus on financial performance becomes highly risky if senior leadership fails to manage and deliver on its core performance in certain critical areas. Our business mentors and coaches have identified the following areas as key:

• Strategy
• Customers
• Suppliers
• Distribution
• Production
• Quality
• Competitors
• Product or service development
• ESG (Environment, Social and Governance)
• Operational excellence
• Safety

Leadership must also deepen and manage their key stakeholder relationships with their people, shareholders and debt providers, as well as their wider industry, government and general communities. The wider focus is critical for strategic business performance and financial performance in both the short and long term.

Why it’s Important to Consider All Strategic & Operational Aspects

At International Business Mentors, we offer business mentoring and coaching around Australia to assist business owners and business leaders to meet the current challenges while still making profits

Richard Branson emphasises that passion and quality lead to profitability: “If you do something for fun and create the best possible product, then the profit will come.”

Henry Ford echoed this by suggesting that a service-oriented business will have substantial profits: “A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large.”

Most business leaders agree that sufficient and well-controlled and predictable profit, cashflow and returns are fundamental. These provide for outlays such as business expenses, working capital, systems, operational assets, premises and production while also allowing for the repayment of debt and interest and providing shareholder economic returns. This is vital for attracting future funding so the business can underpin its strategic expansion.

Yet, for a business to thrive and survive, the other strategic and operational aspects must be actively managed and led.

At International Business Mentors, our business coaches and business mentors can help business leaders and owners navigate strategic challenges while maintaining profitability, cashflow and returns. Issues such as high interest rates, increased costs, reduced demand, climate change sensitivity, workplace initiatives, ethical behaviour and creating great products or services should also be managed.

Steve Jobs noted the importance of focusing on quality: “If you keep your eye on the profit, you’re going to skimp on the product. But if you focus on making really great products, then the profits will follow.”

Tony Hsieh highlighted the relationship between missions and profit: “Good businesses generate missions to drive their profits. Great businesses generate profits to drive their missions.”

Yvon Chouinard summarised that profit is a result of doing everything else right.

Ron Kaufman and Patrick Dixon stressed the importance of customer success and delivering on promises for profitability.

Hubert H. Humphrey and Clayton Christensen discussed the ethical and mission-driven aspects of achieving profit.

These insights underline the importance of ethical behaviour and staying true to a business’s mission and people to achieve profit.

How Business Mentoring & Business Coaching in Australia Can Help

The economic downturn due to COVID-19 and the subsequent slow GDP growth, high interest rates and inflation has led to many business failures. However, experienced business mentors and coaches can help businesses with positive culture, strategies and profits, providing valuable advice. A business coach or mentor can help you understand the following key aspects:

• Attracting and retaining talent is a significant continuing strategic challenge. Without a strong team, businesses are more likely to underperform or fail.
• Cutting costs might can be a quick fix for profitability, but it is crucial to explore revenue-boosting strategies. These include analysing leads for growth opportunities, using efficiency software, focusing marketing on thriving industries, investing in digital marketing, and deciding between innovation and marketing investments.
• Customer care is vital, especially in tough times to retain good customers. This not only aids profit strategy, but also meets broader stakeholder and possible regulatory commitments.
• Encouraging innovation and supporting teams are essential for continuous improvement and problem-solving.

International Business Mentors can help businesses to identify, consider and develop strategies to retain and boost profitability, while adhering to core principles and missions.

Contact us to find out how our business mentors or coaches can assist your thinking to improve both strategic and financial performance.