Business planning: the first ninety days

Business financial planning is one of those phrases that means different things to different people — and most of those things are some version of 'looks at the books once a month.' Ours is more specific.

The first ninety days of a new engagement are mostly listening. We sit with the operator. We watch how cash actually moves through the business. We ask awkward questions about pricing. We learn which numbers people quote from memory and which ones they look up because they're embarrassed not to know them.

Then we build the smallest possible operating model that tells the truth. One spreadsheet. Thirteen weeks of cash. A real budget — not the one you sent the bank. By day sixty we usually know more about the company's economics than anyone other than the owner. By day ninety the owner usually does too.

What we find at day thirty is usually one of three things. The first is a business that is profitable on paper but perpetually short on cash, because the owner is drawing against receivables that are sixty or ninety days out. The fix is not a loan — it's an invoice cycle that matches the expense cycle. The second is a business with healthy margins and a cost structure that hasn't been examined since the company was half its current size, which means it's leaving three or four points on the floor every month. The third is a business that is genuinely struggling — revenue not keeping pace with expenses, a pricing model that made sense at $400,000 in revenue and doesn't at $1.2 million. Each of those has a different conversation. None of them show up in a summary P&L.

Owner compensation is almost always the most awkward topic in the first ninety days, and also one of the most consequential. Owners of S corporations and single-member LLCs have wide latitude in how they pay themselves, and the choices affect self-employment tax, qualified business income deductions, and the personal financial plan in ways that compound over years. A 47-year-old owner pulling $60,000 in salary and $190,000 in distributions from an S-corp might be doing that entirely correctly — or might be leaving $12,000 in legitimate QBI deduction on the table, or structuring compensation in a way that reduces future Social Security benefits, or both. We work through the personal and business side together, because no one should be looking at just one of those numbers in isolation.

The thirteen-week cash model is the tool we use most in the first quarter. It is deliberately short-horizon — not because we don't think about the next three years, but because thirteen weeks is the furthest most businesses can forecast cash with any accuracy, and false precision in a longer model breeds false confidence. We build it once, update it weekly, and use the variance between plan and actual to ask the uncomfortable question: why was the forecast wrong, and does the answer change something structural about the business? Most of the time it doesn't. Occasionally it does, and catching that at week five is very different from catching it at week thirty.

By the end of ninety days, the owner has a clear view of unit economics, a working cash model, a real budget for the year, and — in most cases — three or four specific decisions to make about pricing, compensation structure, or cost. That's the deliverable. Not a report. Not a presentation. A decision list, sorted by impact.

There is one conversation the first ninety days almost always surfaces, regardless of industry or size: the business is undercapitalized relative to the ambitions of the person running it. This is not a failure of character. It is a product of how small businesses grow — slowly, then suddenly, then all at once — and the capital base rarely keeps pace with the demand. A service firm that doubled revenue in eighteen months often has the same credit facility and the same cash reserve it had when it was half the size. We model what the business actually needs to run comfortably at its current scale and what it would need at the next one, so the owner is having the capital conversation before it becomes an emergency rather than during one.

The personal financial plan is always the final agenda item in the first ninety days, and it is almost always the one the owner is most relieved to get to. Running a business is consuming in a way that crowds out the owner's own financial life. By the time we close the first quarter, the owner has a business that is better understood and a personal balance sheet that has finally been looked at by someone who knows what they are reading.

One thing the first ninety days almost never produces is a full set of answers. What it produces is a clear map of the questions worth asking and the order in which to ask them. The business is not a problem to solve in a quarter — it is an entity to understand well enough to advise correctly. The owner who walks out of day ninety with the right questions written down is in a fundamentally better position than the one who walked in with a folder of answers that didn't cohere. The questions are the deliverable. Everything else follows from there, at a pace the business and the owner can actually sustain.