Identify Your WHY – Week #1 of The Financial Operating System®

Step #1 in The Financial Operating System® focuses on establishing clarity about your personal and professional objectives for what your business will produce for you. This step serves as the foundational pillar for all subsequent actions, encouraging business owners to reflect deeply on their goals and aspirations to ensure alignment between their efforts and their desired outcomes.

Key Questions to Answer:

1. Why Are You in Business?
   • This includes understanding the core reason for starting and continuing your business. Was it out of necessity, like getting laid off and creating your own job? Or was it driven by a passion to serve a market, the desire for financial freedom, or the frustration of working for someone else?
   • Your “why” may evolve over time. For example, what motivated you at the beginning of your journey might not be the same reason you are in business today. Revisiting this periodically is important to stay aligned with your goals.
2. What Do You Want to Achieve Financially?
   • Define specific financial objectives. These might include:
     • Earning a certain annual income to meet living or family expenses.
     • Building a business that can be sold for a specific value.
     • Growing revenue and profitability to fund personal goals like retirement or lifestyle upgrades.
   • Your financial “why” provides a target to aim for and influences the way you measure success.
3. What is Your Business Model?
   • Your business model should reflect how your operations are structured to achieve your goals. It includes:
     • Whether revenue comes from one-off transactions, recurring income, or project-based work.
     • How your business delivers value: low-margin, high-volume sales or specialized premium services.
     • The target audience you serve and how you differentiate your offerings in the market.

Examples of Motivations and Financial Objectives:

The book offers examples to help business owners think about their personal motivations and objectives:

• Someone who wants to retire in six years might focus on stabilizing profits and preparing the business for sale.
• A person passionate about animals may aim to serve 100 veterinary clinics and dominate their local market.
• A consultant who values work-life balance may prioritize flexible schedules and maximizing income without sacrificing personal time.
• A tech entrepreneur might aim to grow the business rapidly to achieve a multimillion-dollar valuation.

Aligning Financial and Operational Goals:

• The “why” is not just about financial targets but also about how the business operates day-to-day. Consider the kinds of customers you want to work with, the culture of your company, and the services or products you deliver.
• This step emphasizes that finance and operations are deeply intertwined. Defining your “why” ensures that your business decisions align with what you value most and gives you clarity in managing towards a purpose.

Importance of Long-Term Vision:

• A clear “why” enables business owners to create a roadmap for the future, whether that’s scaling for growth, maximizing current profitability, or preparing for a transition like retirement or sale.
• Aspirational goals like a 10-year vision or BHAGs (Big Hairy Audacious Goals) provide a sense of direction, but they should be grounded in reality. Radical performance improvements require commitment, resources, and often a shift in mindset.

Balancing Growth and Stability:

• Owners must choose whether their business should focus on rapid growth or steady profitability. Each path carries unique risks and challenges, from cash flow issues in growth-focused models to operational bottlenecks in stability-focused businesses.
• The clarity of your “why” ensures that you can navigate these decisions confidently, with a clear understanding of trade-offs.

A Lighthouse for Your Journey:

• Defining your “why” acts as a “lighthouse” or “true north,” guiding you through both challenges and opportunities. Without clarity on what you want to achieve, it becomes difficult to set metrics, make decisions, and align your team around common goals.

By taking the time to answer these questions and reflect on the purpose of your business, you create a framework that not only drives your decisions but also keeps you motivated. This step is critical to successfully implementing The Financial Operating System® and making meaningful progress toward your long-term goals.

Next Step:

Business owners can self-implement The Financial Operating System. Chapters are available to download at smartbooks.com/resources or you can buy the whole book from Amazon (the marketing firm version or the general business version). If you would like assistance with implementation or would like to accelerate results for your business, please contact author Cal Wilder at cwilder@smartbooks.com or book a free consultation with our team directly using this calendar link.