Month: January 2018

Do you have a strategic financial plan?

A strategic business financial, or capital plan is your road map to align your borrowing, investing and spending activities with the company mission and vision. Your financial plan is not your financial forecast or your budget. These are documents that memorialize the projected results from your strategic goals, objectives, strategies and tactics. Your strategic financial plan is how you will get to the results in your budget. Your borrowing will be more effective, your spending more powerful and your investing more accretive with a well constructed strategic financial plan.

The first step in capital planning is to identify your company mission and vision. These are high-level guiding statements about what the company is and where it is going. Typically, senior level executives are responsible for determining the company direction and often use the collaborative efforts of other employees to set a business course. Your capital plan must line up with the company mission and vision and provide financial support to the business functions that drive the organization forward. Spending, investing and borrowing activities must support the company mission and vision to achieve desired business outcomes. Debt and equity can be effectively employed to generate positive mission and vision leverage.

The next step is to set out capital goals that line up with the overall company goals. Goals are boundaries, limits or end points along the journey to business growth. Goals are by nature general, broad and non-specific. Don’t include specific measurable benchmarks in your goals. Improving financial durability is a good example of a capital goal. How we achieve the goal is the function of capital objectives.

Business objectives are quantifiable and specific milestones that support the attainment of business goals. Capital objectives are measurable hurdles using relevant financial metrics such as the amount of leverage or liquidity. Limit your financial objectives to three or four critical areas that will advance your business goals. You might decide to move your leverage ratio to 50% of total capital which is in-line with the average of your industry competitors. This objective supports the goal of improved financial durability by increasing resilience during economic or financial market disruptions. If cash flow falls or credit is tight your company can operate without crippling debt service or refinancing stress.

Strategies are the plans designed to accomplish business objectives. There may be one or more strategies for each financial objective. Executives design capital strategies to lay out how the company will achieve its financial objectives. Think of strategies as a blueprint a general would create to fight a battle. They are the high level plans to accomplish a business objective. The chief financial officer might design a capital strategy to identify and payoff certain loans with small prepayment penalties to support the objective of a 50% total leverage ratio. She also might develop a strategy to obtain new equity from investors as a source of funds to retire debt.

Tactics are the actions required to implement financial strategies. They are detailed marching orders with specific instructions and coordinated movement by unit level team members. Business leaders must be aware of the strengths and weaknesses of their managers and employees to carry out tactics. The wise leader makes a critical evaluation of the talent on his or her team and uses that information as a foundation for the strategic planning process.

The CFO might hold a road show with specific cities and dates to provide the most current financial and operating performance data to the highest qualified investors. Finance, investor relations and accounting staff are key contributors to developing and delivering the road show tactic. The investor capital secured by the road show supports the financial strategy of acquiring new equity capital to retire debt. The debt reduction supports the objective of a 50% total leverage ratio which fulfills the goal of greater financial durability. The company can pursue its mission and vision from a position of greater balance sheet strength.

Financial goals, objective, strategies and tactics are a strategic planning pyramid. Each element supports the elements above it. Strategic financial planning brings all the business capital activities into alignment with the global corporate identity and the direction of the company. Plan for business success through well designed and executed financial goals, objectives, strategies and tactics that effectively support your company mission.

In these financially unsettling times, wouldnt it be nice to know you can still send your children to college, retire at 65 and be able to mail postcards from exotic locations to your future grandchildren? Its not only possible, its probable when your finances are in the right hands. While you may be skilled at handling certain money matters, chances are you dont even realize youre inept at others. To be safe, it might be time you considered the benefits of personal financial planners. Even if you feel you can perform several of the functions of a financial planner yourself, putting them all together into a cohesive strategy that produces solid, long-term returns is no easy feat. A financial planner can make that happen. When considering how to choose a financial advisor, youll want to sit down and really evaluate your needs. This depends, at least in part, on your stage in life, your goals and what you expect to receive in return. Are you a new college graduate with $50,000 in debt, $30,000 in income with a brand-new 401(k)? Or are you a 60-year-old trying to prepare for retirement? Once you figure out what youre looking for, its easier to determine how much help you need and where to look. How to Choose a Financial Planner Financial planners deal with everything from estate and tax planning to insurance and debt management to college savings and retirement funds. When figuring out how to find a financial planner, make sure to look for one who has experience working with others in situations similar to yours. As with any professional service, youll want to start by asking for suggestions from people whose judgment you trust. Ask acquaintances who have needs similar to yours, since a planner focused on the needs of young families may not be a good choice for recent retirees. Questions to Ask a Financial Planner Before selecting a financial advisor, youll want to do your research. Ask the following questions (created by the National Association of Personal Financial Advisors) to ensure they have the expertise and qualifications necessary to guarantee reliable service, and that they are the right fit for your particular situation: What is your educational background? College Degree: Graduate Degree:

What are your financial planning credentials/ designations and affiliations? NAPFA-Registered Financial Advisor Certified Financial Planner (CFP) Chartered Financial Consultant (ChFC) Certified Public Accountant/Personal Financial Specialist (CPA/PFS)

How long have you been offering financial planning services?

Do you have clients who might be willing to speak with me about your services?

Will you provide me with references from other professionals?

Have you ever been cited by a professional or regulatory governing body for disciplinary reasons?

What more can you tell me about your experience in providing financial planning services?

How many clients do you work with?

Are you currently engaged in any other business, either as a sole proprietor, partner, officer, employee, trustee, agent or otherwise?