THE 3 FUNDAMENTALS THAT KEEP A BUSINESS ALIVE

You can do a hundred things right, but if you miss the few fundamentals, the business still dies.

And the opposite is also true: if you do the fundamentals right, you can have duct tape and zip ties on the rest for a while and still be okay.

I released a podcast this week where I discussed this with my business partner, Travis. We talked about our experience as advisors and how interesting it is to see “live.”

It’s easy for us to get into a business and judge what they’re doing, but the reality is that most of these businesses have been around for a long time and done really well.

We talked about this as a reminder that, while yes, we and everyone else like to comment on what people in businesses should really be doing, the reality is that success or failure comes down to doing the fundamentals right.

The problem is, “fundamentals” is vague. What are the fundamentals?

While every business’s fundamentals are slightly different, we boiled it down into three things:

1. You have to get new work in.
2. You have to perform that work well.
3. You have to collect on that work.

If you’re thinking, “Yeah, I know,” that’s the point. It’s simple but not easy. It’s easy to get distracted. It’s easy to take the wrong approach on any part of the fundamentals.

There are a million ways to do sales and marketing. There are a million ways to perform the work. Collecting, well, probably not a million ways. Ultimately, it all leads to just getting the money…

To understand how well a business owner knows these basics, I like to ask one question:

If you added $100 of new revenue tomorrow, could you show me how that $100 actually flows through your business?

Most people struggle with this at first. Not because they’re not smart and don’t know, but because they’ve taken the time to think through this fundamental flow.

This is one of the fundamental things we try and understand when we with business owners as CFOs, but also in my workshop, 5 Days to Financial Clarity. We have another one coming up, May 18-22 if you want to join.

JOIN THE WORKSHOP

Today we're going to break down how you can understand that flow of $100 and turn it into more profits/cash.

MAP YOUR VALUE CHAIN

In the real world, those fundamentals show up as a simple chain. The words change based on your business, but the logic does not.

SERVICE BUSINESS (EXAMPLE)

Lead → Close → Deliver → Invoice → Collect

PRODUCT BUSINESS (EXAMPLE)

Market → Sell → Buy → Receive → Ship → Collect

That’s the business. Everything else is support.

There are a lot of different value chains inside a business but the fundamental one, the main one, ultimately comes down to what we demonstrated above.

And when you understand those chains, you start to actually understand where profit and cash actually come from.

Profit is what happens when the chain is efficient. Cash is what happens when the timing works.

A business can be “profitable” and still feel broke if cash gets trapped in the chain.

A business can be “busy” and still be fragile if the wrong links are weak.

So right now, pause and ask for yourself: what is the primary value chain for your business?

Take a minute and map it out on a sheet of paper.

I want to walk through mapping this value chain for your business.

THE “2–3 THINGS” RULE (WHAT YOU SHOULD ACTUALLY OPTIMIZE)

Most businesses don’t have that many things that truly move the needle.

A lot of owners are doing a lot of work, but it isn’t impactful because it’s aimed at the wrong link.

Here’s the test: If I could wave a magic wand and fix two or three links in your chain this quarter, which ones would change the business the fastest?

Three filters we use to find areas for significant impact:

1. IT TOUCHES CASH. If it breaks, you feel it in 30–60 days.
2. IT REPEATS WEEKLY. It’s a recurring constraint, not a one-time fire.
3. IT’S MEASURABLE. You can’t manage what you can’t see.

Some examples of the “2–3 things” we’ve seen and work on for businesses:

• TIME TO INVOICE: the work is done, but billing is late. By improving the process, you can inject cash into the business that was previously “stuck” in the cycle. Immediate increase in your cash balance!
• JOB ECONOMICS: you’re not clear which work is actually profitable. By tracking job-by-job revenue, cost, and margins, we can identify what’s profit and what isn’t. The clarity here gives you clarity on what business to chase in the future.
• COLLECTIONS RHYTHM: when nobody truly owns AR, money never gets collected. By putting in a process, you actually increase your profits, as you quit “losing” money.
• SALES MOTION MISMATCH: a relationship business trying to grow with “non-touch” activity. We do the Business Model Canvas process with all clients and it’s amazing how often we find these types of things. You hear it worked for someone else so you try it, without thinking about how your relationships and business are different.
• DELIVERY EFFICIENCY: rework, scope creep, or utilization problems. Understanding and tracking against scope is rarely done well. When it is, it forces conversations that can reshape how the business actually runs.

The point is not to pick the “best” ones. The point is to pick the true constraint in your chain.

IF YOU KNOW THE 2–3 LINKS, YOUR KPI LIST GETS SMALL FAST

This is where owners usually get it backwards: they start with KPIs. As new people and things pop up in the business, they keep adding KPI after KPI after KPI. They start building dashboards and ways to digest these KPIs and ultimately end up with 40 different numbers and no clarity about what's most important.

The first problem is that you can't focus on forty things at once. Goofy, us, right?

But even deeper, if you don't understand the chain of KPIs and the value chain, they're just a bunch of disconnected numbers.

A KPI is only useful if it attaches to a link in the chain. And once you pick the 2–3 links that matter most, you only need a handful of KPIs to manage them.

Here’s a simple way to do it:

For each of your 2–3 links, pick:

• 1 LEADING KPI (predicts the outcome)
• 1 LAGGING KPI (confirms the outcome)
• 1 HEALTH CHECK (quality or timing)

Example for a service business:

DELIVER (PERFORM WELL)

• Leading KPI: on-time completion %
• Lagging KPI: gross margin per job
• Health check: rework hours or change orders %

INVOICE (SPEED)

• Leading KPI: days to invoice
• Lagging KPI: billed $ per week
• Health check: unbilled WIP $

COLLECT (CASH TIMING)

• Leading KPI: % AR over 60 days
• Lagging KPI: overdue AR collected per week
• Health check: average days to pay

Now you’re not “tracking metrics,” you’re managing the business’s value chain.

It should feel so simple that you almost wonder if you're doing enough.

WHAT TO DO THIS WEEK (15 MINUTES, NOT A PROJECT)

• Write your primary value chain on one page.
• Circle the 2–3 links that create the most stress.
• Assign 3 KPIs per link (leading, lagging, health).
• Put a 15-minute weekly review on the calendar.
• Kill the KPIs that don’t attach to a link.

Clarity beats complexity.

If you’d like help with, or to go deeper into this process, this is exactly why we built 5 Days to Financial Clarity.

This workshop is not about theory but instead about walking you through this system (and more) for your business.

We walk through:

1. How money flows through your business (the value chain)
2. Identifying your profit & cash drivers
3. Picking the right KPIs to track on the right cadence
4. Creating a plan to extract more profit & cash over the next 90 days

And here’s the guarantee: If this workshop doesn’t generate more savings than what you paid for it, turn in your worksheets and we’ll refund your money.

I hope you'll choose to join us.

JOIN THE WORKSHOP

‍