A Good Strategy Should Leave Room to Change

I once worked with a company that made a substantial investment in a fleet of vehicles.

The decision had already been made when I became involved. The company had taken on significant debt and purchased the vehicles. My question wasn't whether I would have made the same decision. It was what we should do with the financial position we now had.

The owner saw value in the fleet beyond transportation. The vehicles were branded and highly visible throughout the community. Employees used them in the ordinary course of business, and every vehicle on the road effectively became another representation of the company.

There was real strategic value in that. There was also a cost.

The vehicles brought debt onto the balance sheet. As they accumulated miles, there were repairs, damage and other operating expenses. We also had to compare those costs against the alternative the company had used previously: employees driving their own vehicles and receiving mileage reimbursement.

The question wasn't simply whether the vehicles were good or bad. It was whether we could preserve what the owner valued about the strategy without allowing it to unnecessarily constrain the company.

Strengthen the Position Before You Need To

The company was producing strong cash flow, so we made reducing the vehicle debt a priority. We paid it down aggressively. At the time, there wasn't an immediate crisis requiring us to do that. The company could afford the debt and the vehicles were serving their intended purpose.

But reducing the debt gave the company something valuable that wouldn't appear on an income statement: flexibility.

Not long afterward, competition increased and began putting pressure on cash flow. That changed the economics. Expenses that were manageable during stronger periods deserved another look. The ongoing costs of the fleet became more important, and management needed greater flexibility to adjust the company's cost structure.

Fortunately, the balance sheet was already in a better position.

Avoid the False Choice

We didn't have to choose between keeping every vehicle indefinitely and immediately liquidating the entire fleet. Instead, we began offering vehicles for sale while continuing to use them.

Employees had an opportunity to purchase vehicles they were already familiar with. Other interested buyers could inquire. We priced the vehicles aggressively enough to encourage sales while they still retained meaningful market value. The fleet gradually became smaller.

That compromise preserved some of the owner's original strategy while giving the company an orderly way to reduce its exposure. Later, as competitive pressures required staffing adjustments, another benefit became apparent: the company wasn't left supporting a large number of vehicles that it no longer had employees to use.

Finance Should Preserve Options

Owners will sometimes pursue strategies that a financial advisor wouldn't have designed independently. That isn't necessarily a problem.

An entrepreneur may see strategic value in something that doesn't fit neatly into a financial model—visibility, customer experience, employee culture, market presence or an opportunity that is difficult to quantify.

Finance should make those economics visible. But making them visible doesn't mean automatically saying no. The better question is:

How can we support the strategy without unnecessarily limiting what the company can do next?

Sometimes that means maintaining liquidity. Sometimes it means reducing debt while cash flow is strong. Sometimes it means structuring an investment so that it can be unwound gradually rather than all at once.

The future rarely unfolds exactly as expected. A strong financial position doesn't tell an owner which strategy to pursue.

It gives the owner room to change course when the strategy—or the world around it—changes.