Shared Financial Management Builds Alignment For Food Businesses

Alignment

As we have talked about before, entrepreneurship is a really difficult enterprise. It involves raising money (usually more than you think), relentlessly selling, new product development, relentlessly selling, developing quality control processes… Did I mention relentlessly selling?

These are a lot of things for one person to learn how to do well. Imagine if you as an entrepreneur tried to help everyone understand what needed to be done to make the business succeed. How do you even go about having that conversation and leading that charge?

One strategy that some food entrepreneurs employ is open-book management. Open book management is essentially sharing the company’s finances and key financial drivers openly with managers to increase their buy-in and understanding of the company’s performance. By sharing company finances and expecting financial literacy of managers, open-book management allows multiple leaders to use the same language and work towards the same goal. The differences between overall profitability and profit margins by department become clear when discussed in a context the managers know and understand. Using a common set of financial statements allows managers to have more meaningful conversations because they can point to specific items on those statements when discussing possible courses of action.

Open-book management can even drive growth because the managers’ and the organization’s goals are more easily aligned. On our podcast this week, Nicole Sallaberry talked about how the Great Basin Community Food Co-op started as a buying club in the back of a punk record store but now has about $4.5 million in annual sales. This growth has allowed them to hire more staff and get more healthy and local food into their store. To help them understand what they need to do to grow, department managers meet weekly to discuss benchmarks and financial goals as part of their management responsibilities and so department managers can be groomed for positions of higher leadership.

Like shared governance (another feature of food co-ops), open-book management is a huge commitment. It means helping managers improve their financial literacy and training them on how to use financial statements and internal/external benchmarks to inform decision-making. The need for education and technical assistance around this topic shouldn’t be underestimated. But, under the right circumstances, open-book management can create more aligned and optimized food businesses that are profitable for the long term.


And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Consultant With TabletBusiness Model Insights

Raising CapitalRaising Capital

Wholesale BrandsCPG/National Brands

Grocery Store Produce SectionMarket Trends

 Farm Bureau Agricultural Contribution To GDP

Farming and AgTech

  • Farm Contribution to Agricultural GDP at Record Low (Farm Bureau) – “On a broad level, agriculture contributed a record-high $1.05 trillion to U.S. gross domestic product in 2016, up $35 billion, or 6 percent, from the prior year. U.S. GDP in 2016 was $18.6 trillion, thus agriculture’s contribution represented 5.7 percent of the U.S. economy. However, as a direct result of falling commodity prices, in 2016, the contribution of farm production to U.S. GDP fell to $136.7 billion, down 6 percent from 2015, and the lowest level since 2010. Importantly, farm-level GDP is down nearly 30 percent from the 2013 record of $187 billion, and after declining for three consecutive years, the farm share of agricultural GDP, at 13 percent, is at the lowest level since the series was first recorded in 2007.”
  • A Shifting Safety Net For Dairy Farmers Facing Uncertain Milk Prices (WisContext)
  • Tips for Better Decision Making and Execution (Compeer Financial)

Mergers And AcquisitionsDeals/M&A

EventsIndustry Events

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