As a small business advisor, you possess a wealth of knowledge and experience in compliance and financial record-keeping. While companies rely on you to keep them within the legal, financial and regulatory boundaries, it is a rare company that uses more stringent compliance to outmaneuver the competition.
Unleashing Your Potential as a CEO Whisperer
As we have noted in Part 1 of this series, businesses do not fail or underperform because they lack a product or service. They fail and underperform because they have not figured out how to identify, reach, and sell to profitable customers.
No amount of compliance-based advisory services will transform a failing or underperforming business into a competitive one. This is where the role of CEO Whisperer comes in.
A CEO Whisperer helps businesses answer three fundamental questions:
- How do I think about the business? This was covered in Part 2 of the series.
- How do I manage the business? The topic of this article.
- How do I grow the business? This will be covered in Part 4 of the series.
These three fundamental questions, in our opinion, must be asked and answered by every business to build a sustainable competitive advantage and outperform their competition.
Part 3: How do I manage the business?
There are innumerable practices, tools, frameworks, and “how to” resources available to help answer this question. Within the volume of options, there are two, “How do I manage the business” frameworks that have survived the test of time and have been applicable in (almost) every situation.
The first framework is a unique perspective on the standard cycle of a business. This model is a simple, yet powerful, way to analyze a business from the customer’s perspective.
In the image below, each box represents a key interaction customers have with a business and, to be effective, each interaction must be aligned with and supportive of the company’s strategy.
Brand = Awareness. How do target customers become aware of a company’s product or service and the underlying value proposition? What are their preferred mediums for interacting with and learning about businesses?
Marketing/Sales = Assessment. Once a target customer becomes aware of a company’s product/service, how are the customers helped in evaluating the company’s value proposition?
Sales Execution = Acquisition. How do customers purchase a company’s product or service? Online? In a store? Through a reseller? How fast and easy is the transaction?
Operations/Delivery = Acceptance. How is the value proposition delivered to the customer? Does the customer take the product with them? Do they have the product delivered? Is the service scheduled to be performed within a narrow or wide window of days and/or times from the date of purchase?
Support Functions = After sales. How are customers supported post-sales? Does the company have live customer service? Is the company easy to reach or are barriers erected to minimize contact with the customer after the sale has been completed?
Each of these customer interactions can form the basis for a differentiated competitive advantage. Remember, different customers buy different value propositions. Some customers will pay a premium to have their grocery shopping done for them (Instacart and excellence in Operations/Delivery) while others prefer the ease and speed of one-click ordering offered by Amazon.
Join the "Catalyst For Growth: Offering Differentiated Advisory Services" webinar, June 14, 4 p.m.-5 p.m. (EST). CLICK HERE to sign up.
CEO Whisperers help their clients assess whether the customer experience across the key interactions with the business are aligned and deliver on the value proposition and the promise the brand makes to the customer.
The second framework that is indispensable to the CEO Whisperer for unlocking value is the DuPont Model. The DuPont Model is timeless, powerful, comprehensive, and elegant in its understanding by non-financial individuals.
The DuPont Model is powerful in that it uses information from both the income statement and balance sheet, thereby providing a comprehensive picture of a company’s financial performance and efficiency.
The elegance of the model lies in its ability to visually depict the key determinants and drivers of return on equity, a core metric of performance.
- Net Profit Margin — a profitability measure that provides information on a company’s pricing strategy and cost containment efforts.
- Asset Turnover — an efficiency measure that provides information on how efficiently a company uses its assets.
- Equity Multiplier — a measure of leverage that provides insights into the aggressive or cautious use of debt.
As with all metrics and ratios, deeper insights can be revealed by looking at trends over time and making comparisons to industry averages.
Expanding on the Net Profit aspect of the DuPont Model allows for more granular insights into improving the profitability of a business.
From the above image, you can see how readily the DuPont Model lends itself to extension, producing a holistic, higher resolution picture of a company and a more granular understanding of the underlying drivers of profit. The model can easily be converted to a spreadsheet, allowing a sensitivity analysis to be performed in a more dynamic fashion.
The impact and magnitude of changes on overall profitability can be quickly determined, and the actions with the highest leverage or greatest cost/benefit can be prioritized and explored further.
How do these two models help you help a client to manage their business? The DuPont Model is in your wheelhouse. It helps create an objective analysis using terms that you are comfortable with and that your client can understand.
Since it is built on equations, it also shows a clear path on which metrics need to improve to improve overall profitability.
The first model is more ambiguous and probably less comfortable to address with clients. You don’t have to be an expert on brand or marketing, just a good chaperone to ask the right questions to help the CEO arrive at the answers.
The worst thing your client can do is try to be everything to everybody—that’s a sure path to failure— and your leadership in helping to explore these questions and answers can help the CEO hone and implement a winning strategy.
Peter Mares co-founded G76 in 2021, at the height of the pandemic, to help middle market companies not just survive, but to thrive. G76 brings Fortune 500 “big data” analytic capabilities tailored specifically to the middle market to help companies grow profits and sales from their existing customers. His career highlights include founding two practices as a partner at the global accounting firm KPMG, and holding executive and C-level positions in global, mid-market and small businesses. He is a CPA with an accounting degree from James Madison University and received his MBA from George Washington University. Peter and his wife, Kimberley, live in Pennsylvania and stay connected with their seven (yes, seven) children spread out across the country. Peter is also an advisor to businesses and start-ups through the Executive Leaders for Advisory Boards.
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